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England’s Financial Revolution

The Sinews of Power: War, Money and the English State, 1688–1783

by John Brewer
Knopf, 289 pp., $19.95

Fourteen years ago, Professor John Brewer published a book that destroyed the prevailing interpretation of English political culture in the eighteenth century, constructed forty years before by Sir Lewis Namier.1 According to Namier, Hanoverian politics, at any rate in the 1760s, were largely devoid of ideology, and were confined to factional bickering over appointments and pensions among a tiny political elite of squires and noblemen.2 To Namier the only people who mattered historically were a tight little closed world of wealthy families, and their friends and dependents. But Brewer showed conclusively that not only were there at times powerful ideological issues at stake, but also that people of the middling sort, such as merchants, tradesmen, clerks, and small freeholders, who were officially excluded from the political process, were very successful in making their voices heard.

This was a dramatic and true revision of the historical record. Today, however, it has now become so much a part of the conventional wisdom that there is a tendency to lose sight of the fact that Namier had identified a basic historical truth. In all times and places politicians spend a large part of their energies on infighting for the spoils of office, and English politicians in the mid-eighteenth century were unusual only in being peculiarly obsessed with these narrowly self-serving concerns.

In his new book, Brewer attacks a second influential view about the eighteenth-century English state, which goes back all the way to the great Whig historians like Macaulay and Trevelyan. Until about 1975 historians had tended to compare the English state of the eighteenth century with that of its main rival, France, and to conclude that the former had a small, weak, decentralized structure of power, with a tiny bureaucracy and only a very small and closely watched standing army. It was ruled at the center by a handful of great aristocratic families, who not only controlled many seats in the House of Commons, but also provided a loose direction, through statute legislation, over the amateur gentry who managed the many-sided business of local government, administration, and justice. Internal order was maintained not so much by force as by an ideology of social deference, a relatively equitable sharing of tax burdens in times of crisis, and above all a uniquely generous and comprehensive system of poor relief. The result was a remarkable absence of violent social conflict, and a steady decline in both homicides and hangings.

The first limitations on the powers of the English state over its subjects were set by the Bill of Rights, by the decisions of liberal-minded judges, and above all by the stubborn reluctance of the landed elite in Parliament to give the officials who were appointed by the king and his ministers sufficient funds or authority to develop a large home-based standing army. One MP said at the time: ” ‘Tis money that makes a Parliament considerable, and nothing else.” One of Brewer’s great contributions is that he closely examines the reality of this truism.

A further limitation on the capacity or even desire of the central government to act decisively was what came to be called Old Corruption. The administration was cluttered with a great many sinecure offices and pensions, which were largely monopolized by the rich and influential. Appointments to office were made not on merit but by purchase and sale (as in the army) or thanks to personal patronage (as in the navy). Income came not from salaries but from fees or bribes extracted from clients. These administrative weaknesses were endemic to all early modern bureaucracies, which were defined by Max Weber as an ideal type he called “patrimonial” as opposed to “modern.” In England, sale of offices was small, largely restricted to the judiciary and the army, but the level of corruption in high financial offices remained very high in the seventeenth and early eighteenth centuries.

In addition to the brakes imposed on centralized government by Parliament and a patrimonial bureaucracy, the English were also peculiarly obsessed by a desire for economic and personal freedom. England (and later Britain) was unique in Europe for its lack of tolls and of trade barriers between cities and between provinces. Belief in the free market as the great engine of economic prosperity was enshrined in the late eighteenth century in Adam Smith’s influential handbook The Wealth of Nations. Finally there was a widespread ideology of the “freeborn Englishman” (or Briton), most forcefully expressed in the opening lines of the patriotic song Rule Britannia. This was an ideology of defiant individualism particularly favored by the prickly and often arrogant gentry who ruled the countryside. Both contemporaries and modern historians have believed that as a result of these trends, laws, and beliefs, England was the most free, most loosely governed, and the most prosperous society in Europe.

Few observers commented on the paradox that this rich, luxury-loving, allegedly under-taxed and undoubtedly under-governed consumer society somehow managed, over a period of one hundred and twenty-five years, from 1689 to 1815, to defeat in one war after another the most powerful of Europe’s ancien régimes—that of France. This was achieved despite the fact that France had five (falling to three) times the population of Britain and about twice the GNP.3 Second, by 1763 England had seized by force the largest empire seen in the West since the fall of Rome, including North America and Canada, to say nothing of a string of naval and commercial bases running from Antigua to Bombay through Gibraltar and Minorca. Although Britain lost half of its empire—America—twenty years later, after 1760 it had already begun to make alliances with Indian elites to conquer and then plunder huge and immensely wealthy parts of the disintegrating Mogul empire in India.

Third, Britain occupied and expropriated most of the land in Ireland after 1689; it first absorbed Scotland in 1707 and then brutally crushed all further resistance there after 1745. As a result the picture of a libertarian, weakly governed England is misleading. One of Brewer’s central points is that while there was considerable liberty in England, despotism was exported to Ireland, India, and, to a lesser extent, America. To pay for these efforts, between half and three quarters of the public revenue was being spent on war during the eighteenth century.

