Download Fiscal Centralization in Early Modern Europe paper presented at the

Another Divergence:
Fiscal Centralization in Early Modern Europe
paper presented at the Eight Conference of the
European Historical Economics Society
September, 4-5, 2009, Geneva
by Kıvanç Karaman
Department of Economics, Bogaziçi University, Istanbul
[email protected]
and
Şevket Pamuk
European Institute, London School of Economics and Political Science
[email protected]
Preliminary; please do not quote without the permision of the authors.
1
Introduction
The early modern era witnessed the formation across Europe of a number of centralized
states that captured increasing shares of their polities’ economic resources as taxes. Those states
that were able to establish and implement a more efficient and centralized system of taxation not
only benefited from greater capacity to deal with domestic challenges, they also enjoyed greater
military success in the international arena. They were also able to shield their economies better
from the large fiscal shocks created by the wars. This process was not universal, however. Not all
states achieved fiscal centralization, and among those that did, its timing and extent varied
significantly. As a result, there emerged, by the second half of the eighteenth century, glaring
differences between the fiscal and military capacities of states that were able to collect more
revenue and those that could not. 1
Tax collection in the early modern era was not at all easy. One can think of a variety
of factors that affected central administrations’ capacity to collect taxes. Size and geography of
the country certainly played an important role. In comparison to a large country with difficult
terrain, it was a lot easier to collect taxes in a small or medium sized country with a relatively
homogeneous terrain. In addition, the capacity to collect taxes increased in proportion to the
degree of urbanization and the size of the urban economy. Similarly, the degree of monetization
and market orientation had a significant impact on the ability to collect taxes even though some
taxes could be collected in kind. Higher levels of income and per capita GDP also made it easier
to collect more taxes, not only in absolute terms, but also as a percentage of per capita income.
In other words, per capita tax revenues increased not only because per capita incomes increased,
but more importantly because administrations achieved the capacity to extract greater shares of a
polity’s income as taxes.
1
For two collections of case studies, R. Bonney (ed.), The Rise of the Fiscal State, 1200-1815,
New York, Oxford University Press, 1999 and C. Storrs (ed.), The Fiscal-Military State in
Eighteenth-Century Europe, Essays in honour of P.G.M. Dickson, Ashgate, 2009; also P. K.
O’Brien and P. Hunt, “England, 1485-1815”, in Bonney, The Rise of the Fiscal State, 53-100 and
S. R. Epstein, Freedom and Growth, The Rise of States and Markets in Europe, Routledge,
London, 2000; for a recent study, see M. Dincecco,“Fiscal Centralization, Limited Government
and Public Revenues in Europe, 1650-1913”, Journal of Economic History, March 2009, Vol. 69,
No. 1, 48-103; a long standing classic on the subject is, C. Tilly, Coercion, Capital and European
States, 990-1990, Oxford: Blackwell, 1990.
2
The growing extractive capacity of central administrations, in turn, relates to intra-state
politics and the relationship between administrations and other stakeholders in taxation. Early
modern states could not employ bureaucracies that functioned based on written regulations,
evaluated on merit and enumerated with fixed wages. 2 Instead, in assessing, collecting and
spending taxes administrations relied on a range of functionaries, officials, corporations, councils,
assemblies and tax farmers. These intermediaries also took part in the military apparatus and
were often major wealth holders in the polity. Due to their role in fiscal and military apparatus,
the intermediaries influenced the size and incidence of the tax burden and captured a significant
portion of tax revenue at the cost of the central treasury through temporary assignments, long
term alienation or embezzlement. 3 Accordingly, there is a close relationship between levels of
central revenue and the changes in the terms of intermediation.
There is an extensive body of literature that identifies the introduction of credible
constraints on executive authority as the critical juncture in domestic politics and fiscal
consolidation. This argument holds that representative regimes were able to apply taxes to
broader sections of the economy and collect more taxes because the representative bodies helped
negotiate and sanction fiscal demands in return for limits on the power of the monarch on the use
of funds, especially during periods of fiscal crises. In contrast, it has been argued, the power of
the so-called absolutist states was not absolute at all. These regimes who retained the control of
expenditure process struggled to collect taxes without such deals with local elites who controlled
large segments of the economy and were able to limit the administration’s access to funds. 4
2
E. Kiser and J. Kane. 2001. "Revolution and State Structure: The Bureaucratization of Tax
Administration in Early Modern England and France", American Journal of Sociology
107(1):183-223.
