2 - The Origins and Development of Stable Fiscal and Monetary Institutions in England

Summary

INTRODUCTION

There are many explanations for the emergence of the nation-state, and then perhaps many more that try to account for the subsequent material success of these nation-states. Sensibly, since of necessity most of these explanations are complex and roam over the whole range of religious, political, cultural, social, and economic factors. The purpose of this chapter, despite its fairly grand title, is much narrower. It is to investigate one area of explanation that has been offered and to follow a particular aspect of that explanation. The explanation is Douglass North's, on the rise of the West (North, 1981; North and Weingast, 1973). The particular aspect of that explanation is to consider how the core of North's thesis relates to the emergence of stable/successful fiscal and monetary institutions in England. Most of the explanations of the nation-state take some account of the fiscal dimension. Certainly, successful fiscal regimes underpin the role and scope of state activity. And stable monetary arrangements underpin economic growth. They do that by providing financial intermediation, which aids growth, and by contributing more generally to macrostability.

The chapter first sets out (Section 2.2) the essence of the North thesis as it relates to the emergence of institutions in England. This section outlines the role of property rights and transaction costs in the context of the origins of growth in England. Evidence on these aspects is not easy to provide, but the concepts are insightful and suggestive and we try to illustrate how.