Hostname: page-component-76fb5796d-2lccl Total loading time: 0 Render date: 2024-04-28T06:28:58.832Z Has data issue: false hasContentIssue false
  • English
  • Français

STATE CAPACITY AND ECONOMIC GROWTH: CAUTIONARY TALES FROM HISTORY

Published online by Cambridge University Press:  21 February 2023

Sheilagh Ogilvie
Sheilagh Ogilvie*
Affiliation:
All Souls College, Oxford, United Kingdom
*
E-mail: sheilagh.ogilvie@all-souls.ox.ac.uk
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper uses economic history to probe the relationship between state capacity and economic growth during the Great and Little Divergences (c.1500–c.1850). It identifies flaws in the dominant measure of state capacity, fiscal capacity, and advocates instead analysing state expenditures. It investigates five key activities on which states historically spent resources: waging war; providing law and administration; building infrastructure; pursuing industrial policy; and fostering a national culture. The lesson of history, it concludes, is not to build a capacious state. Rather, we need a state that uses its capacity to help (or at least not hinder) market activity.

Keywords

state capacityeconomic historytaxationbureaucracyindustrial policyN40H7H10L50L9
Type
Lecture
Information
National Institute Economic Review , Volume 262 , Autumn 2022 , pp. 28 - 50
Copyright
© The Author(s), 2023. Published by Cambridge University Press on behalf of National Institute Economic Review

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

This article is based on the Prais Lecture on Productivity 2021, given on 25 November 2021

References

Alesina, A., Baqir, R. and Easterly, W. (1999), ‘Public goods and ethnic divisions’, Quarterly Journal of Economics, 114, 4, pp. 1243–84.CrossRefGoogle Scholar
Alesina, A., Giuliano, P. and Reich, B. (2021), ‘Nation-building and education’, Economic Journal, 131, 638, pp. 2273–303.CrossRefGoogle Scholar
Auriol, E. and Warlters, M. (2005), ‘Taxation base in developing countries’, Journal of Public Economics, 89, 4, pp. 625–46.CrossRefGoogle Scholar
Besley, T. and Persson, T. (2009), ‘The origins of state capacity: Property rights, taxation, and politics’, American Economic Review, 99, 4, pp. 1218–44.CrossRefGoogle Scholar
Besley, T. and Persson, T. (2011), Pillars of Prosperity: The Political Economics of Development Clusters, Princeton: Princeton University Press.Google Scholar
Besley, T. and Persson, T. (2013), ‘Taxation and development’, in Auerbach, A.J., Chetty, R., Feldstein, M. and Saez, E. (eds), Handbook of Public Economics, Amsterdam: Elsevier, pp. 51–110.CrossRefGoogle Scholar
Bogart, D. (2009), ‘Turnpike trusts and property income: New evidence on the effects of transport improvements and legislation in eighteenth-century England’, Economic History Review, 62, 1, pp. 128–52.CrossRefGoogle Scholar
Bogart, D. (2014), ‘The transport revolution in industrializing Britain’, in Floud, R., Humphries, J. and Johnson, P. (eds), The Cambridge Economic History of Modern Britain, Cambridge: Cambridge University Press, pp. 368–91.CrossRefGoogle Scholar
Bogart, D., Drelichman, M., Gelderblom, O. and Rosenthal, J.-L. (2010), ‘State and private institutions’, in Broadberry, S. and O’Rourke, K. (eds), The Cambridge Economic History of Modern Europe. Volume 1, 1700–1870, Cambridge: Cambridge University Press, pp. 368–91.Google Scholar
Bonney, R. (1999), The Rise of the Fiscal State in Europe, c.1200–1815, Oxford: Oxford University Press.CrossRefGoogle Scholar