3
Bonney “Revenues” in Bonney ed. Economic Systems and State Finance, Oxford: Oxford
University Press, 1995.
4
P. T. Hoffman and K. Norberg, “Conclusion”, in Hoffman and Norberg (eds.), Fiscal Crises,
Liberty and Representative Government, 1450-1789, Stanford University Press, Stanford Calif.,
1994, pp. 299-310; P. T. Hoffman and J. Rosenthal, “The Political Economy of Warfare and
Taxation in Early Modern Europe: Historical Lessons for Economic Development”, in J. N.
Drobak and J. V. C. Nye (eds.), The Frontiers of the New Institutional Economics, San Diego,
Calif., 1997, 31-56; J. L. Van Zanden and M. Prak, “Towards and economic interpretation of
citizenship: The Dutch Republic between medievaş communes and modern nation-states”,
European Review of Economic History, 10, 111-45: and more recently, M. Dincecco,“Fiscal
3
In contrast, the literature on military revolution and fiscal military states emphasizes the role
of changes in military technology and related organizational innovations in driving fiscal and
coercive centralization. 5 While the relative importance and exact sequencing of the innovations is
a matter of dispute, this literature has argued that improvements in firearms and artillery
technologies as well as gains in discipline, drill, and tactical capacity of troops favored
centralization of domestic violence and led to massive expansion of centrally administrated and
provisioned infantry units at the cost of decentralized production of cavalry. The timing of the
monopolization of violence lagged in Eastern Europe because until the modern era, cavalry was
the only effective defense against recurring attacks of horse riding archers of the Central Asian
steppe. 6 The process of monopolization of violence and centralization of finances were closely
intervened because centrally administrated troops consume the bulk of the tax revenues and in
turn proved instrumental in eliminating domestic fiscal and judicial fragmentation.
Patterns of Fiscal Centralization in the Early Modern Era
In this section we review the changes in the revenues of leading European states England,
France, the Dutch Republic, Spain, Venice, Austria-Hungary, Prussia, Russia, Poland
and the Ottoman Empire during the early modern era, from the early part of the sixteenth
century until the end of the eighteenth century and then until World War I. For the purposes of
our intertemporal and international analysis, we will first convert all monetary
magnitudes into tons of silver by multiplying the magnitudes in current monetary units
of accounts in each country with the silver content of the unit of account for that year.
Centralization, Limited Government and Public Revenues in Europe, 1650-1913”, this Journal,
March 2009, Vol. 69, No. 1, 48-103.
5
J. Brewer, The Sinews of Power, War, Money and the English State, 1688-1783, London, 1989;
P. K. O’Brien and P. Hunt, “England, 1485-1815”, in R. Bonney (ed.) The Rise of the Fiscal
State in Europe, c. 1200-1815, Oxford University Press, 1999, 53-100, and more recently C.
Storrs (ed.), The Fiscal-Military State; also, Jan Glete “War And The State In Early Modern
Europe: Spain, The Dutch Republic And Sweden As Fiscal-Military States, 1500-1660” and
Richard Bean (1973), “War and the birth of the nation-state”.
6
Kenneth Warren Chase “Firearms: A Global History to 1700”, Azar gat,”War in Human
Civilization”,parker “ Military Innovation and the Rise of the West 1500-1800”, Hoffman “Why
Was It that Europeans Conquered the World?”
4
We will then calculate a number of indicators such as per capita tax revenues in grams
of silver and ratio of per capita tax revenues to daily wages of construction workers. We
have taken great care to apply similar definitions of revenue to all the states, but the limitations
imposed by the variations in accounting procedures and fiscal structures should be kept in mind.
