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England’s Financial Revolution

But the English taxpayer paid a high cost for his country’s military and naval successes. According to the latest comparative data, which are admittedly of shaky reliability, in about 1810, toward the end of the largest and most expensive war in history, England was paying in taxes about 12 percent of its GNP, and in 1812–1815 about 18 percent. This was two or three times the proportion paid in France.7 But since two thirds of this taxation for war fell on the rich, the burden was seen as just.8

If efficient public finance was the major cause of Britain’s military successes, inefficient public finance was the proximate cause of France’s spiral down from defeat to Revolution. By 1716, the French public debt was already larger in relation to annual taxation than that of England would be a century later.9 When it came to borrowing beyond his means, Louis XIV was the Ronald Reagan of his age, although running a deficit in peacetime was a regular habit of the French ancien régime. What made the French tax system so inadequate was that it was thwarted at every turn by France’s peculiar political and social system. Loyalty of different interest groups or whole provinces to the central state was maintained by grants of special privileges and tax exemptions to each group and province. As a result, the state was largely unable to tax industry and commerce, or even the great landlords, and was therefore forced to squeeze what it could out of those least able to pay, namely the small peasants whose incomes and productivity were growing only very slowly, if at all.

Unable to raise enough money from taxes, the French state was obliged to pay for war not only by short-term loans at high rates of interest, but also by selling more and more tax-exempt hereditary offices. As elsewhere in Europe, this practice of the sale of hereditary offices had become common in the sixteenth and seventeenth centuries, since it was the only way fledgling early modern states could finance great wars at a time when they were still too weak to impose taxation. It caused a permanent and cumulative drain on future government finances to pay the salaries of thousands of superfluous officials. The result is known as the “tax-office state,” a phrase that is applicable to much of the third world today, where bloated bureaucracies exist merely to provide employment and thus discourage rebellion.

The cumulative result of these fiscal failures over two centuries precipitated the summoning of the Estates General in 1789, and so opened the way to the French Revolution. The French state was thus in the end destroyed by fiscal collapse, caused by the “patrimonial” political and administrative system which had so long kept it going.

America provides a third example of the critical importance of public finance. When the London politicians perceived that the British would not willingly be taxed any more heavily to pay for war, they were induced after 1760 to try to force the American colonists to pay for the defense of their own precarious frontiers. This was not an unreasonable demand, but it was made tactlessly and arrogantly, and without stopping to think whether the financial benefit would exceed the political cost. The attempt ran up against the cherished principle of no taxation without representation—itself a legacy of the English Glorious Revolution—and led directly to the American Revolution and the consequent loss to Britain of its American colonies. Boring and recondite though it may be, public finance thus clearly matters, and Brewer is right to make it the prime concern of his book.

The Sinews of Power is not flawless. Since the book only covers the period between 1688 and 1783 it leaves out the traumatic climax to the story of the great hundred-and-twenty-year conflict with France, the prolonged and staggeringly expensive struggle between 1793 and 1815. This means that the most impressive fiscal achievements of the English state remain unexplored. All earlier wars had been paid for predominantly by borrowing: according to one calculation not used by Brewer, up to 75 percent of the cost of war between 1702 and 1783 was raised by loans, left to be repaid by future generations.10 The younger Pitt, however, was opposed to such profligacy, and finally managed to push through an income tax. As a result, only 40 percent of the cost of the wars between 1793 and 1815 was paid for by loans on the future, despite the fact that they were by far the most expensive wars ever fought.11

Brewer also fails to tell his readers enough about how politicians and the public perceived these wars at the time. We need to know more about the support given by different parts of English society for a land war in Europe to secure the Low Countries from occupation by any great power, and to preserve the balance of power; for a sea war to open up commerce; and for the creeping territorialism that created the new Empire in India. To do this would involve a more careful treatment of the prevailing culture, ideology, and mental attitudes of the British public. John Bull is nowhere mentioned, and there is no discussion of that spirit of fierce, vainglorious nationalism so evident in 1763. Nor are we told whether there was a countervailing philosophy of Little England—or Little Britain—arising out of the old antistatist ideology of the partisans of “Country.” And how did the politicians and professional administrators regard the state they served? Did they all agree with the plainspoken brutality of Robert Walpole: “I believe…that force is necessary for the support of government”? How far, and when, did there evolve a loyalty to the principle of public service for its own sake, rather than for personal advantage? Was Robert Walpole the last English politician to make a huge fortune out of the holding the highest office? And if so, why? Brewer discusses these matters briefly, but we still do not know all the answers.

