I tit ti
Institutions
and
d economic
i growth.
th
ƒ Why did some countries create efficient institutions?
ƒ Why did others create inefficient institutions?
1
France.
France
ƒ Charles VII takes over
a destroyed country
after Hundred Years
W
War,
1422.
1422
ƒ Medieval sources of
revenue depleted by
war.
Creating
eat g nation
at o state
ƒ C
requires large and
growing revenues.
Jean Fouquet, portrait of Charles VII of
France, c. 1444. The Louvre, Paris.
2
France.
France
ƒ Charles effective in
restoring order.
ƒ Estates General must
approve levies.
ƒ Estates anxious to
restore order
order.
ƒ Special right to levy
turns into a permanent
right.
i ht
ƒ Excluding nobles and
clergy from taxation.
Jean Fouquet, portrait of Charles VII of
France, c. 1444. The Louvre, Paris.
3
France.
France
ƒ Guilds become fiscal
agents for the crown.
ƒ Taxation more
effective.
p
JP system
y
in
ƒ Compare
England.
ƒ Strengthens guilds.
ƒ Administrative
bureaucracy.
Jean Fouquet, portrait of Charles VII of
France, c. 1444. The Louvre, Paris.
4
Colbertism.
Colbertism
ƒ Jean
Jean-Baptiste
Baptiste Colbert.
ƒ Finance minister under Louis XIV
(1661-83).
ƒ Colbertisme synonymous with
mercantilism.
ƒ Economic reforms.
ƒ Efforts to reduce “particularism
particularism.”
ƒ But favored state monopoly and
industrial control. Origin of
laissez faire.
ƒ Frustrated by royal need for
revenue.
ƒ Prohibitive tariffs lead to war
with the Netherlands.
5
Spain in 1492.
1492
ƒ Reconquest ends with capture of
Granada, last Moorish stronghold.
ƒ Unification and consolidation of
power.
power
ƒ Cortes grant taxing power.
ƒ Taxes increase 20 times between
1470 and
d 1540.
1540
ƒ Expulsion of the Jews (and then
Moriscos in 1609).
)
ƒ Loss of artisanal, commercial, and
agricultural skills.
ƒ Columbus sets sail
sail.
Queen Isabella of Spain. Ruled 1479-1504.
6
The Mestas.
Mestas
ƒ Sheep
Sh
guild.
ild
ƒ Granted Royal privilege in
1273.
ƒ Transhumance rights in
exchange for funds to
finance reconquest.
ƒ Decree of 1501 reserves in
perpetuity all land on which
sheep have ever grazed.
ƒ Effect on enclosure.
ƒ Price controls on cereals.
ƒ Consulado
Cons lado of B
Burgos.
gos
Transhumance routes in Spain.
7
The Spanish empire.
empire
8
The Spanish empire.
empire
ƒ Monopoly
l control.
l
ƒ Casa de Contratación.
ƒ Prohibition
P hibiti off colonial
l i l industry.
i d t
ƒ Bullion and Inflation.
ƒ Looted and mined gold and
silver floods Spain and Europe.
ƒ Prices increase by more than a
factor of three in Spain, and a
factor of five in Brabant and
England.
9
The Spanish empire.
empire
120
100
80
60
40
20
15
01
15
11
15
21
15
31
15
41
15
51
15
61
15
71
15
81
15
91
16
01
16
11
16
21
16
31
16
41
16
51
0
Index of silver imported to Seville
Seville, 1501-1660
1501-1660. (1591-1600=100).
(1591-1600=100)
Source: John H. Munro, “The Monetary Origins of the ‘Price
Revolution.’”
10
The decline of Spain.
Spain
ƒ Revenues.
Revenues
ƒ Americas less than 20 percent.
ƒ Netherlands largest
g
source.
ƒ Costs.
ƒ Far exceed revenues.
ƒ Hapsburgs spend on military
and wars to expand empire.
ƒ Effects.
Effects
ƒ Borrowing and bankruptcy.
ƒ Fiscal spiral.
Titian, Charles V Seated (1548).
Pinakothek Munich.
ƒ Confiscation, monopoly, sale of
titles.
11
The Netherlands.
Netherlands
ƒ Passes from Burgundy to
the Hapsburgs (1477).
ƒ Both Burgundians
g
and
Hapsburgs encourage
growth and trade.
ƒ Small taxes on many items
in exchange for secure
property rights.
ƒ Discourage monopolies
monopolies,
guilds.
ƒ The goose that lays the
golden
ld eggs??
The Netherlands in 1543.
12
The Netherlands.
Netherlands
ƒ Increased exactions lead to
successful rebellion (1572-1581).
ƒ Antwerp sacked; commercial
leadership moves to Amsterdam.
