Creditor Communities and the Emergence of the Tax State

• In Event: Historical Taxation and Representation: Actors and Institutions

Abstract

This paper analyzes how creditors propelled the strengthening of tax institutions in early modern Europe. Around 1600, most European polities used non-state actors to extract revenue. Local notables collected head taxes in the countryside, and tax farmers wrested revenue from more urbanized areas. Over time, many rulers replaced them with salaried bureaucrats, because these agents were more reliable. Sovereigns consequently established primacy over their tax apparatus.

This paper argues that the growing political power of creditors best explains these developments. Creditors sought stronger tax institutions for a few reasons. People who had lent money to the government recognized that greater extractive capacity enhanced the government’s ability to repay them. But creditors who did not loan money to the state also sought robust administration. Stronger tax institutions dampened inflation (thereby supporting the value of their outstanding loans) and assisted revenue diversification, which had multiple benefits, such as supplanting traditional revenue-raising schemes that obstructed economic flows.

To indicate the role that creditors played in these processes, the paper uses survival analysis to scrutinize a novel dataset on seventeen European polities between 1600 and 1900. Overall, this paper emphasizes creditor communities and coalitional politics in the rise of the modern state.

Author

• Ryan Saylor, University of Tulsa