What Price for Your Parliament? Lessons from the Union of Scotland and England

• In Event: Poster Session: Politics and History & International History and Politics
  In Poster Session: Poster Session: Politics and History

Abstract

For what price will a democratic institution vote itself out of existence? Under what conditions can embittered communities come together to form a new nation? I study a fascinating episode from British history that provides remarkable insights into the power of money to motivate the surrender of political power, the creation of new political parties, the formation of new nations and even to compensate for past grievances.

In 1707, the Scottish Parliament ratified the Act of Union. Formally, this act joined Scotland and England to form a new nation, the United Kingdom. In effect, the Scottish Parliament voted itself out of existence. By constructing a novel data set from Scottish archival and biographical records, I reveal how the Act of Union was shaped by the catastrophic failures of the Darien Company, a private company in which many Scottish politicians had lost considerable investments. As far as I am aware, this is the first empirical analysis by any political scientist of this remarkable episode in democratic reform and nation formation.

I first study how the failure of the Darien company reshaped factional alignments within the Scottish parliament. Specifically, I study the emergence of the New Party, a small faction that broke away from the nationalistic Country Party and voted uniformly in favor of union. By exploiting the unique historical context, I employ an instrumental variable strategy to show that politicians who invested in the Darien company were more than twice as likely to join the New Party as non-investors. This effect is both causal and robust to numerous alternative specifications and estimation methods. By joining the New Party, Darien investors had a better chance of receiving financial compensation for their losses than by remaining with the obstructionist Country Party. Ultimately, as part of the 1707 union agreement, England promised to compensate not only all Scots who were owed money by the Scottish Parliament, but also Scots who had lost money investing in the Darien Company. This large payment was known as the Equivalent.

In the second part of my analysis, I determine whether the Equivalent was necessary for union to be passed. My analysis suggests that the Equivalent was critical. Without the promised compensation, Darien investors in the Scottish parliament would have been more likely to vote against union, reversing the result of the vote.

The experiences of Darien investors rendered them uniquely distrustful of English political elites and naturally opposed to any union with England. The English parliament had endeavored to ensure the Darien company would fail and had done nothing to stop the English East India Company interfering with Darien operations. Most egregious was King William’s opposition to the company, which confirmed many Scots’ long-simmering suspicion that their own king only cared for English welfare. These events left Darien Investors feeling betrayed and wronged. I find that Darien investors in the Scottish Parliament were less likely to vote for Union than non-investors, but this could be offset by the financial compensation they would receive from the Equivalent. Darien investors who expected to receive greater compensation were more likely to vote in favor of union than those who received less. Had these investors not received any compensation, my estimates suggest that many investors would have voted no, blocking the Act of Union and sustaining the Scottish Parliament.

These results reveal the sheer power of financial incentives to drive fundamental change in the structure of democratic institutions, whether these be informal institutions (political parties) or formal (the very existence of a parliament). Furthermore, I am able to estimate of the ‘price’ of a politician’s political power and patriotism. The Union of England and Scotland had lasting ramifications for the evolution of British parliamentary democracy, and provides important insights for modern political science.

Author

• Mitchell Harvey, Stanford University