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Few historical arguments have influenced modern political science as much as Douglass North and Barry Weingast’s 1989 article, “Constitutions and Commitment”. Its central claim is simple. By limiting the power of the English Crown, the Glorious Revolution of 1688 made the state’s promises to repay its debts and respect private property credible. That credibility, they argued, allowed England to borrow cheaply, build a modern financial system, fight and win expensive wars against France and, eventually, become the first industrial economy.
The argument is the basis of much of today’s institutional economics and of the “institutions rule” view of development associated with Daron Acemoglu and James Robinson. This essay explains the thesis, the evidence for it, and the criticisms that every postgraduate student should know.
The commitment problem
The starting point is a problem that applies to any ruler. A sovereign who can change the rules at will cannot credibly promise not to change them. A king may promise to repay a loan, but if he can later reschedule the debt, raise taxes arbitrarily or seize assets, sensible lenders will charge high interest or refuse to lend. The ruler’s power to act becomes a weakness, because nobody trusts his promises.
North and Weingast argue that the Stuart kings illustrated this problem. Before 1688 they forced loans, sold monopolies, manipulated courts and, in the “Stop of the Exchequer” of 1672, suspended repayments to lenders. Public finance was therefore costly and unstable.
The solution: 1688
The revolution that removed James II and brought William III and Mary II to the throne created, in their account, a new institutional balance:
- Parliamentary supremacy over money. The Crown could no longer raise taxes or borrow without Parliament, and Parliament itself contained many of the state’s creditors.
- An independent judiciary. Judges appointed “during good behaviour” rather than at the king’s pleasure could protect property against the state.
- Multiple veto points. Changing policy required agreement between the Crown, the Commons and the Lords, which made sudden expropriation much harder.
The authors’ evidence was financial. After 1688, government borrowing expanded rapidly, the Bank of England was founded in 1694, and interest rates on government debt fell over the following decades. A state that had limited its own power found that it could raise far more money.
The criticisms
The thesis has been tested heavily, and much of the debate has been productive.
The timing of interest rates. Nathan Sussman and Yishay Yafeh (2006) found that interest rates on British government debt did not fall immediately after 1688. They remained high for about three decades, falling significantly only in the 1720s and 1730s. If 1688 had made commitment credible at once, markets should have reacted much sooner. This suggests that credibility was built gradually, through political stability, Whig dominance and repeated experience of repayment, rather than created by a single constitutional change.
Interests rather than institutions. David Stasavage (2003) argued that institutional constraints only matter if the people who hold the veto want to protect creditors. Commitment was credible after 1688 because Whig governments, closely tied to financial interests, controlled Parliament for long periods. When Tories who were more sceptical of the financial system held power, the commitment looked weaker. The lesson is that rules are only as reliable as the coalitions that support them.
What kind of revolution? Historian Steve Pincus, in 1688: The First Modern Revolution (2009), challenged both the old Whig story of a peaceful, conservative restoration and the narrow economic model. He argued that 1688 was a real revolution, a contest between two competing projects of state modernisation. James II’s was centralising, French-style and land-based. His opponents’ was commercial, Dutch-style and based on manufacturing and trade. Pincus and Robinson (2014) argued that what mattered was not merely limiting the Crown but a change in who controlled the state and what policies they followed.
Earlier strengths. Other historians point out that English property rights and common-law courts were already relatively strong before 1688, and that the fiscal-military state was partly built by the very Stuart and Cromwellian regimes that are blamed for insecurity.
Why the debate matters today
The North–Weingast thesis is about more than seventeenth-century England. It shaped the idea, influential in World Bank thinking from the 1990s onwards, that developing countries need independent central banks, independent courts and binding fiscal rules to attract investment. Indonesia’s own reforms after 1998 drew on this logic: Bank Indonesia’s independence under Law No. 23 of 1999 and the 3 percent deficit ceiling in the 2003 State Finance Law.
The criticisms are a useful warning. Institutions copied without the political coalitions that support them can be weakened or reversed, and credibility is earned over time rather than established by a single law. Students who want to know whether Indonesia’s fiscal rules are credible should therefore ask not only what the law says, but which interests would defend it, and how often it has been tested.
Questions for seminar discussion
- Did 1688 create credible commitment, or did it make credibility possible to build over the following forty years?
- Can credible commitment exist under authoritarian rule? Consider late imperial China, Singapore or Suharto-era technocracy.
- How much of the “institutions rule” research agenda depends on one English case, and is that a problem?
References and further reading
- Acemoglu, D., & Robinson, J. A. (2012). Why Nations Fail: The Origins of Power, Prosperity, and Poverty. Crown.
- North, D. C., & Weingast, B. R. (1989). Constitutions and commitment: The evolution of institutions governing public choice in seventeenth-century England. The Journal of Economic History, 49(4), 803–832.
- North, D. C. (1990). Institutions, Institutional Change and Economic Performance. Cambridge University Press.
- Pincus, S. (2009). 1688: The First Modern Revolution. Yale University Press.
- Pincus, S. C. A., & Robinson, J. A. (2014). What really happened during the Glorious Revolution? In S. Galiani & I. Sened (Eds.), Institutions, Property Rights, and Economic Growth: The Legacy of Douglass North. Cambridge University Press.
- Stasavage, D. (2003). Public Debt and the Birth of the Democratic State: France and Great Britain, 1688–1789. Cambridge University Press.
- Sussman, N., & Yafeh, Y. (2006). Institutional reforms, financial development and sovereign debt: Britain 1690–1790. The Journal of Economic History, 66(4), 906–935.
- Brewer, J. (1989). The Sinews of Power: War, Money and the English State, 1688–1783. Unwin Hyman.
