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History of English Literature

Notes for his war against France; however, the change in credibility argued by North and Weingast
(1989) looks past William’s reign, so it also requires confidence that William’s successors would
abide by the constitution. A source of long-run confidence was that the Glorious Revolution
reasserted the risk of a monarch losing his throne. William III’s decision tree in 1689 again looked
like Charles II’s in 1660, and Parliament’s threat to remove an offending monarch was becoming
credible.

Notes The seventeenth century had now seen Parliament remove two of the four Stuart
monarchs, and the second displacement in 1688 was much easier than the wars that
ended the reign of Charles I in 1649.

Another lasting change that made the new constitution more credible than the old constitution
was that William and his successors were more constrained in fiscal matters. Parliament’s growing
‘power of the purse’ gave the king less freedom to maneuver a constitutional challenge. Moreover,
Parliament’s fiscal control increased over time because the new constitution favored Parliament in
the constitutional renegotiations that accompanied each succeeding monarch.
As a result, the Glorious Revolution constitution made credible the enduring ascendancy of
Parliament. In terms of the king, the new constitution increased the credibility of the proposition
that kings would not usurp Parliament.

8.2.7 Fiscal Credibility

The second credibility story of the Glorious Revolution was that the increased credibility of the
government’s constitutional structure translated into an increased credibility for the government’s
commitments. When acting together, the king and Parliament retained the power to default on
debt, seize property, or change rules; so why would the credibility of the constitution create
confidence in a government’s promises to the public?
A king who lives within the constitution has less desire to renege on his commitments. Recall that
Charles II defaulted on his debts in an attempt to subvert the constitution, and, in contrast, Parliament
after the Glorious Revolution generously financed wars for monarchs who abided by the
constitution. An irony of the Glorious Revolution is that monarchs who accepted constitutional
constraints gained more resources than their absolutist forebears.
Still, should a monarch want to have his government renege, Parliament will not always agree,
and a stable constitution assures a Parliamentary veto. The two houses of Parliament, Commons
and Lords, creates more veto opportunities, and the chances of a policy change decrease with more
veto opportunities if the king and the two houses have different interests.
Another aspect of Parliament is the role of political parties. For veto opportunities to block
change, opponents need only to control one veto, and here the coalition aspect of parties was
important. For example, the Whig coalition combined dissenting Protestants and moneyed interests,
so each could rely on mutual support through the Whig party to block government action against
either. Cross-issue bargaining between factions creates a cohesive coalition on multiple issues.
An additional reason for Parliament’s credibility was reputation. As a deterrent against violating
commitments today, reputation relies on penalties felt tomorrow, so reputation often does not
deter those overly focused on the present. A desperate king is a common example. As collective
bodies of indefinite life, however, Parliament and political parties have longer time horizons than
an individual, so reputation has better chance of fostering credibility.
A measure of fiscal credibility is the risk premium that the market puts on government debt.
During the Nine Years War (1688-97), government debt carried a risk premium of 4 percent over

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