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Global Wars, Public Debts, and the Long Cycle

Published online by Cambridge University Press:  13 June 2011

Karen A. Rasler
Political Science at Arizona State University
William R. Thompson
International Relations at Claremont Graduate School
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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.

Research Article
Copyright © Trustees of Princeton University 1983

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1 Wallerstein, Immanuel, The Modern World-System: Capitalist Agriculture and the Origins of the European World-Economy in the Sixteenth Century (New York: Academic Press, 1974)Google Scholar, and The Modern World-System: Mercantilism and the Consolidation of the European World-Economy, 1600–1750 (New York: Academic Press, 1980); Organski, A.F.K. and Kugler, Jacek, The War Ledger (Chicago: University of Chicago Press, 1980)Google Scholar; Doran, Charles F. and Parsons, Wes, “War and the Cycle of Relative Power,” American Political Science Review 74 (December 1980), 947–65CrossRefGoogle Scholar; Chase-Dunn, Christopher, “Interstate System and Capitalist World-Economy: One Logic or Two?International Studies Quarterly 25 (March 1981), 1942CrossRefGoogle Scholar; Gilpin, Robert, War and Change in World Politics (New York: Cambridge University Press, 1981).CrossRefGoogle Scholar

2 On the post-1815 changes in mass participation and resource mobilization, see Howard, Michael, War in European History (London: Oxford University Press, 1976).Google Scholar Many of the advocates of the argument of uneven economic growth, of course, do qualify their discussions. For example, Organski and Kugler (fn. 1), 10, note that they suspect that “war and the preparation for it had much greater effect on development than the other way around” at the inception of the modern international system. Wallerstein (fn. 1, 1980), in his world-system survey and re-interpretation of European economic history, also discusses a variety of factors that are not exclusively economic.

3 Modelski, , “The Long Cycle of Global Politics and the Nation-State,” Comparative Studies in Society and History 20 (April 1978), 214–35.CrossRefGoogle Scholar

4 There is really no need to argue that Portugal's term as a world power is fully comparable with those of its successors. From an evolutionary perspective, the Portuguese era can perhaps best be viewed as a transition period in the movement away from the traditional Mediterranean locus of activity and toward the new Atlantic and northwestern European center in the emerging world system. Each successive world power has enjoyed access to a broader resource base than its predecessors, thereby increasing the potential scope and influence of world power leadership.

5 See Diffie, Bailey and Winius, George, Foundations of the Portuguese Empire, 1415–1580 (Minneapolis: University of Minnesota Press, 1977), 414.Google Scholar

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7 Diffie and Winius (fn. 5), 428.

8 The Dutch were forced to suspend interest payments between 1572 and 1586, however. See Parker, Geoffrey, “The Emergence of Modern Finance in Europe, 1500–1730,” in Cipolla, Carlo M., ed., The Fontana Economic History of Europe: The Sixteenth and Seventeenth Centuries (Glasgow: William Collins Sons, 1974), 573.Google Scholar

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11 The calculations of Dutch global naval capabilities as indicated by the number of warships are based on series discussed in William R. Thompson, “Seapower in Global Politics, 1500–1945: Problems of Data Collection and Analysis,” paper delivered at the annual meetings of the International Studies Association-West and the International Studies Association, Los Angeles, Calif., March 1980; and Thompson, , “Operationalizing Long Cycle Theory: The Basic Problems and Some Proposed Solutions for the Sixteenth and Late Twentieth Centuries,” paper delivered at the annual meeting of the American Political Science Association, New York, N.Y., September 1981.Google Scholar

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14 H. A. Miskimin notes that in 1519, the election of the Holy Roman Emperor required large sums of money for the purpose of bribing the electors. Consequently, the power struggle is said to have degenerated into a test of credit worthiness between Charles V and France's Francis I. See Miskimin, , The Economy of Later Renaissance Europe, 1460–1600 London: Cambridge University Press, 1977), 163–64.Google Scholar

15 The Spanish-English comparison is made in Davis, Ralph, The Rise of the Atlantic Economies (Ithaca, N.Y.: Cornell University Press, 1973), 68.Google Scholar The 17th-century French-English contrast is advanced in Dickson, P.G.M. and Sperling, John, “War Finance, 1689–1714,” in Bromley, J. S., ed., The New Cambridge Modern History: The Rise of Great Britain and Russia, 1688–1725, VI (London: Cambridge University Press, 1970), 285Google Scholar; the 18th-century reference is found in O'Brien, Patrick and Keyder, Calgar, Economic Growth in Britain and France, 1780–1914 (London: George Allen & Unwin, 1978), 5760.Google Scholar The French advantage in total revenues continued until about 1793, although not to the same extent, according to Mathias and O'Brien (fn. 13), 610.

