english financial history

A social vs. an institutional history of the “Financial Revolution” and the importance of experimentation. Part 1

Since P.G.M. Dickson’s seminal study about post-1688 England, “Financial Revolution” (hereafter FR) has become a key notion for economic and financial historians.[1]

The notion has given rise to an important historiographical debate which brought to light significant disagreements: What was the decisive feature of the FR: the long-term national debt, the tax system, the financial markets, the parliament’s “credible commitment” to the repay the national debt?[2] Did the FR start only after the 1688 Glorious Revolution?[3] To what extent was England a pioneer? To what extent the notion might also apply to other countries in earlier historical periods (16th century Netherlands, 16th Naples, 18th century France, etc.)?[4] There is no consensus about these questions. And no more consensus around another important question (see next post), whether it would not be more correct to talk about financial “evolution” rather than “revolution”, since this phenomenon was not a “sharp and unique break from the past”.[5]

Despite these disagreements, the literature concurs in seeing financial revolutions (or evolutions) as a matter of institutions: banks, securities markets, tax systems, sovereign debts, etc. We may add institutions and political economy. Anders Ögren encapsulates this view when he writes: “The term financial revolution may be misleading since a financial revolution at heart is institutional. Fundamental institutional changes are necessary prerequisites for the financial system to become revolutionized.”[6]

Most scholars draw a strong connection between FR and military/economic success. This had been from the start Dickson’s perspective. He argued that the national debt – that is to say the central piece of the English FR according to him – was the key strength that explain why “it was England, not France, which was the more consistently successful [during the wars of the late 17th and 18th century] despite the inferiority of its resources”.[7] For P. Rousseau and R. Sylla what characterize not only the English FR, but all financial revolutions, is the development of a “good financial system”, which becomes a factor of economic expansion. Hence, they see FR happening in later periods and outside Europe: in the United States in the 1780-90s, in Meiji Japan in the 1870-1880s.[8]  Along the same lines, Ögren defines a FR as “the establishment of the fundamental organisations and institutions required for a successful financial system within a relatively short time span”, and he explains that a FR “has to be followed by an increase in financial services in three ways: in quantity, variety, and quality [which] should promote economic growth and structural changes through modernization.” [9]

I propose a different perspective. My argument is to examine financial revolutions through the lens of social history instead of institutional history. By social history, I mean the study of the intentions and practices of the historical actors. That is to say, the projectors, the investors, and the government officials which were engaged in this process we call today FR. What were they thinking? What were they doing?


1. Avoiding an anachronistic perspective

The actors were looking for a successful outcome for their projects. Yet, how could they have known in advance if the new institutions they were designing and implementing would succeed? When, after long debates and discussions, the English parliament decided (April 1694) to grant a charter to the Bank of England (BoE) in exchange for a £1,2 million loan, it was trying to prevent a national bankruptcy. Far from being sure the BoE would foster a “good financial system”, contemporaries, at first, even doubted that it would raise its capital. A 1695 pamphlet noted that the BoE’s subscription “was to the amazement of ourselves, as well as the astonishment of our enemies (the French) compleated in less time than could have been imagin’d”[10]. Despite the admiration for the speed of the subscription, the pamphlet considered that the BoE was “very detrimental” to England’s trade and economy. Overall, in the next decades, the BoE, together with the other institutions central to the English FR, were the object of much criticism and hostility in England.[11]

It is only ex-post that we can judge if the BoE and the English FR was a success or a failure. And the same is true for John Law’s financial experiments in 1719 France. Or, to take a contemporary example, for the Quantitative Easing implemented by central banks in the aftermath of the 2008 crisis.

Financial history should not be read backward. The risk, otherwise, is to fall into what R. Aron used to call “retrospective illusion of fatality”.[12] To avoid an anachronistic perspective on the FR it is essential to recognize the viewpoints of the actors, the uncertainty in which they were immersed, and the range of possibilities open to them.


2. Experimentation

More than implementing such or such institution, the actors of the FR were re-thinking and reshaping their financial tools and infrastructures. And they did that through intense “experimentation”. I argue that this intense experimentation with ideas, techniques, and institutions is what best characterizes a FR. This means that failed, fruitless experiments (by far the more numerous) were not less significant than successful ones. In fact, for the student of early modern financial history, failed experiments are often more interesting than successful ones.

The focus on the practices has important implications for research: it vastly increases the archival material from which students of FR can draw. The many pieces of evidence that were hitherto considered irrelevant (stillborn projects, abortive schemes, etc.) become relevant.
There is no reason financial history should only investigate successful revolutions. Unsuccessful and aborted revolutions are interesting too. No political historian thinks the German Revolution of 1918-19 is not worth studying because it lasted just a few months. Besides its enormous intrinsic importance, the German Revolution also sheds light on the contemporary Russian Revolution. The same is true for the many financial experiments that failed/aborted across Europe in the years 1690-1720: apart from their inherent interest, they help better understand the English FR.


