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Similarly, according to Fang, Chinese patent medicines were becoming increasingly popular in villages and many of these medicines had proper- ties similar to Western pharmaceuticals. One must thus ask: A final issue pertains to regional variation: England, Japan, and China. Harvard University Press, It traces the emergence of the modern fiscal state, an important institutional innovation that enabled governments to centralize tax collection and use revenues to borrow from capital markets on a long-term, ongoing basis.

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Compared to the traditional fiscal state, the modern fiscal state collected taxes efficiently and effectively. More impor- tantly, sizeable and stable revenues increased state capacity to manage economies and stimulated the development of long-term credit instruments.

Yet it did not emerge everywhere and faced many obstacles militating against its development, since maintaining decentralized tax collection was simply cheaper and more convenient in the short-run. How, then, did this important institution emerge?

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Moreover, it challenges prior research in history, economics, political science, and sociology that have postulated other factors—such as warfare, industrialization, elite conflict, or representative government—as being crucial to the rise of the modern fiscal state. First, all had a commercial economy with integrated finan- cial networks to facilitate the extraction and transmission of tax revenues—the fundamen- tal infrastructure for a modern fiscal state. Second, all experienced decades of fiscal problems—the s to the s for England, the s to the s for Japan, and the s to the s for China—that existent institutions could not adequately resolve.

Furthermore, major disruptive events capped off these periods of difficulties —the English Civil Wars in , the Meiji Restoration in , and the Taiping Rebel- lion in Third, as these events exacerbated fiscal pressures, they also forced state actors to experiment with new approaches to public finance.

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During their respective episodes of institutional development, all three possessed the appropriate socioeconomic conditions. Yet while a modern fiscal state emerged in England and Japan, it did not in China. According to He, an important causal mechanism present in the first two cases but not the third was a credit crisis: The credit crisis served as the carrot and stick inducing reform.

Paths toward the Modern Fiscal State

First, because the central gov- ernment issued the credit instruments, it was on the hook for the debt. Bearing all the financial risks for their redemption, the center could not shift the debt onto local govern- ments and thus had an incentive to centralize tax collection.


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Second, because the severity of the credit crisis was so serious, it limited the set of policy choices available to state actors, including writing off the obligation and thereby defaulting. Subsequent chapters look at the individual paths of fiscal reform. In England, the massive debts Parliament incurred to fund wars during the late seventeenth and early eighteenth centuries were the credit crisis that made centralized tax collection an impera- tive chapter 2. In Japan, the unsecured paper notes the Meiji government issued to fund the Restoration served a similar impetus, pushing leaders to centralize tax collection chapters 3—4.

In China, however, no similar credit crisis occurred after the Taiping Rebellion, since unsecured paper notes issued were limited in circulation and quickly withdrawn chapter 5. The Qing government, according to He, had the capacity to create a modern fiscal state during the late nineteenth century, as demonstrated by its successful repayment of the Sino-Japanese War indemnity. JavaScript is disabled for your browser. Some features of this site may not work without it. Paths toward the modern fiscal state: England , Japan , and China Download.

Massachusetts Institute of Technology.

Paths toward the Modern Fiscal State — Wenkai He | Harvard University Press

This dissertation examines the rise of the modem fiscal state, which enabled the state to use centrally collected revenues from indirect taxes to mobilize financial resources either through long-term borrowing or issuing paper notes. The modem fiscal state greatly enhanced state capacity and stimulated financial development; it thus represented a crucial stage in the transformation from early modem to modem state and economy.

My comparative analysis of England, Japan, and China shows multiple sequences and outcomes. All three cases had well-established early modem states and sophisticated market economies.

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Under the pressure of increasing spending demands, state actors conducted similar experiments, such as short-term borrowing, issuing of paper notes, and the collection of taxes upon domestic consumption. England became a modem fiscal state by the s when its government used the revenues from excises and the customs to service its massive long-term debt. Japan made the leap in the late s when tax revenues were employed to back up paper money, i.


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