16 Spanish and French debt practices are discussed in Braudel, Fernand, The Mediterranean and the Mediterranean World in the Age of Philip II, II, trans, by Reynolds, Sian (New York: Harper & Row, 1973)Google Scholar; Elliot, John H., Imperial Spain, 1469–1716 (New York: New American Library, 1963)Google Scholar; and Wolf, John B., The Emergence of the Great Powers, 1685–1715 (New York: Harper & Row, 1951).Google Scholar

17 Parker, , Europe in Crisis, 1598–1648 (Ithaca, N.Y.: Cornell University Press, 1979), 73.Google Scholar

18 Ibid., 134.

19 Discussions of the connections between domestic revolts and financial problems can be found in Ardant, Gabriel, “Financial Policy and Economic Infrastructure of Modern States and Nations,” in Tilly, Charles, ed., The Formation of National States in Western Europe (Princeton: Princeton University Press, 1975), 164242Google Scholar; Charles Tilly, “Reflections on the History of European State Making,” ibid., 3–83; Bonney, Richard J., Political Change in France under Richelieu and Mazarin, 1624–1661 (London: Oxford University Press, 1978).Google Scholar Also see Tilly's, paper “Sinews of War” delivered at the Council of European Studies Conference of Europeanists, Washington, D.C., March 1979.Google Scholar

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21 For an introduction to the European development of public credit, see Fryde, E. B. and Fryde, M. M., “Public Credit with Special Reference to North-Western Europe,” in Postan, M. M. and Rich, E. E., eds., The Cambridge Economic History of Europe: Economic Organization and Policies in the Middle Ages, III (London: Cambridge University Press, 1963), 430553Google Scholar; Lane, Frederic C., Venice and History: The Collected Papers of Frederic C. Lane (Baltimore: The Johns Hopkins University Press, 1966), 8798Google Scholar; and Miller, Edward, “Government Economic Policies and Public Finance, 1000–1500,” in Cipolla, Carlo M., ed., The Fontana Economic History of Europe: The Middle Ages (New York: Harper & Row, 1970), 339–73.Google Scholar

22 On the concept of the world system's lead economy, see Modelski, George, “Long Cycles, Kondratieffs, and Alternating Innovations: Implications for U.S. Foreign Policy,” in Kegley, Charles W. Jr, and McGowan, Patrick, eds., The Political Economy of Foreign Policy Behavior (Beverly Hills, Calif.: Sage, 1981), 6383.Google Scholar

23 The data on the British and U.S. public debts are taken from Mitchell, Brian R. with Deane, Phyllis, Abstract of British Historical Statistics (London: Cambridge University Press, 1962)Google Scholar; Mitchell, Brian R. and Jones, H. G., Second Abstract of British Historical Statistics (London: Cambridge University Press, 1971)Google Scholar; Central Statistical Office, Annual Abstract of Statistics (London: H.M.S.O., 1976)Google Scholar; U.S. Department of Commerce, Historical Statistics of the United States: Colonial Times to 1970 (Washington, D.C.: G.P.O., 1975)Google Scholar; and U.S. Office of the President, Economic Report of the President (Washington, D.C.: G.P.O, 1981).Google Scholar The same sources, as well as Mitchell, Brian R., European Historical Statistics, 1750–1970 (London: Macmillan, 1975)CrossRefGoogle Scholar, and Jastram, R. W., The Golden Constant: The English and American Experience, 1560–1976 (New York: John Wiley, 1977)Google Scholar, were utilized to develop corrective price series expressed in constant 1913 values. Explicit discussions of British and U.S. national debt histories are not all that common. For the British experience, see Hamilton, Earl J., “Origin and Growth of the National Debt in Western Europe,” American Economic Review 37 (May 1947), 118–30Google Scholar; Peacock, Alan T. and Wiseman, Jack, The Growth of Public Expenditures in the United Kingdom (Princeton: Princeton University Press, 1961)Google Scholar; Dickson (fn. 12); Carter, Alice C., The English Public Debt in the Eighteenth Century (London: The Historical Association, 1968)Google Scholar; Roseveare, H., The Treasury: The Evolution of a British Institution (New York: Columbia University Press, 1969)Google Scholar; and Palmer, Stanley H., Economic Arithmetic: A Guide to the Statistical Sources of English Commerce, Industry, and Finance, 1700–1850 (New York: Garland Publishing, 1977).Google Scholar The history of the U.S. national debt is given some attention in Ratchford, Benjamin U., “History of the Federal Debt in the United States,” American Economic Review 37 (May 1947), 131–41Google Scholar, and Myers, M. G., A Financial History of the United States (New York: Columbia University Press, 1970).Google Scholar

