This term refers to the extensive changes brought about in the British financial system between the Glorious Revolution of 1688 and the 1720s by the creation of a system whereby a national debt could be accumulated to provide government with spending power beyond the scope of taxation. This became necessary as a result of the extensive military commitments undertaken between 1688 and 1815. At the same time business, in order to expand, required a secure means for making payments, as well as a stable system of credit. There were three main elements to this revolution: the use of the bill of exchange for financial transactions, trade in shares of the capital stock of corporations, and perpetual annuities issued by the government and thus free from the risk of default.
These developments had profound economic results. They provided an institutional framework within which economic activity expanded, not only by creating a means by which provincial business could be transacted and linked to the main financial centre in London, but, perhaps more critically, by integrating London with the main European financial centre, Amsterdam, which by the end of the 18th cent. it had superseded. Secondly they provided a conduit through which investment on an unprecedented scale could be mobilized. Throughout the 18th cent. the principal customer remained the government. The state thus played a major role in stimulating the development of the financial system.
Subjects: British History.