Graphs 1 and 2 present total revenues of the leading European states during the early modern
era. A number of interesting patterns emerge from these graphs. They make clear that revenues of
most European states increased sharply during the seventeenth and especially the eighteenth
centuries. Most striking in this respect were England and Holland but others including Austria
and Russia also experienced significant increases in tax revenues. These large increases in
revenues across Europe led to the emergence of large differences in state revenues between the
Ottomans and most European states. These differences reached their peak, in most cases, during
the second half of the eighteenth century when the revenues not only of the more successful and
more powerful states in western Europe but also those in central and eastern Europe such as
Austrian Monarchy and Russia.
Table 1
Sizes of Armies and Navies of different Countries, 1550-1780 (in thousands)
1550
1700
1780
A
N
A
N
A
N
England
France
Dutch Republic
Spain
Austria
Prussia
Russia
Ottoman Empire
41
43
25
14
145
9
18
0
100
50
76
224
90
37
62
37
52
140
115
118
86
26
0
0
0
30
79
183
27
64
253
181
408
140
109
85
22
62
0
0
19
30
Source: Data set prepared by Peter Brecke,, http://www.inta.gatech.edu/peter/power.html; for the
Ottoman Empire, Rhoads Murphey, Ottoman Warfare, 1500-1780, UCL Press, London, 1999.
As Table 1 makes clear, these increases translated into sharp increases in the size of the
armies across Europe. This long term shift in the fiscal and military balance of power is
consistent with what happened in the battlefield during the early modern era.
5
Decomposing the Emerging Differences in Total Revenues
Equation 1A: Total Tax revenues in Tons of Silver = Total GDP in Tons of Silver * Tax
Revenues as percent of GDP or
Equation 1B: Total Tax revenues in Tons of Silver = Population * Real GDP per capita *
Price Level in grams silver * Tax Revenues as percent of GDP
It would be useful to briefly analyze further the causes of the emerging differences in tax
revenues between the European states. As Equations 1A and 1B make clear, there were four basic
causes of the emerging differences in tax revenues measured in tons of silver. One important
cause was the large differences in population trends. Another cause for the emerging differences
in total revenues in tons of silver was the changing price levels in terms of silver. During the
early modern centuries price levels in northwestern and more generally western Europe,
measured in silver terms increased much more as rising incomes and wages in this region which
pulled up the prices of services and other non-tradable goods. There emerged as a result
significant differences in the price level between western Europe and the rest of the continent. 7
With a higher price level in silver terms, states tended to collect more taxes measured in tons of
silver. While there was a common market for mercenaries in Europe, it is reasonable to assume it
still cost more in northwestern and more generally in Western Europe to buy the same basket of
military goods including soldiers and equipment. In other words, this component of the growing
difference in tax revenues did not necessarily translate into differences in military power.
Equation 1B suggests another potential cause of the growing differences in revenues was the
differences in GDP per capita. Per capita GDP and incomes were rising rapidly in England and
the Dutch Republic during the seventeenth and eighteenth centuries. In contrast, however, per
capita GDP in the rest of the continent did not show any strong trend during the early modern era,
7
Robert C. Allen, “The Great Divergence in European Wages and Prices from the Middle Ages
to the First World War”, Explorations in Economic History, 38, 2001, pp. 411-47; Ozmucur and
Pamuk, “Real Wages”, 2002.
6
rising to some extent in Western Europe but probably declining in southern Europe, especially in
Italy. 8
The final cause of the emerging differences in revenues was the rapidly growing differences
in tax revenues of the central administrations as a percent of GDP or total income. Our
calculations, again subject to some degree of error due to the shortcomings of the existing GDP
per capita estimates for the early modern era, suggest that share of tax revenues of the central
administration as a percent of GDP or total incomes rose in most of the European countries from
less than 5 percent in the sixteenth century to a range between 5 and 10 percent and in a small
number of cases that include Britain and the Netherlands to more than 10 percent by the 1780s. 9
A more reliable way to measure the differences in the capacity of states to collect tax
revenues or the tax burden of the population would be to compare the per capita tax revenues of
the states with the daily wages of unskilled workers. Graph 3 makes clear the same ratio rose
significantly in most European countries during the early modern era.
