Category Archives: 1870-1914

“Standards of living in Europe’s Global Empires” session in the WEHC, Paris 2022

This session has been accepted to the World Economic History Conference, which will happen in Paris in 2021.

Update: Due to COVID-19, this conference will instead take place in the summer of 2022.

Session title: “Standards of living in Europe’s Global Empires”

Organizer: Nuno Palma (University of Manchester; ICS, Univ. de Lisboa; CEPR)

Please notice this program is still subject to changes. I will update it as new information arrives.

Asia

Pim de Zwart (Wageningen University) and Jan Lucassen (International Institute of Social History, Amsterdam): Poverty or Prosperity in Northern India? New Evidence on Real Wages, 1590s-1870s.

Jan Lucassen (IISH, Amsterdam): Deep monetization and real wage developments: India C13th-19th

Africa

Calumet Links (LEAP, Department of Economics, Stellenbosch University), Erik Green (LEAP, Department of Economic History, Lund University), and Dieter von Fintel (LEAP, Department of Economics, Stellenbosch University): Does household structure influence inequality estimates: the case of Khoe of Swellendam 1825.

Kleoniki Alexopoulou (Tuebingen University, Germany) and Filipa Ribeiro da Silva (International Institute of Social History, Amsterdam, The Netherlands): Free and unfree labour migration in Portuguese Africa, 19th- 20th century

Latin America

Tommy E. Murphy (Universidad de San Andrés, Argentina) Truly Bare-Bones: What if Bare Bones Baskets Were Not Fixed?

Angelo Carrara (Universidade Federal do Rio de Janeiro): Living standards of the slave population in mining areas of colonial Brazil

Comparative

Ewout Frankema (Wageningen University): Exploring Long-term Colonial Legacies Through the Lens of Independence: What Can We Learn From Ethiopia and Thailand?

Hélder Carvalhal (Cidehus, Univ. Évora), Paulo Teodoro de Matos (ISCTE-IUL), and Nuno Palma (Univ. Manchester, Univ. Lisboa; CEPR):  Welfare Benchmarks for Portugal’s Global Empire, 1660-1700

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Monetary Policy in Historical Perspective (16th-19th Centuries)

Monetary Policy in Historical Perspective (16th-19th Centuries)

16 October 2020, University of Manchester

UPDATE: Due to COVID-19, this conference will instead take place one year later: Friday 15 October 2021.

Organisers: Dr Stefano Locatelli (History, UoM), Dr Nuno Palma (Economics, UoM)

This event (which I previously mentioned here) is sponsored by the ESRC (Economic and Social Research Council) and the Manchester Jean Monnet Centre of Excellence, and is the second part of a two-part event organised in collaboration with the History Department, the Department of Economics and the Centre for Economic Cultures at the University of Manchester.

Program

9.00-10.00. Keynote: François Velde (Federal Reserve Bank of Chicago), The Neapolitan banks in the context of early modern public banks

10.00-10.20. Coffee break.

11.20-11.40. Nicholas J. Mayhew (Oxford), The medieval roots of the early modern and modern monetary system

10.40-12.00. Kivanç Karaman (Bogaziçi University), The Determinants of the Differences in Price Levels Across Europe, 1300-1914 (with Şevket Pamuk, Malik Çürük, Tilburg and Seçil Yıldırım-Karaman).

12.00-12.20. Mina Ishizu (LSE), How the West India trade fostered the last resort lending by the Bank of England (with Carolyn Sissoko)

12.20-12.40. Adam Brzezinski (Oxford), Monetary Capacity (with R. Bonfatti, K. Karaman and Nuno Palma)

12.40-13.00. Francisco Cebreiro Ares (Universidad de Santiago de Compostela), A Financial Revolution in Spain and the Vales Reales: The History of a Misunderstanding in Monetary Policy at the End of the 18th Century

13.00-14.00 Lunch

14.00-14.20. Felix Ward (University of Rotterdam), The vagaries of the sea: evidence on the real effects of money from maritime disasters in the Spanish Empire (with Adam Brzezinski, Yao Chen and Nuno Palma)

14.20-14.40. Carlos Javier Charotti (University of Manchester), State, Merchants, and the Bank of England during the Seven Years’ War (with Nuno Palma and Carolyn Sissoko)

14.40-15.00. Carolyn Sissoko (University of the West of England), How Post-War Normalization Caused the 1825 Crisis