3. Scholars of the FR have much underlined the dimension of experimentation.

P.G.M. Dickson and J. Sperling, for instance, explain that the Vienna City Bank (1706) “was the Habsburgs’ most successful financial experiment in [1689-1714]”.[13] P. Temin and H.-J. Voth write: “We describe here how English government debt attained a high level of efficiency through a sequence of experiments — the greatest of which resulted in the South Sea Bubble.”[14] A. L. Murphy notes that “the experiments of the 1690s and the early eighteenth century, although costly and administratively problematic, laid the pattern for funding the national debt throughout the long eighteenth century.”[15] We could multiply the examples. The historiography has extensively underlined that experiments played a crucial part in the FR. What is novel in my approach, is to place experimentation at the center of the analysis, and to draw the consequences in terms of sources studied.


4. Experimentation for the historical actors

We are using here the word experiment in a generic “real-world” sense: trying new ideas, methods, institutions without being sure of the outcome.

Did the historical actors, in the years 1680-1720, use the term, or at least the notion of “experimentation” in the financial literature? The answer depends on the language. English projectors and pamphleteers used the term “experiment”. Two examples among hundreds: A 1708 pamphlet recalled that “the parliament was induced in the year 1697 to make an experiment by giving permission to all persons as well as the company to trade to Africa”.[16] Describing a financial operation engineered by John Law in 1719, Daniel Defoe commented: “But in this new experiment, John Law found himself a little embarrass’d, for there were such a run for the new subscription, there were consequently no buyers, or fewer buyers than before for the old stock.”[17]

Interestingly, English texts of the period considered the ethical dimension of social experimentation. For instance, a 1705 project for a land-mint that reads:

 As to the objection some are pleased to make against it, as being a new thing, and never having a precedent in any time or place, the undertaking therefore must be only the trying an experiment on the nation. To which it is answered that, altho [sic] it be a new experiment, if it be withal a proper and only remedy, there is no reason to decline it for its singularity[…][18]

We also find the idea that an experiment might be temporary. In a 1715 pamphlet, Charles Davenant explains (about tariffs of East India and Persian silks): “Perhaps an experiment of four or five years would plainly demonstrate that the wear of them would not so much hurt us at home”.[19]

France presents a different picture. The 1694 Dictionnaire de l’Académie française indicates that the words “expérience” and “exprérimenter” were already used in the sense of the English word “experiment”.[20] Yet, I did not find any occurrence for “experimenter” in the French financial literature of the time. French projectors used “essay” (trial), “tenter” (to try) or “espreuve” (attempt). However, the notion of “experimentation” is present under their pens. For instance, in Vauban’s celebrated Projet d’une dixme royale. Expounding his method for implementing the tax, Vauban explains:[21]

Pour y parvenir, je serois d’avis d’y procéder par la voye de l’expérience; & à cet effet, de faire choix de deux ou trois élections du royaume, en résolution, que si deux ou trois ans après qu’on aura réduit leur taille & leurs autres subsides en dixme royale, les peuples n’en sont pas contens; ou que ce nouveau système soit trouvé moins avantageux pour le roi que les précedens, de remettre les tailles et les autres subsides sur le vieux pied.

It is noteworthy that in the English translation (published three years later), “la voye de l’expérience” became “an experiment”. Here is the text:[22]

To that end, it is my opinion that an experiment should be made on any two or three elections [provinces] in the kingdom, to try whether or not the people, two or three years after their taxes and other subsidies have been reduc’d to the royal tythe, would not be easie and content, or if this new scheme, upon tryal, should prove less beneficial to the king, than the former methods, to lay it aside, and put all the taxes and the other subsidies upon their ancient foot.

Italy appears similar to France. More research would be needed to have a precise overview for the rest of Europe. My guess is that the situation was similar to France and Italy: projectors did not use the word “experiment”, but they used the notion.

There was indeed a widespread culture of experimentation in early modern Europe. A culture stemming from a long historical tradition of artisanal experimentation, in a general context of fluid connections between technical expert knowledge (alchemy, metallurgy, botany, surgery, military engineering, etc.) and natural philosophy.[23] Financial projectors were part of this culture.


[1] P. G. M. Dickson, The Financial Revolution in England: A Study in the Development of Public Credit, 1688-1756 (Macmillan, 1967).

[2] See in particular John Brewer, The Sinews of Power: War, Money and English State: 1688-1783 (Cambridge (Mass.): Harvard, 1988); Larry Neal, “How it all began: the monetary and financial architecture of Europe during the first global capital markets, 1648–1815,” Financial History Review 7, no. 2 (October 2000): 117–40;  Douglass C. North and Barry R. Weingast, “Constitutions and Commitment: The Evolution of Institutions Governing Public Choice in Seventeenth-Century England,” The Journal of Economic History 49, no. 4 (December 1989): 803–32.

