The Reformation was a turning point in history.Many scholars have argued that it played a crucial role stimulating economic growth, liberal ideas, and institutional change. However, assessing these claims is challenging because identifying the effects of the Reformation is extremely difficult.

The schism between Reformed and Catholic Christianity coincided with so many other developments that clear chains of causation are difficult to pick out. Many important events occurred between the invention of the printing press circa 1450 and 1648 when the Thirty Years' War ended. Stronger and more centralized political units emerged in France, Spain, the Netherlands, and England. The New World was discovered, and colonial empires were established.

We describe how, in conjunction with the rise of more powerful and centralized states in Western Europe, the Reformation undermined the equilibrium of conditional toleration that we outlined in Part 1. By significantly increasing religious diversity across Europe, the Reformation placed pressure on existing systems of conditional toleration. Keeping Jewish communities confined to ghettos was something an early modern city could manage, but separating Catholics from Protestants would often prove too much. The larger the polity in question – and themore involved the government was in people's lives – the more severe the problem of heterogeneity became.When the pressure was too great, civil conflict, always a possibility, became a terrible reality. The years followingMartin Luther's declaration of independence from Rome saw some of the most savage acts of religious violence Europe had ever experienced. Violence and unrest instigated political reform; however, many rulers decided to abandon the use of identity rules and religion to legitimate rule, relying instead on more secular institutions that were founded on more general rules.

The states that emerged out of the inferno of persecution and violence of the sixteenth century differed fundamentally from their medieval predecessors, and these differences would have important consequences for economic development and the rise of liberalism. In the Dutch Republic, Great Britain, and to a lesser extent, France, the enforcement of strict religious conformity ceased to be viable by the eighteenth century. All three of these polities were relatively powerful and centralized, qualitatively different from their medieval predecessors even if to modern eyes they appear to have been riddled with cronyism and corruption. All of these societies saw fierce religious persecution in the decades after 1517.