15.00-15.20. Jan Greitens (Württemberg), Mid-18th Century Monetary Theory and Policy in Prussia: Johann Graumann and Johann Heinrich Gottlob Justi

15.20-15.40 Coffee break

15.40-16.00. Alejandra Irigoin (LSE), The demand for silver specie (dollar coin) in Qing China until the opening of China (Nanjin 1842, Tianjin 1857-59)

16.00-16.20. Matthias Morys (University of York), Taming the Global Financial Cycle: Central Banks and the Sterlization of Capital Flows in the First Era of Globalization (1891-1913) (with Eric Monnet and Guillaume Bazot)

16.20-16.40. Alba Roldan Marin (Universidad de Barcelona), Reconsidering Spanish Economic History During the Classical Gold Standard Era: Short- and Long-term Analyses

16.40-17.00. Meng Wu (LSE), Adjustments and Vicissitudes: Indirect Notes Issuance in Republican China, 1915-1936 (with Xin Dong)

17.00. END OF CONFERENCE, followed by dinner at 19.00.

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What can we learn from two centuries of budget data? (Highlight IV)

This post continues the highlights series. The author is Per F. Andersson, who is a Lecturer at Lund University, and an expert in Comparative Politics, Institutions, and Taxation. He is responsible for the text below, and the amazing dataset he mentions was was put together both by him and by Thomas Brambor.

The data and codebook are available at: https://www.perfandersson.com/data.html

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What can we learn from two centuries of budget data? Introducing the “Financing the State: Government Tax Revenue from 1800 to 2012” dataset – Per F. Andersson

The history of the state is closely linked to the history of taxation. Austrian sociologist Rudolf Goldscheid held that “the budget is the skeleton of the state stripped of all misleading ideologies”, and  Joseph A. Schumpeter went even further, famously stating that “The spirit of a people, its cultural level, its social structure, the deeds its policy may prepare – all this and more is written in its fiscal history, stripped of all phrases. He who knows how to listen to its message here discerns the thunder of world history more clearly than anywhere else ([1918]1991 p. 101).“ If Schumpeter and Goldscheid were right, much can be gained from studying taxation during the last two centuries, an era that saw dramatic changes not only in the extent of taxation but also in economic and political organization.

Given the importance of taxation for understanding politics, state capacity, and economic growth, it is surprising that there is no historical cross-country dataset over government finances. In this post I present an attempt by me and Thomas Brambor to provide this information. The dataset provides information from 31 countries: Argentina, Australia, Austria, Belgium, Bolivia, Brazil, Canada, Chile, Colombia, Denmark, Ecuador, Finland, France, Germany, Ireland, Italy, Japan, Mexico, New Zealand, Norway, Paraguay, Peru, Portugal, Spain, Sweden, Switzerland, the Netherlands, the United Kingdom, the United States, Uruguay, and Venezuela from 1800 (or independence) to 2012. In other words, it includes all South American, North American, and Western European countries with a population of more than one million, plus Australia, New Zealand, Japan, and Mexico.

We make three main contributions. First, we move beyond previous historical studies which focus on Western Europe by including North America, all major countries in South America, and Australia, Mexico, New Zealand and Japan. Second, in contrast to existing modern datasets, usually covering a large number of countries but only for a few decades, our dataset goes back to the early nineteenth century. Third, while previous efforts have concentrated on overall revenue or contrasting direct and indirect taxes, we provide more detailed information allowing for a more comprehensive understanding of the rise of the modern tax state.

This post begins with a short description of how the dataset was put together, and how it differs from previous efforts (for longer discussion see the online codebook available at: https://www.perfandersson.com/data.html). In the second part of the post I demonstrate how the data can be used to explore changes in the size and composition of government revenue during the last two centuries.

Constructing the dataset

The dataset contains information on the public finances of central governments. We focus on tax revenues, defining taxes as compulsory and unrequited levies by the government. The information on tax revenue is presented as a share of the total budget and as a share of total domestic product. We have divided tax revenue from the central state into several categories. First, we are interested in the shares of total revenue coming from direct and indirect taxes. Further, we measure types of direct taxes, namely taxes on property and income. For indirect taxes, we separate excises (taxes on specific goods, such as salt or tobacco), broad-based consumption taxes (such as value-added tax), and taxes on international trade (a complete list of variables and their definitions is available in the codebook.)