Increases in the revenue over GDP ratios and in the revenues per capita over the daily wage
ratios in many European countries despite the limited increases in per capita real GDPs during the
early modern era suggest that the increases in the fiscal capabilities of centralized administrations
preceded the rapid economic growth of the 19th century. It is also reasonable to assume that the
gains in revenue over GDP ratios were primarily driven by centralization of taxes rather than
increases in the tax burden per se. As a case in point, the 18th century increase in English revenue
over GDP ratio occurred simultaneously with consolidation of around ninety percent of the gross
tax revenue at the central treasury. Consolidation was achieved by the reforms after 1660,
including unification of tax administration under Treasury Board, abolition of tax farming and
8
Based on Van Zanden, “Early Modern Economic Growth”; also Carlos Alvarez-Nogal and
Leandro Prados de la Escosura, “The decline of Spain, 1500-1850, Conjectural estimates”,
European Review of Economic History, Vol. 11, 2007, pp. 319-66; Angus Maddison, The World
Economy, Historical Statistics, OECD Development Centre, Paris, 200xxx UPDATE ; admittedly
these GDP per capita estimates are not precise but they give a reasonable good idea of the basic
trends.
9
P. K. O’Brien and P. Hunt, “England, 1485-1815”, 53-100.
7
centralization of upkeep of armed forces. 10 To offer a contrast, in Ancien Regime France, it is
estimated that only forty percent of the gross tax collection made it to the central treasury 11 .
If it is indeed the centralization of fiscal administration that drove the gains in revenues,
comparing the figures across polities should help identify underlying determinants. A visible
pattern is that small, densely populated and urbanized polities, such as England, Venice and the
Dutch Republic, had higher per capita revenues than large territorial states like the Ottomans. As
distances from the capital cities increased, the logistics of transferring the tax extraction to the
center and back became more difficult, and a larger share of the gross tax revenue was spent
without entering the central coffers and budgets. In fact, in larger polities, the great share of the
revenues were extracted from core provinces, such as Castile in Spain, pays d’Election in France,
and Anatolia and Balkans in the Ottomans, and outer regions contributed smaller amounts
sporadically. A survey of the polities also suggests territorial empires tended to have larger
agrarian sectors which were harder to monitor and hence necessitated elaborate tax apparatuses
with multiple layers of intermediation that resulted in lower net revenues to the center.
Another determinant of an administration’s fiscal capacity was the size of money stock and
degree of monetization. 12 Monetization was a necessary condition for centralizing finances,
because it allowed transferring revenues to the political center, paying a standing central army or
mercenaries in cash, investing in military technologies and training, and if necessary
redistributing the funds around the country. Had it not been for a thirty-three-fold increase in the
silver coinage in the Old World between 1500 and 1800, centralization of European fiscal
systems might not have occurred. 13 Within Europe, there was a lag in increases in per capita
money stock as one moved from west to east. In the Ottoman case, the trajectory of monetary
system mimics that of the administration’s political fortunes. Ottoman money stock is estimated
10
' O'Brien, Patrick and Hunt, Philip A (1999) “England, 1485-1815”, R. Bonney (ed), The rise of
the fiscal state in Europe, pp. 54-5.
John P. LeDonne, Absolutism and Ruling Class: The Formation of the Russian Political Order,
1700-1825. New York: Oxford University Press, 1991, p. 269
11
12
Tilly, Coercion, Capital and European States, pp. 88-89
13
Michael George Mulhall, The Dictionary of Statistics, Fourth Edition, 1903, pp. 306-10.