Brewer, J. (1989), The Sinews of Power: War, Money and the English State, 1688–1783, London: Unwin Hyman.Google Scholar
Britnell, R.H. (1998), ‘The English economy and the government, 1450–1550’, in Watts, J.L. (ed), The End of the Middle Ages? England in the Fifteenth and Sixteenth Centuries, Stroud: Sutton, pp. 89–116.Google Scholar
Broadberry, S. (2016), ‘When and how did the great divergence begin?’, in Paper Presented at the Fifth Asian Historical Economics Conference, Seoul National University, Seoul, September 2–3, 2016.Google Scholar
Broadberry, S., Guan, H. and Li, D.D. (2018), ‘China, Europe, and the great divergence: A study in historical national accounting, 980–1850’, Journal of Economic History, 78, 4, pp. 955–1000.CrossRefGoogle Scholar
Broadberry, S., Guan, H. and Li, D.D. (2021), ‘China, Europe, and the great divergence: A restatement’, Journal of Economic History, 81, 3, pp. 958–974.CrossRefGoogle Scholar
Broadberry, S. and Wallis, J.J. (2016), ‘Shrink theory: The nature of long run and short run economic performance’, University of Oxford, 4 April 2016.Google Scholar
Capra, C. (1999), ‘The Italian states in the early modern period’, in Bonney, R. (ed), The Rise of the Fiscal State in Europe c.1200–1815, Oxford: Oxford University Press, pp. 417–42.Google Scholar
Carlitz, R., Morjaria, A. and Mueller, J. (2022), ‘State-building in a diverse society’, CEPR Discussion Papers, DP17735.CrossRefGoogle Scholar
Chang, H.-J. (2002), Kicking Away the Ladder: Development Strategy in Historical Perspective, London: Anthem.Google Scholar
Charles, L., Daudin, G. and Marzagalli, S. (2022), ‘In the epicentre of the storm? The effects of the revolution and warfare on the French economy, 1789–1815’, in O’Brien, P.K. (ed), The Crucible of Revolutionary and Napoleonic Warfare and European Transitions to Modern Economic Growth, Leiden: Brill, pp. 50–81.Google Scholar
Conway, S. (2014), ‘The eighteenth-century British army as a European institution’, in Linch, K. and McCormack, M. (eds), Britain’s Soldiers: Rethinking War and Society, 1715–1815, Liverpool, Liverpool University Press, pp. 17–38.CrossRefGoogle Scholar
Cornell, A., Knutsen, C.H. and Teorell, J. (2020), ‘Bureaucracy and growth’, Comparative Political Studies, 53, 14, pp. 2246–82.CrossRefGoogle Scholar
Costa, L.F., Lains, P. and Miranda, S.M. (2016), An Economic History of Portugal, 1143–2010, Cambridge, Cambridge University Press.CrossRefGoogle Scholar
Davies, B. (2013), ‘Military engineers and the rise of imperial Russia’, in Lenman, B.P. (ed), Military Engineers: The Development of the Early Modern European State, Edinburgh, Edinburgh University Press, pp. 201–15.Google Scholar
De Vries, J. (2012) ‘Review of R. Bin Wong and Jean-Laurent Rosenthal, before and beyond divergence: The politics of economic change in China and Europe’, American Historical Review, 117, 1, pp. 165–6.CrossRefGoogle Scholar
Dincecco, M. and Federico, G. (2022), ‘Napoleon in Italy: A legacy of institutional reform?’ in O’Brien, P.K. (ed), The Crucible of Revolutionary and Napoleonic Warfare and European Transitions to Modern Economic Growth, Leiden: Brill, pp. 141–70.Google Scholar
Dincecco, M., Fenske, J. and Onorato, M.G. (2019), ‘Is Africa different? Historical conflict and state development’, Economic History of Developing Regions, 34, 2, pp. 209–50.CrossRefGoogle Scholar
Dincecco, M. and Katz, G. (2016) ‘State capacity and long-run economic performance’, Economic Journal, 126, 590, pp. 189–218.CrossRefGoogle Scholar
