Different Paths to the Modern State in Europe: The Interaction between Domestic Political Economy and Interstate Competition

Abstract

Theoretical work on state formation and capacity has focused mostly on early modern Europe and on the experience of western European states during this period. While a number of European states monopolized domestic tax collection and achieved gains in state capacity during the early modern era, for others revenues stagnated or even declined, and these variations motivated alternative hypotheses for determinants of fiscal and state capacity. In this study we test the basic hypotheses in the existing literature making use of the large date set we have compiled for all of the leading states across the continent. We find strong empirical support for two prevailing threads in the literature, arguing respectively that interstate wars and changes in economic structure towards an urbanized economy had positive fiscal impact. Regarding the main point of contention in the theoretical literature, whether it was representative or authoritarian political regimes that facilitated the gains in fiscal capacity, we do not find conclusive evidence that one performed better than the other. Instead, the empirical evidence we have gathered lends supports to the hypothesis that when under pressure of war, the fiscal performance of representative regimes was better in the more urbanized-commercial economies and the fiscal performance of authoritarian regimes was better in rural-agrarian economies.

The Rise of Effective States in Europe

“…The establishment of effective states was a centuries-long process. As K. Kivanc Karaman and Şevket Pamuk (2013), Noel Johnson (2006), and Johnson and Mark Koyama (2014) show, fiscal change did in fact occur under the Old Regime. Yet the magnitudes of early fiscal improvements are relatively small.…”

“…By contrast, Patrick O'Brien (2011) argues that the true source of England's fiscal success was the political consensus struck by elites to promote order and stability during the 1640s. Karaman and Pamuk (2013) claim that the relationship between parliamentary reform and fiscal strength depends on a pre-condition: elites must be willing to trade higher tax burdens for fiscal control in the first place. They find that parliamentary bargains were more likely in commercial-oriented urban societies (e.g., the Dutch Republic).…”

Standardizing the Fiscal State: Cabal Tax Farming as an Intermediate Institution in Early-Modern England and France

“…2 1 See for example Tilly (1990); Bonney (1999); Ertman (1997); Bonney (1995); Chanda and Putterman (2007); Persson (2009, 2011); Kiser and Kane (2001); Dincecco (2009Dincecco ( , 2011Fukuyama (2011); O'Brien (2011); Dincecco (2011); Karaman and Pamuk (2011); ; Gennaioli and Voth (2011).…”