Paths toward the Modern Fiscal State

Paths toward the Modern Fiscal State

Wenkai He
Copyright Date: 2013
Published by: Harvard University Press
https://www.jstor.org/stable/j.ctt2jbwvj
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  • Book Info
    Paths toward the Modern Fiscal State
    Book Description:

    Wenkai He shows why England and Japan, facing crises in public finance, developed the tools and institutions of a modern fiscal state, while China, facing similar circumstances, did not. He's explanation for China's failure at a critical moment illuminates one of the most important but least understood transformations of the modern world.

    eISBN: 978-0-674-07463-7
    Subjects: Economics, Business, Political Science

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. ACKNOWLEDGMENTS
    (pp. vii-xii)
  4. INTRODUCTION
    (pp. 1-23)

    Great economic and political transformations are often associated with the emergence and consolidation of new institutions. However, social scientists are ill equipped to explain the creation of new institutions. The powerful analytical tools developed by rational-choice institutionalists to understand how institutions influence policy outcomes or shape actors’ preference say very little about the dynamic question of their emergence.¹ Moreover, the rise of new institutions often covers a long time span. Thus methods or theories with a short time horizon are ill suited to handle this temporal dimension when seeking a causal explanation.²

    Institutional development is a highly political process as...

  5. 1 CREDIT CRISES IN THE RISE OF THE MODERN FISCAL STATE
    (pp. 24-50)

    In the study of institutional development, both rational choice and historical institutionalists have attempted to apply theories about the functions and distributional effects of institutions to explain changes in existing institutions when socioeconomic contexts vary.¹ Variations in political power among major actors can also lead to changes in existing institutions.² However, this endogenous approach to institutional development is not very helpful to explain the creation of new institutions when their functions and distributional effects are still unknown. The theory of exogenous institutional change, conversely, emphasizes the role of external shocks, such as wars or foreign occupation, in fundamental institutional innovation.³...

  6. 2 ENGLAND’S PATH, 1642 – 1752
    (pp. 51-77)

    In England’s transformation into a modern fiscal state between 1642 and 1752, we can discern a clear sequence in which previous institutional achievements provided a basis for subsequent institutional development. A fiscal state that rested on customs, the monthly assessment (the predecessor of the land tax in 1692), and excises became firmly established after the English Civil Wars. In the Restoration period (1660–1688), the management of the royal government’s ordinary revenue became more centralized; the royal government centrally collected customs in 1672 and excises on liquors in 1683. In fighting the Nine Years War and the War of the...

  7. 3 THE RAPID CENTRALIZATION OF PUBLIC FINANCE IN JAPAN, 1868 – 1880
    (pp. 78-104)

    By the early 1890s, the Japanese government had built centralized institutions to collect indirect taxes on alcohol and manage government finance. This institutional development helped the Japanese government safeguard the convertibility of the banknotes issued by the Bank of Japan and raise long-term domestic loans. These institutions of a modern fiscal state contrast sharply with the fiscal decentralization and low creditworthiness of paper notes only two decades earlier. How shall we account for this achievement?

    The historian Banno Junji characterizes the political development after the Meiji Restoration as a trial-and-error process with multiple possible outcomes.¹ Indeed, the forced opening of...

  8. 4 THE EMERGENCE OF THE MODERN FISCAL STATE IN JAPAN, 1880 – 1895
    (pp. 105-130)

    The credit crisis of nonconvertible paper notes significantly affected both the direction and tempo toward centralization in public finance in early Meiji. As the center had to bear full responsibility for redeeming the notes circulating in the economy, the credit crisis changed the risk distribution between the center and local governments. This motivated the central government to actively search for the means to speed up centralization in tax collection and the management of government spending. Peasant resistance to heavy land taxes made the extraction of more revenue from consumer goods appealing. By 1880, the Japanese government had a centralized bureaucracy...

  9. 5 ECONOMIC DISRUPTION AND THE FAILURE OF PAPER MONEY IN CHINA, 1851 – 1864
    (pp. 131-152)

    Because the Qing government did not cast its own silver coins, it could not use devaluation to mitigate the severe deflation caused by the dearth of domestic silver stocks between the 1820s and 1840s. When the chronic unemployment and depression of these decades finally triggered the Taiping Rebellion in 1851, pressure mounted to meet the increasing military demands. Between 1851 and 1868, total state expenses in putting down the Taiping Rebellion, the Nian Rebellion, and other smaller uprisings in Guangdong, Fujian, and the southwest ran as high as 300 million tael of silver.¹ This was an enormous amount for a...

  10. 6 THE PERSISTENCE OF FISCAL DECENTRALIZATION IN CHINA, 1864 – 1911
    (pp. 153-179)

    Public finance in the post-Taiping period exhibited both significant changes and strong inertia, which cannot be accounted for by simple political conservatism on the part of the Qing government.¹ As we have seen, the high value of silver, which had greatly troubled both the Chinese economy and government finance between the 1820s and 1850s, began to fall after 1858. In the mid-1870s, major Western powers went on the gold standard, the price of silver dropped in the international market, and silver poured into East Asia.² Inflows of silver stimulated the Chinese economy, and the relative cheapness of silver compared with...

  11. CONCLUSION
    (pp. 180-188)

    History is not just a data generator for social scientists to test hypotheses and build formal models. Instead, history should be an integral part of the causal narrative to explain divergent outcomes in institutional development and political transformation. This comparative historical analysis of three episodes of institutional development in England (1642–1752), Japan (1868–1895), and China (1851–1911) is constructed in and through concrete historical contexts. Its causal narrative attempts to account for a specific “great transformation”: the rise of the modern fiscal state. But this approach also holds some general implications for understanding historical causation in complex temporal...

  12. NOTES
    (pp. 189-258)
  13. BIBLIOGRAPHY
    (pp. 259-300)
  14. INDEX
    (pp. 301-313)