ƒ By 17th century, Dutch become
commercial leaders of Europe.
ƒ Economic diversification.
ƒ The Dutch East India Company
(1602).
ƒ “The First Modern Economy.”
Replica of Henry Hudson’s schooner, the Half Moon.
13
England.
England
ƒ Government funded as an
extended household.
ƒ Expenditures
p
exceed revenues
from Crown lands.
ƒ Sale of land to meet shortfall.
ƒ Eli
Elizabeth
b th sells
ll 25 per centt after
ft 1588
war with Spain.
ƒ James I sells another 25 per cent.
ƒ Charles I (1625-1641) sells the rest.
ƒ Parliament controls taxes and
customs
customs.
King James I (ruled 1603-1625).
14
Stuart England.
England
Stuarts seek revenue outside parliamentary control
control.
ƒ New customs impositions.
ƒ Sale
S l off monopolies.
li
ƒ Expansion of peerage.
ƒ Packing the House of Lords
Lords.
ƒ James: a baronet for £1,095; price
later falls to £220.
ƒ Loans secured under threat.
ƒ Purveyance.
King Charles I (ruled 1625-1641).
ƒ Charles I seizes £130,000 of bullion
stored in the Tower of London (1640).
15
Stuart England.
England
ƒ Parliament
a a e t withholds
t o ds revenues.
e e ues
ƒ Demands respect for traditional
property rights.
ƒ C
Common Law
L
courts
t oppose
monopolies.
ƒ Coke invokes Magna Carta.
ƒ Charles responds with Royal
Prerogative.
ƒ
ƒ
ƒ
ƒ
Prerogative courts.
Special laws for individuals.
Star Chamber
Chamber.
Fires Coke and other judges.
Sir Edward Coke (1552-1634).
16
The English Civil War.
War
ƒC
Coalition
liti builds
b ild against
i t
the Crown.
ƒ Marginal incentive to
support the king declines
as costs of other people’s
people s
privileges mount.
Execution of Charles I (1649).
ƒ Unlike continental
monarchs, English king
has no standing army.
army
17
The English Republic.
Republic
ƒ Star Chamber Abolished.
Abolished
ƒ Restrictions against
monopolies enforced
enforced.
ƒ Regular standing parliament.
ƒ Royal
Ro al administrative
administ ati e
mechanisms abolished.
ƒ Act of 1660 abolished feudal
tenures, effectively making
England a fee simple society.
Oliver Cromwell (1599-1658).
18
The Restoration.
Restoration
ƒ Cromwell unable to find a
stable form of government.
ƒ Son proves a poor successor.
successor
ƒ Stuarts restored to power
(1660).
ƒ Royal abuses begin again.
ƒ “Rechartering”
Rechartering the Whigs out
of parliament.
King Charles II (ruled 1660-1685).
ƒ James II turns on his own
followers (1686-88).
19
The Glorious Revolution.
Revolution
ƒ Parliament welcomes
invasion by William of
Orange
g and Mary,
y,
Protestant daughter of
James II.
ƒ Parliamentary supremacy.
ƒ Fiscal revolution underpins
political revolution.
ƒ A self-enforcing
constitution.
William III (ruled
1689-1702.
1689
1702.
Mary II (ruled
1688-1694).
20
A self-enforcing
self enforcing constitution.
constitution
ƒ Required parliament
parliament’ss assent for major
policy changes.
ƒ Allowed wealth-holders to veto what wasn’t in
their interest.
ƒ Ways of reneging unilaterally eliminated.
ƒ
ƒ
ƒ
ƒ
Limited Crown sources of funds.
funds
Audit expenditures.
Prerogative courts abolished.
J di i l tenure.
Judicial
t
John Locke (16321704 ). Published
Two Treatises of
Government (1690).
(1690)
ƒ Self enforcing.
ƒ Credible threat of dethronement.
21
The fiscal revolution.
revolution
ƒ Parliament agrees to put
government on sound
financial footing
g in
exchange for veto power.
ƒ Evidence: lenders now
willing to supply funds.
ƒ After 1688, government has
access to unprecedented
d
d
funds.
1688
ƒ Tenfold increase, 16881697.
William III (ruled
1689-1702.
1689
1702.
Mary II (ruled
1689-1694).
22
The fiscal revolution.
revolution
ƒ The Glorious Revolution
as a “business merger”
between Britain and the
Netherlands.
ƒ Alliance with the House of
Orange allows Britain to tap
into sophisticated Dutch
financial capabilities.
ƒ Territorial market-splitting
between Dutch and British
E t IIndia
East
di Companies.
C
i
William III (ruled
1689-1702.
1689
1702.
Mary II (ruled
1689-1694).
23