8
at 1000-1500 tons of silver at the end of 15th century. 14 France’s money stock at the same period
was around 700 tons, implying a roughly similar per capita money stock. 15
Another major determinant of the fiscal capacity of the states was politics and the
institutional framework that governed the relationship between the central administrations and tax
intermediaries. One body of literature identifies the introduction of credible constraints on
executive authority as the critical juncture in domestic politics and fiscal consolidation. This
argument holds that representative regimes were able to apply taxes to broader sections of the
economy and collect more taxes because the representative bodies helped negotiate and sanction
fiscal demands in return for limits on the power of the monarch on the use of funds, especially
during periods of fiscal crises. In contrast, it has been argued, that the absolutist regimes who
retained the control of expenditure process struggled to collect taxes without such deals with
local elites who were able to limit the administration’s access to funds. 16
In contrast, the literature on military revolution and fiscal military states emphasizes the role
of changes in military technology and related organizational innovations in fiscal centralization. 17
While the relative importance and exact sequencing of the innovations is a matter of dispute, this
literature has argued that improvements in firearms and artillery technologies as well as gains in
discipline, drill, and tactical capacity of troops favored military and fiscal centralization and
provisioned infantry units at the cost of decentralized production of cavalry. The timing of the
monopolization of violence lagged in Eastern Europe because until the modern era, cavalry was
the only effective defense against recurring attacks of horse riding archers of the Central Asian
steppe. 18 The process of monopolization of violence and centralization of finances were closely
14
Pamuk, A Monetary History, pp. 51-2.
Glassman, Debra and Redish, Angela (!985). “'New Estimates of the Money Stock in France,
1493-1680”. The Journal of Economic History XLV, pp. 31 - 46
15
16
Hoffman and Norberg (eds.), Fiscal Crises, Liberty and Representative Government, 14501789; Hoffman and Rosenthal, “The Political Economy of Warfare and Taxation in Early
Modern Europe: Historical Lessons for Economic Development”.
17
Brewer, The Sinews of Power, War, Money and the English State, and Storrs (ed.), The FiscalMilitary State.
18
Kenneth Warren Chase “Firearms: A Global History to 1700”, Azar gat,”War in Human
Civilization”,parker “ Military Innovation and the Rise of the West 1500-1800”, Hoffman “Why
Was It that Europeans Conquered the World?”
9
intervened because centrally administrated troops consume the bulk of the tax revenues and in
turn proved instrumental in eliminating domestic fiscal and judicial fragmentation.
Trends in Fiscal Centralization During the Nineteenth Century
Total and per capita revenues of most European states continued to rise both in grams of silver
and in inflation adjusted terms during the nineteenth century. Not all of this increase was due to
fiscal centralization, however. Most European countries experienced significantly higher rates of
economic growth during the nineteenth century both in absolute terms and in comparison to the
earlier period. The Angus Maddison series suggest that in most western and northwestern
European countries real per capita GDP increased by more than 200 percent during the period
1820-1913. In many of these countries, per capita tax revenues rose more slowly than per capita
income during the nineteenth century. In the countries of southern and eastern Europe, on the
other hand, where it had been more limited before the nineteenth century, fiscal centralization as
measured by tax revenues / GDP or per capita tax revenues / daily wage ratios rose and per capita
revenues of the states rose faster than per capita incomes during the nineteenth century. (See
Graphs 4 and 5)
Bringing Asia In: A Larger Divergence
On the basis of the available evidence from Iran, China and Japan, the pattern of fiscal
centralization in Asia during the centuries up to World War I is consistent with what we have
observed inside Europe. Per capita central revenues in Iran and China present were even lower
than those of the Ottoman Empire during the early modern centuries. Moreover, fiscal
centralization remained limited during the nineteenth century even after taking into account that
the aggregate price levels in terms of silver was lower in east Asia. Not unexpectedly, Japan
exhibits a somewhat different pattern, after low levels of central revenues during the early
modern centuries, per capita revenues increases during the nineteenth century. However, even in
the case of Japan both per capita revenues and the per capita revenues / daily wage ratio are quite
low in comparison to those of western and central European countries during the nineteenth
century. It would be interesting to incorporate the case of Mughal and colonial India into this
comparison.
