This grand bargain—the Revolutionary Settlement of 1689—had far-reaching effects. First, the transfer of power from an absolute monarch to a representative legislative body invigorated the rule of law, the essential soil in which nations thrive economically.18 Second, the establishment of a crown excise tax made it easier for the government to pay off debts, thus making it a better credit risk and dramatically lowering interest rates. As a bonus, lenders perceived that a dominant legislature made up of wealthy bondholders and businessmen was less likely to default on its loans. Between 1690
...more