Dincecco, M. and Onorato, M. (2016), ‘Military conflict and the rise of urban Europe’, Journal of Economic Growth, 21, 3, pp. 259–82.CrossRefGoogle Scholar
Easterly, W. and Levine, R. (1997), ‘Africa’s growth tragedy: Policies and ethnic divisions’, Quarterly Journal of Economics, 112, 4, pp. 1203–50.CrossRefGoogle Scholar
Echávarri Otero, J., de la Guerra Ochoa, E., Chacón Tanarro, E., Muñoz Sanz, J. L., Bautista Paz, E., Álvarez Redondo, J. R., Díaz Lantada, A. and Munoz-Guijosa, J. M. (2012), ‘Royal manufactures promoted by the Spanish crown during the 18th and 19th centuries: An approach to European industrialisation’, in Koetsier, T. and Ceccarelli, M. (eds), Explorations in the History of Machines and Mechanisms, Dordrecht: Springer, pp. 55–68.CrossRefGoogle Scholar
Eloranta, J. (2005), ‘Military spending patterns in history’, in Whaples, R. (ed), EH.Net Encyclopedia. https://eh.net/encyclopedia/military-spending-patterns-in-history.Google Scholar
Filipczak-Kocur, A. (1999), ‘Poland-Lithuania before partition’, in Bonney, R. (ed), The Rise of the Fiscal State in Europe, c. 1200–1815, Oxford: Oxford University Press, pp. 443–79.CrossRefGoogle Scholar
Goenaga, A., Sabaté, O. and Teorell, J. (2018), ‘War and state capacity in the long nineteenth century’, STANCE Working Paper Series 2018, 6, Lund University.Google Scholar
Harris, R. (2004), ‘Government and the economy, 1688–1850’, in Floud, R. and Johnson, P. (eds), The Cambridge Economic History of Modern Britain, Volume 1: Industrialisation, 1700–1860, Cambridge: Cambridge University Press, pp. 204–37.CrossRefGoogle Scholar
Henriques, A., Freire Costa, L. and Palma, N. (2022), ‘Anatomy of a premodern state’, Economics Discussion Paper Series, EDP-2208, University of Manchester.CrossRefGoogle Scholar
Hoffman, P.T. (1994), ‘Early modern France, 1450–1700’, in Hoffman, P.T. and Norberg, K. (eds), Fiscal Crises, Liberty, and Representative Government, 1450–1789, Stanford: Stanford University Press, pp. 226–53.CrossRefGoogle Scholar
Hoffman, P.T. (1996 ) Growth in a Traditional Society: the French Countryside, 1450–1815, Princeton: Princeton University Press.CrossRefGoogle Scholar
Hoffman, P.T. (2012), ‘Why was it Europeans who conquered the world?’, Journal of Economic History, 72, 3, pp. 601–33.CrossRefGoogle Scholar
Hoffman, P.T. (2015), ‘What do states do? Politics and economic history’, Journal of Economic History, 75, 2, pp. 303–32.CrossRefGoogle Scholar
Hoffman, P.T., Monson, A. and Scheidel, W. (2017), ‘Public economics and history: A review of Fiscal regimes and the political economy of premodern states, Edited by Andrew Monson and Walter Scheidel’, Journal of Economic Literature, 55, 4, pp. 1556–69.CrossRefGoogle Scholar
Horn, J. (2015), Economic Development in Early Modern France: the Privilege of Liberty, 1650–1820, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Johnson, N.D. and Koyama, M. (2017), ‘States and economic growth: Capacity and constraints’, Explorations in Economic History, 64, 1–20.CrossRefGoogle Scholar
Karaman, K.K. and Pamuk, Ş. (2010), ‘Ottoman state finances in European perspective, 1500–1914’, Journal of Economic History, 70, 3, pp. 593–629.CrossRefGoogle Scholar
Karaman, K.K. and Pamuk, Ş. (2013), ‘Different paths to the modern state in Europe: The interaction between warfare, economic structure, and political regime’, American Political Science Review, 107, 3, pp. 603–26.CrossRefGoogle Scholar
