CHAPTER TWO. The Evolution and Importance of Public Credit

The explanation of the rise and fall of the world system's leading powers in terms of uneven economic development tends to overlook the role of the creation and management of public credit and national debts. Prior to 1815, the Netherlands and Great Britain owed a significant proportion of their respective victories over the larger and wealthier states of Spain and France to the development of competitive financial capabilities. Winning, however, leads to higher absolute debt burdens which, prior to 1945, encouraged postwar reductions in governmental expenditures. In this fashion, world leaders have contributed to the erosion of their preponderant capability positions before the emergence of international rivals. These ideas are elaborated within the context of George Modelski's long cycle of world leadership theory and through a brief review of war-related financial problems between 1500 and 1815 and the consequent development of national debts. The longitudinal analysis of British and American public debt data provides collaborating empirical support.

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The Vote of the Millones (1590)

The Historical Journal ◽

10.1017/s0018246x00021890 ◽

1987 ◽

Vol 30 (1) ◽

pp. 1-20 ◽

Cited By ~ 2

Author(s):

A. W Lovett

Keyword(s):

Western Europe ◽

Government Debt ◽

Low Countries ◽

Charles V ◽

Public Credit ◽

Credit Worthiness

The efforts of Charles V (1500–58) to consolidate and defend his hereditary possessions gave a powerful boost to the development of public credit in western Europe. To meet a scale of expenditure which surpassed anything seen before, Imperial agents had recourse to an entirely new series of financial devices, necessity providing, as it normally did, the spur to invention. Charles V's servants exploited the facilities of the Antwerp Bourse to encourage the investing public to sink its money into government debt rather than commercial enterprises or speculations in commodities. Additional funds were raised on the credit-worthiness of provincial taxgatherers in the Low Countries. Thanks to the ingenuity of his financial advisers, the emperor survived the dramatic collapse of his position in Germany during the spring of 1552; and he was able shortly after to attempt the recovery of the Imperial bishoprics of Metz, Toul and Verdun, which the Lutheran princes had bartered away in their bid for French support.

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Three Territorial State Experiences

States of Credit ◽

10.23943/princeton/9780691140575.003.0007 ◽

2011 ◽

Author(s):

David Stasavage

Keyword(s):

Seventeenth Century ◽

Political Representation ◽

Dutch Republic ◽

Access To Credit ◽

Territorial State ◽

Public Credit ◽

History Of ◽

City State ◽

Territorial States ◽

Strong Control

This chapter examines public credit and political representation in three European territorial states: France, Castile, and Holland. It tackles the following question: If having a representative assembly with strong control over finance had major advantages, then why could territorial states not emulate the institutions present in their city-state neighbors? The chapter first considers the early history of the rentes sur l'Hôtel de Ville and how it set the stage for the French monarchy's frequent difficulty in later obtaining access to credit. It then discusses absolutism in Castile and Castilian public credit in the seventeenth century, along with representative assemblies in the Dutch Republic. The experience of France, Castile, and the Dutch Republic shows that most territorial states faced obstacles in establishing an intensive form of political representation, and thus in gaining access to credit.

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The Evolution and Importance of Public Credit

States of Credit ◽

10.23943/princeton/9780691140575.003.0002 ◽

2011 ◽

Author(s):

David Stasavage

Keyword(s):

Interest Rates ◽

Early Modern Europe ◽

Access To Credit ◽

Public Credit ◽

The Difference ◽

City States ◽

The Cost ◽

Territorial States ◽

New Evidence

This chapter examines why access to credit was important for European states and provides extensive new evidence on the evolution of public credit across five centuries, from 1250 to 1750. The ability to borrow was critical in medieval and early modern Europe because it allowed states to participate in wars, either defensive or offensive. In order to better understand this fact, the chapter analyzes the movement that took place from compulsory to paid service for soldiers, along with opportunities to finance wars through current taxation. It also explains when states first borrowed long-term and measures the cost of borrowing, focusing on interest rates based on nominal rates at issue when these are available, and based on the fiscal proxy when they are not. The chapter highlights the difference between city-states and territorial states, with the former enjoying an apparent financial advantage that allowed them to begin borrowing earlier and to obtain access to lower-cost finance.

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