Brewer stresses the many forces that were leading to a centralization of external power in England during the eighteenth century. One was the growing nationalist sentiment that bound the country together, though whether this nationalism was “English” or “British” was never very clearly defined, and tended to vary from region to region. There was also a popular jingoism that favored belligerent and expansive territorial conquests for empire. Brewer also makes the point that eighteenth-century England, despite its liberties, was in significant ways the most centralized state in Europe. Owing in part to its origins in conquest in 1066, it had long since abolished internal trade barriers, enforced a single currency, and established nationwide legal systems. During the eighteenth century there developed the conception of the unfettered sovereignty of the king in Parliament, thanks to which the executive, the king, and a majority party could—and still can—impose legislation over the whole country on any matter. This represented a concentration of power that in fiscal affairs far exceeded the limited and fragmented authority of Louis XIV, and that was wholly unaffected by submission to a small and easily corrupted electorate every seven years.

But Brewer particularly emphasizes the importance of money, which has always provided the materials of war. By doing so, and by stressing the enormous military power that money made possible, he has forced historians to rethink the nature of the early modern British state. He shows convincingly how Britain’s military and naval power depended on its capacity to tax and borrow, and how both were directly related to its economic prosperity, its administrative and banking institutions, its social structure, and above all its Parliamentary political organization. Public finance is not usually a stimulating subject; the eyes tend to glaze over when faced with rows of statistics about tax revenues, loans, and expenditures. But the destiny of nations hinges upon such esoteric matters, as can be seen by a brief look at England, France, and America.

Take England first. For three centuries before 1688, the English state had been unable to raise adequate revenues from taxes, as a result of which it was no more than a marginal player in the European power game, without a single major land victory to its credit between Agincourt in 1415 and Blenheim in 1704. Even at sea her record was not impressive. For example, in 1588 the Spanish Armada was primarily defeated by bad planning and bad weather, rather than by any feats of arms by the English navy.

Building on the work of other scholars before him, Brewer has demonstrated convincingly that after 1660 a handful of bureaucratic reformers carried out a “financial revolution,” which at last provided the English state with a highly efficient fiscal system. Parliamentary taxes provided the secure state income upon which to float a great raft of permanently funded government debt at a very low interest. The management of this debt was handled by the Bank of England and copied from the Dutch, and many of the creditors were Dutch. Thereafter it did not matter much that the English state owed far more than the French, since it could always borrow more, much to the astonishment of English politicians.

Walpole in the 1730s, Pelham in the 1740s, and the younger Pitt in the 1780s were all pacifists, not out of conviction, but from fear that the investors in the public funds would not forever go on laying the golden eggs with which to finance new wars. In 1741, Pelham remarked that “our credit has supported itself almost to a miracle; how else could we have furnished them [allied German states supplying mercenary troops, such as Hesse] with such vast sums of money?” In 1742, a British ambassador observed that “the rapidity with which the loan for next year was filled indicated both the great riches of our country and the great confidence the monied men have in the Administration.”4 It was this new found capacity to raise huge sums on funded debt at low interest that enabled England to emerge from an era of relative military obscurity to win the dominant place on the world stage that it held for just over a century, from 1815 to 1945. Even so, between 1750 and 1820, debt servicing in peacetime amounted to about half of net government expenses.5

There were several reasons why investors felt that they could rely on “certain and punctual payments” by the British state. One was a tax system that included a land tax on property, a selective excise tax on some easily controlled internal products, mostly alcohol, and customs duties on imports. The burden was accepted because the taxes were more or less fairly assessed on all classes. Unlike in France, there were no large exemptions made for high office or high status. The rich paid a land tax, which was heavy during the two great threats to national security from Louis XIV and Napoleon, but fairly light in between.6 The poor were largely immune from the tax collector, and all taxes acquired legitimacy by being approved by Parliament. Enforcement was in the hands of a tightly regulated and more or less honest civilian bureaucracy rather than, as in France, by semi-militarized gangs whose depredations were virtually beyond the reach of the law. Thus it was England’s peculiar political, social, and administrative structure that made possible the fiscal system, which in turn made possible the public debt, which provided the money with which to conquer the British Empire.

  1. 1

    John Brewer, Party Ideology and Popular Politics at the Accession of George III (Cambridge University Press, 1976).

  2. 2

    Lewis B. Namier, The Structure of Politics at the Accession of George III (Macmillan, 1929).

  3. 3

    David Weir, “Tontines, Public Finance and Revolution in France and England, 1688–1789,” Journal of Economic History, Vol. 49, No. 1 (1989), p. 98, Table 1. I am grateful to Dr. O’Brien for drawing my attention to this article. It should be pointed out that there are half a dozen equally plausible, or implausible, estimates of GNP from which to choose (p. 98, footnote 12).

  4. 4

    Jeremy Black, “England’s Foreign Alliances in the Eighteenth Century,” Albion, Vol. 20 (1988) p. 586.

  5. 5

    Brian R. Mitchell and Phyllis Deane, Abstract of British Historical Statistics (Cambridge University Press, 1962), pp. 389–391, and p. 396.

  6. 6

    Patrick K. O’Brien, “The Political Economy of British Taxation, 1660–1815,” Economic History Review, Vol. 41 (1988), p. 13.

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