Kisch, H. (1959), ‘The textile industries of Silesia and the Rhineland: A comparative study of industrialization’, Journal of Economic History, 19, 4, pp. 541–64.CrossRefGoogle Scholar
Kiser, E. and Levi, M. (2015), ‘Interpreting the comparative history of fiscal regimes’, in Monson, A. and Scheidel, W. (eds), Fiscal Regimes and the Political Economy of Premodern States, Cambridge: Cambridge University Press, pp. 557–71.CrossRefGoogle Scholar
Körner, M. (1999), ‘The Swiss confederation’, in Bonney, R. (ed), The Rise of the Fiscal State in Europe, c. 1200–1815, Oxford: Oxford University Press, pp. 327–57.Google Scholar
Koryś, P. and Tymiński, M. (2021), ‘Economic growth on the periphery: Estimates of GDP per capita of the congress kingdom of Poland (for years 1870–1912)’, European Review of Economic History, 26284-301.Google Scholar
Koyama, M. (2022), ‘Legal capacity’, in Jenkins, J. A. and Rubin, J. (eds), The Oxford Handbook of Historical Political Economy, Oxford: Oxford University Press.Google Scholar
Kroener, B.R. (2000), ‘The modern state and military society in the eighteenth century’, in Contamine, P. (ed), War and Competition between States, Oxford: Oxford University Press, pp. 195–220.CrossRefGoogle Scholar
Lewis, M.E. (2015), ‘Early imperial China, from the Qin and Han through Tang’, in Monson, A. and Scheidel, W. (eds), Fiscal Regimes and the Political Economy of Premodern States, Cambridge: Cambridge University Press, pp. 282–307.CrossRefGoogle Scholar
Liu, W.G. (2015), ‘The making of a fiscal state in Song China, 960–1279’, Economic History Review, 68, 1, pp. 48–78.CrossRefGoogle Scholar
Maddison, A. (2010), ‘Statistics on World Population, GDP and Per Capita GDP, 1–2008 AD’, available online at http://www.ggdc.net/MADDISON/oriindex.htm [accessed 5 December 2022].Google Scholar
Malinowski, M. and van Zanden, J.L. (2017), ‘Income and its distribution in preindustrial Poland’, Cliometrica, 11, 3, pp. 375–404.CrossRefGoogle Scholar
Mann, M. (1986), The Sources of Social Power, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Mathias, P. (2011), The Transformation of England: Essays in the Economic and Social History of England in the Eighteenth Century, Abingdon: Routledge.Google Scholar
Milhaud, C. (2019), ‘Review of Dincecco and Onorato, From warfare to wealth: The military origins of urban prosperity in Europe’, Economic History Review, 72, 1, pp. 419–20.CrossRefGoogle Scholar
Mirabeau, G.-H.D.R. (1788), De la monarchie prussienne sous Frédéric le Grand, Paris: Le Jay fils/Maradan.Google Scholar
O’Brien, P.K. (1988), ‘The political economy of British taxation, 1660-1815’, Economic History Review, 41, 1, pp. 1–32.CrossRefGoogle Scholar
O’Brien, P.K. (2022), ‘Britain’s wars with France 1793–1815 and their contribution to the consolidation of Its industrial revolution’, in O’Brien, P.K. (ed), The Crucible of Revolutionary and Napoleonic Warfare and European Transitions to Modern Economic Growth, Leiden: Brill, pp. 22–49.CrossRefGoogle Scholar
O’Rourke, K.H. (2006), ‘The worldwide economic impact of the French Revolutionary and Napoleonic wars, 1793–1815’, Journal of Global History, 1, 1, pp. 123–149.CrossRefGoogle Scholar
Ogilvie, S. (2000), ‘The European economy in the eighteenth century’, in Blanning, T.W.C. (ed), The Short Oxford History of Europe, Vol. XII: The Eighteenth Century: Europe 1688–1815, Oxford: Oxford University Press, pp. 91–130.Google Scholar
Ogilvie, S. (2005), ‘The use and abuse of trust: The deployment of social capital by early modern guilds’, Jahrbuch für Wirtschaftsgeschichte/Economic History Yearbook, 2005, 1, pp. 15–52.Google Scholar