10
Investigating the Determinants of Central Tax Revenues
In this section we present some very preliminary results of econometric analysis of the
determinants of centralized revenue collection. To investigate the role played by different
variables in the expansion of state revenues, we estimate the following regression equation:
where
,
is the revenue for polity i’s central government at period t in tons of silver,
,
are respectively variables that measure socioeconomic, political and military factors for
polity i at period t, and
heteroskodasticty.
in others.
is the disturbance term that we allow to exhibit autocorrelation and
are polity-specific fixed effects in some specifications and random effects
are 50-year dummies. We only include European polities and the Ottomans in the
regression since at the current stage we lack the data for one or more of the regressors for the
other polities. We present regression results for 16th-18th century and 16th-19th century
separately to address the concern that the political, economic and technological changes in the
19th century fundamentally altered the nature of state. Table 2 on the next page summarizes the
results:
11
TABLE 2: Influence of Socioeconomic, Political and Military Factors on
Central Treasury Revenue
FIXED EFFECT
16 -18 cent. 16th -19th cent.
1
2
3
4
th
MODEL
Log
population
log nominal
Socioeconomic wage
log nominal
Variables
gdp per
capita
urbanization
rate
Constraint on
Executive
Military Threat
1.250***
1.106***
0.465***
0.154***
147
RANDOM EFFECTS
16 -18th cent. 16th -19th cent.
5
6
7
8
th
0.968*** 0.831***
1.118***
1.023***
0.843***
0.538***
0.676*** 0.702***
0.028***
0.551***
constraint on
executive
-0.112
log army size
of other states
weighted by
distance
0.152*
log distance
to central
asian steppe
Observations
th
0.994*** 1.048***
0.853***
0.939***
0.140***
0.013
0.015
0.072***
-0.074
0.024
0.01
-0.134**
0.061
-0.089*
-0.008
0.085
0.262*** 0.13
0.218**
0.213**
0.271***
0.244***
0.521***
0.525***
216
221
0.679*** 0.638***
138
216
199
147
152
*,**,*** refer to 10%, 5% and 1% level of significance. The dependent variable is always
the log central tax revenue.
12
Socieconomic variables in the regressions include population which for most European
polities included in our comparisons increased sharply during the early modern period, doubling
or more than doubling in many cases. 19 In all six specifications population is significant at 1%
level and the coefficients suggest increases in population resulted in roughly proportional
increases in revenue. To proxy for changes in per capita income we either include estimates of
GDP per capita 20 or silver wages. 21 Since the dependent variable revenue is measured in silver,
we adjust the real GDP per capita estimates by multiplying them by indices of silver price level
by Allen (2003). These real GDP per capita estimates are not precise but for our present
purposes, they give a reasonable good idea of the basic trends. In contrast to estimates of GDP,
data for the daily wages of construction workers in the urban centers, especially in the leading
urban centers is much more abundant and much more reliable for all of the European countries.
For all specifications in table 2 these proxies for income are significant at 1% level but less than
unit elastic. In models 1-5 and 7 we also include urbanization rates as regressor. In the literature
urbanization rates are often used as proxies for income but for the current study are also relevant
because they proxy the rise of urban culture, notions of civic duty and breakdown of feudal
obligations. In most specifications coefficients for urbanization are significant with the expected
sign but they also suggest issues of collinearity with other measures of income.
We consider next the evidence on the relevance of constraints on executive which we proxy
with the measure developed by Acemoglu et al. 22 . For models 1-4, 6 and 8 the coefficient is
insignificant and for models 5 and 7 and it is significant but carries the opposite sign from that
19
McEvedy and Jones, Atlas of World Population History; Malanima,“European Population”.
Based on Maddison, The World Economy, Historical Statistics; also Carlos Alvarez-Nogal and
Leandro Prados de la Escosura, “The decline of Spain, 1500-1850, Conjectural estimates”,
European Review of Economic History, Vol. 11, 2007, 319-66;
21
Robert C. Allen, “The Great Divergence in European Wages and Prices from the Middle Ages
to the First World War”, Süleyman Özmucur and Ş. Pamuk, “Real Wages and Standards of
Living in the Ottoman Empire, 1489-1914”, The Journal of Economic History, Vol. 62,
2002, pp. 292-321.
