Constitutional reform and state capacity building: the case of the Glorious Revolution

In the work we have tried to explain why the delay in lowering the interest rate on English government debt after the Glorious Revolution is consistent with North and Weingast’s thesis. The transfer of political power from the Crown to Parliament was followed not only by an increase in tax revenue but also by substantial changes in its composition, namely a significant increase in the share of excise taxes relative to total revenue. Before the Glorious Revolution, Parliament was against the king having a predictable and reliable revenue, such as that raised by excise duty. The availability of this income would have allowed the king to count on continuous and abundant resources, freeing him from the need, in times of war, to convene Parliament to ask for authorization to increase taxes. Having a large amount of predictable and certain resources at his disposal, the king could maintain a standing army. By eliminating this risk the Glorious Revolution allowed the state to pursue the intensive growth of excise revenues. This policy choice was made by a coalition of interest groups represented in Parliament, namely the landowners and monied interests. These groups decided to set up a bureaucracy and increase the revenue from indirect taxes. By this decision the groups represented in Parliament shifted the tax burden of increasing public spending on to interest groups that had no political representation.