Ogilvie, S. (2011), Institutions and European Trade: Merchant Guilds, 1000–1800, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Ogilvie, S. (2019), The European Guilds: An Economic Analysis, Princeton: Princeton University Press.Google Scholar
Ogilvie, S. and Carus, A.W. (2014), ‘Institutions and economic growth in historical perspective’, in Durlauf, S. and Aghion, P. (eds), Handbook of Economic Growth, Amsterdam: Elsevier, pp. 405–514.Google Scholar
Oldland, J. (2019), The English Woollen Industry, c.1200–c.1560, London: Routledge.CrossRefGoogle Scholar
Ormrod, W.M. (1999), ‘England in the middle ages’, in Bonney, R. (ed), The Rise of the Fiscal State in Europe, c. 1200–1815, Oxford: Oxford University Press, pp. 18–52.CrossRefGoogle Scholar
Osafo-Kwaako, P. and Robinson, J. A. (2013), ‘Political centralization in pre-colonial Africa’, Journal of Comparative Economics, 41, 1, pp. 6–21.Google Scholar
Palma, N. and Reis, J. (2019), ‘From convergence to divergence: Portuguese economic growth, 1527–1850’, Journal of Economic History, 79, 2, pp. 477–506.CrossRefGoogle Scholar
Pamuk, Ş. (2006), ‘Estimating economic growth in the Middle East since 1820’, Journal of Economic History, 66, 3, pp. 809–28.CrossRefGoogle Scholar
Pamuk, Ş. (2017), ‘Incomes in South East Europe since 1500 in comparative perspective’, In Paper Presented at the Center for Liberal-Democratic Studies, Belgrade, June 14, 2017.Google Scholar
Pamuk, Ş. (2019), Uneven Centuries: Economic Development of Turkey since 1820, Princeton: Princeton University Press.CrossRefGoogle Scholar
Pamuk, Ş. (2021), ‘The rise of state capacity in Europe, Asia and the rest of the world since 1500’, In Paper Presented at the Quantitative History Webinar, University of Hong Kong, 23 September 2021.Google Scholar
Pamuk, Ş. and Shatzmiller, M. (2014), ‘Plagues, wages, and economic change in the Islamic Middle East, 700–1500’, Journal of Economic History, 74, 1, pp. 196–229.CrossRefGoogle Scholar
Pfister, U. (2022), ‘War, state growth, and Germany’s transition to post-Malthusian growth.’ in O’Brien, P.K. (ed), The Crucible of Revolutionary and Napoleonic Warfare and European Transitions to Modern Economic Growth, Leiden: Brill, pp. 82–113.Google Scholar
Prados de la Escosura, L. and Santiago-Caballero, C. (2022), ‘The Napoleonic wars: A watershed in Spanish history’, in O’Brien, P.K. (ed), The Crucible of Revolutionary and Napoleonic Warfare and European Transitions to Modern Economic Growth, Leiden: Brill, pp. 171–204.Google Scholar
Queralt, D. (2019), ‘War, international finance, and fiscal capacity in the long run’, International Organization, 73, 4, pp. 713–753.CrossRefGoogle Scholar
Ridolfi, L. and Nuvolari, A. (2021), ‘L’histoire immobile? A reappraisal of French economic growth using the demand-side approach, 1280–1850’, European Review of Economic History, 25, 3, pp. 405–28.CrossRefGoogle Scholar
Roberts, M.W. (1968), ‘Grain taxes in British Ceylon, 1832–1878: Problems in the field’, Journal of Asian Studies, 27, 4, pp. 809–34.CrossRefGoogle Scholar
Roche, D. (1998), Journal de ma vie: Jacques-Louis Ménétra, compagnon vitrier au XVIIIe siècle, Paris: A. Michel.Google Scholar
Rosenthal, J.-L. and Wong, R.B. (2011), Before and Beyond Divergence: The Politics of Economic Change in China and Europe, Cambridge, MA: Harvard University Press.CrossRefGoogle Scholar
Rosevear, A., Bogart, D. and Shaw-Taylor, L. (2022), ‘Government, trusts, and the making of better roads in early nineteenth century England and Wales’, Working papers, 22–23-01, UCI Department of Economics.Google Scholar