20
22
Acemoglu, D., S. Johnson, and J. Robinson (2005), 'The Rise of Europe: Atlantic Trade,
Institutional Change, and Economic Growth', American Economic Review, 95, (3), 546-579.
13
predicted in the literature. The unexpected result might also be related to strong correlation
between constraint on executive and other measures of economic development.
The variables under military threat the category relate to the body of work that emphasizes
military revolution and fiscal military states. One thread in this literature emphasizes the political
fragmentation in Europe as well as interstate competition and warfare as major causes of
innovations in military technology and organization. It is argued this in turn led to the
centralization of armies and finances. In order to proxy for the military threat level each
administration faced at each period we calculate an index using the available data on army sizes
available for Europe. 23 For each administration we calculated the sum of the sizes of armies of all
other administrations weighted by the distances between the capitals. While the coefficient is not
significant in all specifications, states appear to raise more taxes when rival states build up larger
armies. One potential problem with the proxy for threat is that it might be capturing a common
regional factor that affects all the states in a region and not an interaction between states. We also
plan to construct a second proxy for interstate competition based on the frequency and magnitude
of wars each state was involved it.
A second version of military threat argument puts the emphasis on the Central Asian Steppe
based nomadic mode of warfare and state tradition. After the invention of the stirrup, the nomads
of central Asian steppes gained a significant military advantage over the neighboring settled
populations and formed a lineage of states that included the Ottomans, Mughals and Safavids. It
is argued that for territories adjacent to the steppe, the only effective response against the
recurring attacks of horse riding archers was decentralized upkeep of their own cavalry, since
infantry proved useless against their mobility and the nomads had no cities that could be attacked
with artillery. Poland, Russia and China depended on their own light cavalry and chain of
fortresses with no final solution against the nomads until modernity. For Western Europe,
however, the threat of Arabic light cavalry had subsided by the 15th century, and from the Steppe
it was protected by distance, forested landscape and lack of pastureland, which in turn put it
earlier on a path towards centralized infantry armies and centralized finances. 24
23
Peter Brecke,, http://www.inta.gatech.edu/peter/power.html
Kenneth Warren Chase “Firearms: A Global History to 1700”, Azar Gat,”War in Human
Civilization”.
24
14
To proxy for the threat from the Steppe we include log distance to the steppe as a regressor in
models 5-8 and which is significant at 1% level in all. One qualification for this finding is that to
be able to include time-invariant log distance to steppe variable as a regressor, we allow for
country specific random effects and hence do not adequately control for other unobserved time
invariant heterogeneity that is correlated with some of the variables of interest. Including more of
the relevant time invariant attributes of the polities in the regression or using time variant
measures of the threat from nomadic warriors may help resolve the issue.
Graph 1: Annual Revenues of European States
50-year averages in tons of silver
1800
1600
1400
1200
1000
800
England
France
Spain
Austria
Russia
Prussia
Dutch R
Venice
Ottoman
Poland
600
400
200
0
1500-49
1550-99
1600-49
1650-99
1700-49
1750-89
Graph 2: Annual Revenues per capita
annual averages in grams of silver
180
England
Dutch R
France
Spain
Venice
Austria
120
Russia
Prussia
100
Ottoman
Poland
160
140
80
60
40
20
0
1500-09
1550-59
1600-09
1650-59
1700-09
1750-59
1780-89
Graph 3: Annual Revenue per capita / Daily Urban Wage
20
18
16
England
Dutch R
France
Spain
Venice
Austria
Ottoman
Poland
14
12
10
8
6
4
2
0
1500-09
1550-59
1600-09
1650-59
1700-09
1750-59
1780-89
Graph 4: Annual Revenue per capita in the 19th Century
in grams of gold
30
25
England
Dutch R
France
Spain
Venice
Austria
Russia
Prussia
Ottoman
20
15
10
5
0
1780-89
1820-29
1850-59
1880-89
1900-09
Graph 5: Annual Revenue per capita / Daily Urban Wage
in the 19th Century
30
25
England
Dutch R
France
Spain
Austria
Prussia
Ottoman
20
15
10
5
0
1780-89
1820-29
1850-59
1880-89
1900-09