Abstract:North's and Weingast's focus on the importance of a ruler's credible commitment to protecting property rights has become the standard approach to states' role in economic growth and been supported e.g. by the "legal origins" literature (LaPorta et al., 1998(LaPorta et al., , 2008 which argued that post-Glorious Revolution English institutions were particularly conducive to economic growth. But growth depends not only investor protection (legal capacity) but also the ability of the state to finance itself, "fiscal capacity". Persson, 2009, 2010) show that the protection of private property rights and that of public property rights to taxation are linked and likely co-evolutionary. However, the precise relation between the two is anything but clear. This paper argues that North and Weingast's model's one-sided focus on state coercion threatening private property rights has obscured the relation between coercion used in revenue collection and the role of fiscal capacity. Our very simple model shows that the relationship between fiscal capacity and legal capacity is not linear, especially in the phase of nation state building. Before 1800 states faced one of two very different central challenges. 1) States that already exhibited high levels of coercion had to try to keep in check the ruler's potential for predation as North and Weingast argued. 2) States that used very low levels of coercion faced a coordination problem instead of a predation issue. The case of Spain provides empirical evidence for the existence of states were an increase in coercion would have improved fiscal capacity, but high levels of legal capacity paradoxically prevented the ruler from adopting this path. Finally, we use financial market developments to show the serious welfare implications that resulted from such a lack of coordination and integration.