Collecting data for a large number of countries over long time spans presents difficult issues regarding measurement and consistency. The overall goal of the data collection has been to create long time series that are internally consistent within a country over time and that connect to contemporary datasets which in turn allow easy continual updates in the future. When different sources of data are combined, there need to be decisions about how to decide which sources to use and how to judge their quality. In addition, using and combining different sources has the potential to introduce measurement error and potentially bias the constructed estimates. In the codebook we describe in detail the decisions about how we integrated disparate sources, and also address a few issues that are relevant for analysis based on these data.

Comparison with related efforts

Previous research using historical tax revenue data either relies on information with a long historical coverage (some even long before 1800, e.g., Dincecco 2009, Karaman and Pamuk 2013) but for a few number of countries — usually Western Europe (Aidt and Jensen 2013), sometimes adding English-speaking off-shoots and Japan (Tanzi and Schuknecht 2000) — or a wide geographic coverage but only for the most recent decades (e.g., Prichard et al. 2014). These efforts rarely provide yearly data (e.g., Tanzi and Schuknecht 2000), or present information only on the size of government (Mauro et al 2013, Karaman and Pamuk 2013).

Many recent papers still rely heavily on Mitchell (2007) (e.g., Beramendi et al. 2019; Lee and Paine 2020). For various reasons we have a different approach which we believe has much to contribute.

Instead of taking existing cross-country databases (such as Mitchell) at face value, we took great pains at comparing and evaluating different sources – often cross checking them with country-specific sources – in order to find as reliable data as possible. During our work we discovered that Mitchell in particular is often unreliable. When comparing the information provided in his volumes with contemporary, high-quality, country-specific data we found two main causes for concern. First, Mitchell is often inconsistent in the way budget items are coded or even which parts of government budgets are presented, which causes problems when interpreting changes over time and across countries. The second problem is that the subcategories of revenues in Mitchell (e.g., direct and indirect taxes) at times sum to more than a hundred percent, which suggest underlying issues in the aggregation process. For these reasons, among others, we have tried to minimize our use of Mitchell as a source, and when we use it, we try to find ways of validating the trustworthiness of his estimates (for example by using country-specific sources).

Overall, a substantial part of our dataset comes from country-specific sources, all listed in the codebook. For users who wish to explore the data in more depth, we also provide detailed information by country allowing analysts to scrutinize by variable which sources were used for every year.

Exploring the data

To begin with, Figures 1 and 2 below present total tax revenues and the share coming from direct and indirect taxes (averages for all countries in the dataset). The figures show how the overall size of the state grew from about six percent of GDP in the nineteenth century to almost twenty percent in the 2000s. During the same period states went from financing themselves mainly through indirect taxes to a more even mix of direct and indirect taxes.

 

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   Figure 1. Central Tax Revenue/GDP

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Figure 2. Share of Direct and Indirect Tax Revenue

However, this general development hides important changes within the categories of direct and indirect taxes. As Figure 3 shows, excises and taxes on international trade were the main sources of indirect tax revenue in the nineteenth century, while broad-based consumption taxes – such as value-added tax – became more important in the late twentieth century. Figure 4 shows the evolution of direct taxes in the same period, documenting how property taxes — an important part of budgets in the nineteenth century — were superseded by income taxes in the twentieth century.

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    Figure 3. Indirect Taxes.

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Figure 4. Direct Taxes.

It is also interesting to observe what happened to taxation around the world during and after major international conflicts. Figure 5 below show total revenues and the share of income taxes — which is considered to be a good indicator of fiscal capacity (e.g., Rogers and Weller 2014) — and three major conflicts: the Napoleonic Wars, the First World War, and the Second World War. While the number of countries for which we have data (and some did not exist at the time) is lower during the Napoleonic wars, it is still interesting to note that the conflict is neither associated with a permanent increase in income tax share nor in the overall size of the state. The two world wars are different. After World War I, the average size of government remained higher than before the war, and this tendency is even stronger after World War II. Looking at the share of revenue coming from income tax, this tendency is much weaker after World War I: while the share increased dramatically during the war, it decreased after the conflict ended (but not all the way down to pre-war levels). In contrast, income tax revenues not only became hugely important during World War II, they also remained so afterwards.

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Figure 5. Size of Government, Income Tax, and War.

Finally, one of the great strengths of our wide geographic coverage is that it allows for comparisons between regions. Figure 6 below shows the evolution of total tax revenues and income tax share between Latin America and Europe.