24 The stakes involved in global wars are discussed in Thompson, William R., “Uneven Economic Growth, Systemic Challenges, and Global Wars,” International Studies Quarterly 27 (September 1983).CrossRefGoogle Scholar

25 Box, and Tiao, , “Intervention Analysis with Applications to Economic and Environmental Problems,” Journal of the American Statistical Association 70 (March 1975), 7092.CrossRefGoogle Scholar

26 Box, G.E.P. and Jenkins, G. M., Time Series Analysis: Forecasting and Control (San Francisco: Holden-Day, 1970).Google Scholar The effects of auto-correlation in ordinary least squares will result in inefficient parameter estimates. See Hibbs, Douglas A. Jr, “Problems of Statistical Estimation and Causal Inference in Time Series Regression Models,” in Costner, Herbert L., ed., Sociological Methodology, 1973–1974 (San Francisco: Jossey-Bass, 1974) 252–89Google Scholar, and Wonnacott, Ronald J. and Wonnacott, Thomas H., Econometrics, 2d ed. (New York: John Wiley, 1979).Google Scholar The original source on quasi-experimental designs is Campbell, Donald T. and Stanley, Julian C., Experimental and Quasi-Experimental Designs for Research (Chicago: Rand McNally, 1966).Google Scholar

27 See McCleary, Richard and Hay, Richard A. Jr, Applied Time Series Analysis for the Social Sciences (Beverly Hills, Calif.: Sage, 1980), 141203Google Scholar, for a more extensive but still readable discussion of Box-Tiao procedures. A previous application of these models to the relationship between global war impacts and price fluctuations may be found in Thompson, William R. and Zuk, Gary, “War, Inflation, and Kondratieff's Long Waves,” Journal of Conflict Resolution 26 (December 1982), 621–44.CrossRefGoogle Scholar

28 Since controlling for inflation tends to slow the immediate impact of wars on real national debt data, the martial interventions have been lagged one, two, or three years in the equations reported in Tables 4 and 5. Parameters reported as statistically significant, in addition, have been re-estimated after removing insignificant parameters. Finally, the reader is cautioned that the reported parameters are not standardized. Parameter coefficients therefore are not strictly comparable between separate series.

29 The functional form of an abrupt, temporary intervention is

where: ω0 = an estimate of the difference between pre- and post-intervention process levels

δ = an estimate of the impact's rate of decay

B = a backshift operator which may be interpreted as B(Xt) = Xt = 1 during war; 0 otherwise.

30 British GNP data have been taken from Mitchell (fn. 23, 1975); Veverka, J., “The Growth of Government Expenditures in the United Kingdom Since 1790,” Scottish Journal of Political Economy 10 (February 1963), 111–27CrossRefGoogle Scholar; and Peacock and Wiseman (fn. 23). American GNP data are from Berry, Thomas S., Revised Annual Estimates of American Gross National Product: Preliminary Annual Estimates of Four Major Components of Demand, 1789–1889 (Richmond, Va.: Bostwick Press, 1978)Google Scholar, and U.S. Office of the President (fn. 23).

31 Figure 3 also provides some suggestive support for the idea that each successive world power possesses access to a resource base of increasingly greater scope. Despite the higher absolute level of public debt, the relative debt load of the U.S. has remained at lower levels than that experienced by Great Britain. If Dutch debt data were available for the 17th and early 18th centuries, we might expect to find that their relative debt burden peaks exceeded the peaks associated with the British and American financial histories.

32 There is some parallel here to the destruction of industrial plants in Germany and Japan in World War II, and the comparative advantage of their being forced to construct new and more modern equipment in order to compete with the existing industrial infrastructure of the American victor. Until competitive threats alter the incentive structure, winners are confronted with obsolesence at an earlier point than their defeated former foes, or at least those who are able to reemerge as competitors.

33 Along similar lines, Parker, Geoffrey, in “Warfare,” in Burke, Peter, ed., The New Cambridge Modern History: Companion Volume, XIII (London: Cambridge University Press, 1979), 208Google Scholar, points out that the “lack of money to pay for unlimited war was undoubtedly the critical restraint on military developments before 1800.” Thus, the financial restraint, in one way or another, was operative before, during, and after wars.

34 The decline in the number of American aircraft carriers in the post-1945 era provides a contemporary illustration of this continuing phenomenon.

35 Stein, and Russett, , “Evaluating War: Outcome and Consequences,” in Gurr, Ted R., ed., Handbook of Political Conflict: Theory and Research (New York: Free Press, 1980), 418.Google Scholar