Crises and public debt capacity: the English financial revolution in the 17th and 18th centuries

This remarkable result did not prevent the debt-to-GDP ratio from increasing at a dizzying pace until 1815, in line with the wars with France.

Between 1688 (the Glorious Revolution) and the years 1730-1740, England succeeded in acquiring a considerable debt capacity. This financial revolution was the nerve of the wars that followed until 1815. It anticipated and prepared the industrial revolution, capitalist expansion and British domination. The debt and the debt/GDP ratio were to explode in the 18th century, the latter exceeding 250% in 1815. If there were financial shocks, the sterling and the credit of the state would hold and consolidate. The article shows how this was achieved: an increase in the capacity to raise taxes in connection with the parliamentary takeover, monetary reform accomplished in the crisis of 1694-97, the creation of the Bank of England to support the debt, the policy of transforming the debt into shares of a colonial company, hiving off and restructuring which gave rise to the major speculative drift of the South Sea Bubble.

The contrast between the 18th and 19th centuries is dramatic. After 1815, with British domination assured, priority was given to reducing levies; the amount of debt was reduced only belatedly and moderately. On the other hand, thanks to growth, the debt/GDP ratio will collapse. Until 1914.

The debt-to-GDP ratio falls, but the amount of debt is only reduced late and moderately.