Three Centuries of the National Debt

The National Debt was made possible shortly after the Glorious Revolution, when William III arranged to sell debt securities through a syndicate of London merchants. The syndicate became the Bank of England, and the securities founded the National Debt.

Chart 4.01: National Debt 1900-2020 Chart 4.02: National Debt 1692-2020

When charted in pounds sterling, in Chart 4.01, the National Debt looks huge. Looking back over the last century, the debt back in 1900 doesnt really register. But by charting debt as a percent of gross domestic product (GDP) in Chart 2, you get a look at government debt compared to the size of the economy at the time.

Chart 4.02 tells, in stark detail, the story of the British Empire. It was built on the National Debt. Throughout the 18th century the National Debt grew and grew, from nothing at the end of the 17th century to about 60 percent of GDP by the end of the War of Spanish Succession in 1715.

In mid-century the Carnatic Wars in India, the Seven Years War against France and the American War of Independence caused another ratchet in National Debt up to 156 percent of GDP in 1784.

But that was just the beginning. The Revolution in France and the subsequent Napoleonic Wars led to another explosion in military spending and the National Debt rose to 237 percent of GDP in 1816 after the battle of Waterloo. The rest of the 19th century was spent in drawing the debt down, to a low of 25 percent of GDP in 1914. That was just before the outbreak of the Great War in Europe.