Adam Smith had this idea that ‘commercial society’ made a lot of things better, particularly improving the politics and mores of earlier social structures. As I outlined in a post long ago, he was particularly keen on the way in which the nascent capitalism of his day distributed economic power, and with it political power.
Here’s some research that would have been grist to his mill.
Shares, Coalition Formation and Political Development: Evidence from Seventeenth Century England
By: Jha, Saumitra (Stanford U)
A key challenge for developing societies is to build coalitions across disparate interests in favour of beneficial policies. This paper documents the role of a financial innovation– shares–in aligning disparate interests in favour of representative government during England’s Civil War (1642-48). Using novel micro-data, the paper shows that shareholding was a major determinant of support for political reform by members of parliament. The paper suggests that shares allowed a broad spectrum of investors to benefit from new opportunities overseas. However, overseas rights belonged chiefly to the executive. Thus the introduction of shares aligned incentives in favour of political reforms and overseas policies crucial for growth.