[3] For a different view: Henry Roseveare, The Financial Revolution, 1660-1760 (London: Longman, 1991), 3; Steven Pincus, 1688: The First Modern Revolution (New Haven, Conn.; London: Yale University Press, 2011), 368–69; Carl Wennerlind, Casualties of Credit: The English Financial Revolution, 1620-1720 (Cambridge, Mass.: Harvard University Press, 2011), 8.

[4] See in particular James D. Tracy, A Financial Revolution in the Habsburg Netherlands: Renten and Renteniers in the County of Holland, 1515-1565 (University of California Press, 1985); Antonio Calabria, The Cost of Empire. The Finances of the Kingdom of Naples in the Time of Spanish Rule (Cambridge University Press, 1991), 104; Jean-Marie Thiveaud, “1689-1715 : Entre vénalité des offices et dette publique: La révolution financière en France: Peut-on parler d’un marché émergent à Paris, avant la création de la Bourse (1724) ?,” Revue d’économie financière, no. 29 (1994): 113–46.

[5] See in particular Roseveare, The Financial Revolution, 3.Michele Fratianni and Franco Spinelli, “Italian City-States and Financial Evolution,” European Review of Economic History 10, no. 3 (December 2006): 257–58.

[6] Anders Ögren, “The Financial Revolution in Sweden, 1650–1900,” in Handbook of Key Global Financial Markets, Institutions, and Infrastructure, ed. Gerard Caprio (London, San Diego: Elsevier, 2013), 269.

[7] Dickson, The Financial Revolution, 8–9.

[8] Richard Sylla, “US Securities Markets and the Banking System, 1790-1840,” Federal Reserve Bank of Saint Louis Review 80 (1998): 83–98; Peter L. Rousseau and Richard Sylla, “Financial Systems, Economic Growth and Globalization,” in Globalization in Historical Perspective, ed. Michael D. Bordo, Alan M. Taylor, and Jeffrey G. Williamson (Chicago: Univ. of Chicago Press, 2005), 384.

[9] Anders Ögren, “Financial Revolution and Economic Modernisation in Sweden,” Financial History Review 16, no. 1 (April 2009): 47. Ögren, “The Financial Revolution in Sweden, 1650–1900,” 269.

[10] Anonymous, Angliae Tutamem or the Safety of England (London, 1695), 5.

[11] Dickson, The Financial Revolution, 17–35.

[12] Raymond Aron, Introduction à la philosophie de l’histoire, Gallimard, 1948, 224-230.

[13] P.G.M. Dickson and John Sperling, “War Finance, 1689-1714,” in The New Cambridge Modern History, vol. 6 (Cambridge: Cambridge University Press, 1970), 312.

[14] Peter Temin and Hans-Joachim Voth, Prometheus Shackled: Goldsmith Banks and England’s Financial Revolution after 1700 (Oxford: Oxford University Press, 2013), 23.

[15] Anne L. Murphy, “The Financial Revolution in England,” in Caprio, Gerard, et al., Eds. Handbook of Key Global Financial Markets, Institutions, and Infrastructure., ed. Gerard Caprio (London, San Diego: Elsevier, 2013), 89.

[16] The African Companies considerations on the late act of Parliament for settling the trade to Africa, answer’d paragraph by paragraph. [London], [1708], 2.

[17] [Daniel Defoe], The chimera or, the French way of paying National Debts, laid open, London, 1720, 67-68

[18] Andrew Brown, An Essay on the New Project for a Land-Mint (Edinburgh, 1705), 25.

[19] Charles Davenant, An Account of the Trade between Great-Britain, France, Holland, Spain, Portugal, Italy, Africa, Newfoundland (London, 1715), 67.

[20] The first meaning listed in the Dictionnaire is “espreuve qu’on fait de quelque chose, soit à dessin, soit par hazard”, with also a reference to “scientific” experimentation.

[21] Vauban, Projet dune dixme royale, 1707, 133.

[22] Vauban, An Essay for a General Tax; or, a Project for a Royal Tythe (London, 1710), 88-89.

[23] See Lissa Roberts, Simon Schaffer, and Peter Dear, eds., The Mindful Hand: Inquiry and Invention from the Late Renaissance to Early Industrialisation (Amsterdam: Koninkliijke Nederlandse Akademie van Wetenschappen, 2007).Ursula Klein, “The Laboratory Challenge: Some Revisions of the Standard View of Early Modern Experimentation,” Isis 99, no. 4 (December 1, 2008): 769–82.

Cite this blog post
Stefano Condorelli (2019, December 8). A social vs. an institutional history of the “Financial Revolution” and the importance of experimentation. Part 1. Notes on research. Retrieved February 25, 2024, from

By Stefano Condorelli

My current research focuses on a global history of the 1720 financial bubble. I am currently an associate researcher at the Center for Global Studies at the University of Bern and associate member at the Collaborative Research Centre “Threatened Order - Societies under Stress” at the University of Tübingen.

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