Brewer may be exaggerating when he claims that the key offices for carrying on war, the Excise Office to raise the money, the Treasury to distribute it, and the Navy Office and Admiralty to spend it, were to an impressive extent efficient and immune to the “Old Corruption” that was the norm in other branches of government. For example, one has only to look at the huge country house of Duncombe Park, erected by the first two (hereditary) Receivers-General of the Excise, Sir Charles and Thomas Duncombe, to have doubts about the degree of success Parliament really had in curbing corruption in the Excise Office. One can also ask how Sir George Downing, the speculative builder of Downing Street, and the two Foxes, Stephen and Henry, acquired their huge fortunes from holding high office in financial departments. Moreover, although it is clear that the administrative system was designed to make cheating very difficult, excise men were not exactly respected figures in eighteenth-century folklore. They were looked upon rather as traveling salesmen were in the 1930s, as predatory, venal, and lecherous seducers of lonely housewives whose husbands were out at work. If we dismiss tax collectors as exceptions to a rule of diligent probity, one can still ask why, in the navy, officers were appointed through patronage, and in the army through a systematized sale of offices. Brewer himself admits that hereditary office-holding proliferated in the Treasury and the Navy Board. None of this sounds very “modern,” or particularly meritocratic or efficient.

Although Brewer certainly discusses the debate between the landed and the monied interests up to 1715, doubts, fears, criticisms, and open opposition to war thereafter have only a minor part in his story. Yet in 1749, Lord Bath observed, “the Army causes Taxes; the Taxes cause Discontents, & the Discontents are Alleged to make an Army necessary. Thus you go in a circle.” In 1761, just as England was winning one victory after another in the Seven Years’ War, a gloomy Tory commented:

our expenses to carry on the war are beyond conception, millions after millions must and will be raised, and not a word said about it; and it is difficult, however, to know how we shall be able to carry on the war much longer, or how to make a safe and honourable peace.12

One would like to know how many influential gentry felt the same way.

Nevertheless, Brewer has unquestionably written an extremely important book. Although other scholars have anticipated him in working out the details of the financial revolution, he is the first to bring to the center of attention the formidable fiscal and war-making capacities of the eighteenth-century British state. Brewer has thus twice changed the direction of British historiography: once, in 1976, when he destroyed the Namierite mythology of rule by a narrow self-centered elite; and with this book now, when he destroys the old Whig myth of a weak state. A handful of talented historians may change their discipline once. Brewer has now done it twice.

He also explains how and why the English managed to preserve their domestic liberties, while ruthlessly crushing opposition elsewhere—as in Ireland and Scotland—and conquering a world-wide empire. He convincingly argues that in fact the two went together, that the peculiar events of the Glorious Revolution of 1688 led not only to a prolonged war with France, but also made possible the development in England of a Dutch banking system and of parliamentary control of the purse and the army. The British state was able to borrow almost without limit for violent military and naval aggression to conquer markets and sea lanes, and to crush all rivals. And yet at the same time the close control of Parliament over both taxation and the standing army encouraged internal prosperity and preserved domestic freedom and tranquility. It was a remarkable feat, and the comparison with Periclean Athens, so dear to contemporary Whigs, perhaps has a ring of truth to it. Only fifth-century Athens, eighteenth- and nineteenth-century Britain, and late-twentieth-century America have managed to pull it off.

Brewer defines this historically rare political structure as “the fiscal-military state.” But this is surely a meaningless tautology, since all states the world has ever seen have raised taxes and fought wars. One of the things that made eighteenth-century Britain unique is not mentioned by Brewer: local government in England raised and distributed large sums of money—about 1 percent of the GNP—for a very extensive welfare system of relief for those who otherwise could not support themselves. One estimate is that in about 1810 a million English citizens were on the poor-relief rolls, many of them the wives and children of men away at the war. Thus the state both paid the husbands to fight and kept the wives and children from starving.13 I would therefore suggest that the eighteenth-century British state is better defined as the first “warfare-welfare state” of the modern world, a model that has become the norm in advanced societies in the twentieth century.

  1. 7

    Peter Mathias and Patrick K. O’Brien, “The Impact of the Revolutionary and Napoleonic Wars, 1793–1815, on the Long-run Growth of the British Economy,” Review, Fernand Braudel Center, Vol. 12 (1989), p. 342; P. Mathias and P. O’Brien, “Taxation in Britain and France, 1715–1810: A Comparison of the Social and Economic Incidence of Taxes collected for the Central Government,” Journal of European Economic History, Vol. 5 (1976).

  2. 8

    Patrick K. O’Brien, “The Political Economy of British Taxation,” p. 13.

  3. 9

    Letter of Professor Jack Goldstone (August 21, 1989); the unpublished data is taken from his forthcoming book on Revolution and Rebellion in Early Modern Europe.

  4. 10

    Peter Mathias and Patrick K. O’Brien, “Taxation in Britain and France,” p. 623.

  5. 11

    Peter Mathias and Patrick K. O’Brien, “Taxation in Britain and France,” p. 623.

  6. 12

    Jeremy Black, “England’s Foreign Alliances in the Eighteenth Century,” pp. 586, 601.

  7. 13

    Peter Lindert, Modern Fiscal Redistribution: Preliminary Essay, Agricultural History Center, University of California, Davis, Working Paper Series 55 (1989), figure 4 and footnote 21.

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