The Wealth of a Nation: Institutional Foundations of English Capitalism

The Princeton Economic History of the Western World #122

by Geoffrey M. Hodgson

How the development of legal and financial institutions transformed Britain into the world’s first capitalist country

Modern capitalism emerged in England in the eighteenth century and ushered in the Industrial Revolution, though scholars have long debated why. Some attribute the causes to technological change while others point to the Protestant ethic, liberal ideas, and cultural change. The Wealth of a Nation reveals the crucial developments in legal and financial institutions in the seventeenth and eighteenth centuries that help to explain this dramatic transformation.

Offering new perspectives on the early history of capitalism, Geoffrey Hodgson describes how, for the emerging British economy, pressures from without were as important as evolution from within. He shows how intensive military conflicts overseas forced the state to undertake major financial, administrative, legal, and political reforms. The resulting institutional changes not only bolstered the British war machine―they fostered the Industrial Revolution. Hodgson traces how Britain’s war capitalism led to an expansion of its empire and a staggering increase in the slave trade, and how the institutional innovations that radically transformed the British economy were copied and adapted by countries around the world.

A landmark work of scholarship, The Wealth of a Nation sheds light on how external factors such as war gave rise to institutional arrangements that facilitated finance, banking, and investment, and offers a conceptual framework for further research into the origins and consolidation of capitalism in England.

Genres: Economics, History

304 pages, Hardcover

Published September 26, 2023

Reviews

[Nikhil · Rating 4 out of 5]

Many books attempt to answer, and will certainly continue to answer, the question of why England hosted the Industrial Revolution. Hodgson offers a survey of some key explanations before providing his own argument that the mutual development of law and finance played a key role. While I see technology as a crucial mover here, I was convinced by his view that these were vital preconditions. Without finance, the expansion of productive activities would have been constrained and slower, hence not really leading to the "revolution" in technical change that was in fact witnessed. A valuable contribution.

[Richard Marney · Rating 4 out of 5]

What drives institutional change and how do evolving institutions contribute to economic development are questions to which literally hundreds of thousands of pages of academic research have be devoted. So why another long, dense tome? Dr. Hodgson's work is an important contribution to the topic area and worth the long slog.