Rutkowski, M. (2017), ‘Primary principles of a compulsory public works system (Corvée) in the construction, repair and maintenance of the communication network of the Kingdom of Poland and other former Polish territories ruled by Tsarist Russia’, Scientific Journal of Silesian University of Technology: Series Transport, 96, 161–73.Google Scholar
Sainsbury, D. (2020a), ‘Toward a dynamic capability theory of economic growth’, Industrial and Corporate Change, 29, 4, pp. 1047–65.CrossRefGoogle Scholar
Sainsbury, D. (2020b), Windows of Opportunity: How Nations Make Wealth, London: Profile Books.Google Scholar
Sargent, T.J. and Velde, F.R. (1995), ‘Macroeconomic features of the French revolution’, Journal of Political Economy, 103, 3, pp. 474–518.CrossRefGoogle Scholar
Scott, H. (2009), ‘The fiscal-military state and international rivalry during the long eighteenth century’, in Storrs, C. (ed), The Fiscal-Military State in Eighteenth-Century Europe: Essays in Honour of P. G. M. Dickson, Aldershot: Ashgate, pp. 23–54.Google Scholar
Spoerer, M. (2008), ‘The revenue structures of Brandenburg-Prussia, Saxony and Bavaria (fifteenth to nineteenth centuries): Are they compatible with the Bonney-Ormrod model?’ in Cavaciocchi, S. (ed), La fiscalità nell’economia europea secc XIII - XVIII: atti della ‘Trentanovesima Settimana di Studi ’, Florence: Firenze University Press.Google Scholar
Szostak, R. (1991), The Role of Transportation in the Industrial Revolution: a Comparison of England and France, Montreal: McGill-Queen’s University Press.CrossRefGoogle Scholar
‘t Hart, M. and Joor, J. (2022), ‘Revolutionary wars and economic change in the new state of the Netherlands, 1795–1815’, in O’Brien, P.K. (ed), The Crucible of Revolutionary and Napoleonic Warfare and European Transitions to Modern Economic Growth, Leiden: Brill, pp. 114–40.Google Scholar
Tanimoto, M. (2019), ‘From “feudal” lords to local notables: The role of regional society in public goods provision from early modern to modern Japan’, in Masayuki, T. and Wong, R.B. (eds), Public Goods Provision in the Early Modern Economy, Berkeley: University of California Press, pp. 17–37.CrossRefGoogle Scholar
Torres Sánchez, R. (2007), ‘Possibilities and limits: Testing the fiscal-military state in the Anglo-Spanish war of 1779–1783’, in Torres Sánchez, R. (ed.), War, State and Development: Fiscal-Military States in the Eighteenth Century, Pamplona: Ediciones Universidad de Navarra, pp. 437–60.Google Scholar
Townsend, J. (1791), A Journey through Spain in the Years 1786 and 1787, London: C. Dilly.Google Scholar
Van Neuss, L. (2015), ‘Why did the industrial revolution start in Britain?’, SSRN Working papers, 2696076.CrossRefGoogle Scholar
Vries, P.H.H. (2015), State, Economy and the Great Divergence: Great Britain and China, 1680s–1850s, London: Bloomsbury.Google Scholar
Wallis, J.J. (2000), ‘American government finance in the long run: 1790 to 1990’, Journal of Economic Perspectives, 14, 1, pp. 61–82.CrossRefGoogle Scholar
Wilson, P.H. (1995), War, State and Society in Württemberg, 1677–1793, Cambridge: Cambridge University Press.CrossRefGoogle Scholar
Wong, R.B. (1997), China Transformed: Historical Change and the Limits of European Experience, Ithaca: Cornell University Press.Google Scholar
Woodside, A. (2009), Lost Modernities: China, Vietnam, Korea, and the Hazards of World History, Cambridge, MA: Harvard University Press.Google Scholar