False economy What’s in it for me? Understand what makes the

The affluence of early industrializers like 
England stems from inclusive political 
institutions developed centuries ago.

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In the modern period, one country in particular 
was quick off the blocks to industrialize. England 
had begun the process of industrialization in the 
seventeenth century – and by the nineteenth, it 
was a global superpower.
This begs the question, why England? Well, it all 
came down to the country’s already existing 
political institutions, which gave rise to inclusive 
economic institutions.
The initial foundation for success had been laid 
long before. The signing of Magna Carta in 1215 
had 
established 
an 
embryonic 
English 
Parliament. More critical still, however, was the 
Glorious Revolution of 1688. This enabled 
William III, who was supported by Parliament, to 
oust James II. In return for its support, the now 
British Parliament was given more power, while 
that of the monarchy was reduced.
Unlike monarchs, members of Parliament were 
elected, albeit only by landowners. As a result, 
the elected Parliament served the interests of 
this minority and, in so doing, created inclusive 
economic institutions that encouraged active 
participation in the economy.
Consequently, legally enforceable property 
rights were enshrined in law, and stronger 
protection laws served to incentivize investment 
and innovation.
Parliament also reformed the banking system. 
The Bank of England was established in 1694. 
One of its primary purposes was to provide 
credit to enable British subjects to invest.
The tax system also underwent reform. To 
encourage 
manufacturing, 
taxes 
on 
manufactured goods, such as stoves, were 
abolished. They were replaced by land taxes. An 
expanding state bureaucracy also allowed for 
the more efficient collection of excise taxes. The 
idea was to reinvest taxes and thereby stimulate 
the economy.
So it was that during the eighteenth and 
nineteenth centuries, the country’s infrastructure 
improved radically. First, the canals were built, 
and later railways too. Both these transport 
systems enabled the easy flow of goods and raw 
materials.
All of these factors together facilitated England’s 
rapid industrialization. Manufacturers now had 
the means and the methods to mass produce 
goods. These were shipped around the globe, 
and the resulting profits were taxed and fed back 
into England’s economy.
Capitalism is all good and well, but how did this 
economic boom and its supporting infrastructure 
allow for England’s institutions to become 
increasingly inclusive? Let’s look at that in the 
next blink.