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Figure 6: The Size of Government and Income Tax in Europe and Latin America

There are several interesting things to note. First, although Latin America does not experience an increase in the income tax share during World War I as Europe does, both regions experience an increase in income tax revenues around the time of World War II. Second, between the end of World War II and the mid-1970s, Europe and Latin America relied to a similar extent on income taxes. But after around 1975, the two regions diverge, both in terms of the income tax share and in terms of total tax revenues.

These are just a couple of examples of what can be explored using our dataset. In my own work I have looked into how democracy and urbanization affect the tax mix (Andersson 2018),  how electoral systems condition the impact of ideology on taxation (Andersson 2019a), and how the adoption of taxes affects fiscal capacity and what types of states make these investments (Andersson 2019b). Thomas Brambor has investigated the legacy effect of non-democratic introductions of the income tax (Brambor 2016).

The data and the codebook are available at: https://www.perfandersson.com/data.html.

References

Andersson, Per F. 2018. “Democracy, Urbanization, and Tax Revenue.” Studies in Comparative International Development 53(1):111–150.

Andersson, Per F. 2019. “Power-sharing and Income Taxation in non-Democratic States.” STANCE Working Paper. Lund University.

Andersson, Per F. 2019. “Left-wing Tax Strategy Depends on the Electoral System.” Working Paper. Lund University.

Aidt, Toke ., & Peter S. Jensen. 2013. “Democratization and the size of government: Evidence from the long 19th century”. Public Choice, 157(3/4), 511-542.

Beramendi, Pablo, Mark Dincecco and Melissa Rogers. 2019. “Intra-Elite Competition and Long-Run Fiscal Development.” The Journal of Politics 81(1):49–65.

Brambor, Thomas. 2016. “Fiscal Capacity and the Enduring Legacy of the First Income Tax Law”. Unpublished manuscript: Lund University.

Dincecco, Mark. 2009. “Fiscal Centralization, Limited Government, and Public Revenues in Europe, 1650–1913.” The Journal of Economic History 69(1):48–103.

Flora, Peter, Franz Kraus, and Winfried Pfenning. 1983. State, Economy, and Society in Western Europe 1815-1975: The growth of industrial societies and capitalist economies, Frankfurt: Campus Verlag.

International Monetary Fund (IMF). 2012. “Government finance statistics (GFS).”

Karaman, K. Kivanc and Sevket Pamuk. 2013. “Different Paths to the Modern State in Europe: The Interaction Between Warfare, Economic Structure, and Political Regime.” American Political Science Review 107(3):603–626.

Lee, Alexander and Jack Paine. 2020. “The Great Revenue Divergence”. Working paper.

Mauro, Paolo, Rafael Romeu, Ariel Binder, and Asad Zaman. 2013. “A Modern History of Fiscal Prudence and Profligacy,” IMF working paper WP/13/5

Mitchell, Brian R. 2007. International historical statistics: Africa, Asia & Oceania, 1750- 2005, 5. ed., New York: Palgrave Macmillan.

, International historical statistics: Europe, 1750-2005, 6. ed., New York: Palgrave Macmillan.

, International historical statistics: the Americas, 1750-2005, 6. ed., New York: Palgrave Macmillan.

Prichard Wilson, Alex Cobham and Andrew Goodall. 2014. “The ICTD Government Revenue Dataset” ICTD Working Paper 19. https://www.wider.unu.edu/sites/default/files/ICTD_WP19.pdf

Rogers, Melissa Ziegler and Nicholas Weller. 2014. “Income taxation and the validity of state capacity indicators.” Journal of Public Policy 34(2):183–206.

Schumpeter, Joseph. 1991. “The Crisis of the Tax State”. In Joseph A. Schumpeter: The Economics and Sociology of Capitalism, ed. Richard Swedberg. Princeton: Princeton University Press. First published in 1918.

Tanzi, Vito & Ludger Schuknecht. 2000. Public spending in the 20th Century. Cambridge, UK: Cambridge University Press.

 

Call for Papers: Monetary Policy in Historical Perspective (16th-19th Centuries)

This has been announced in eh.net and elsewhere but I have not posted it here yet. The deadline is at the end of next week. I will post the program when we have it.

Call for Papers: Monetary Policy in Historical Perspective (16th-19th Centuries)

16 October 2020 – Keynote speakers: Francois Velde (Federal Reserve Bank of Chicago)

Organisers: Dr Stefano Locatelli (History, UoM), Dr Nuno Palma (Economics, UoM)

Submission closes: 31st January 2020 Acceptance notification: 28th February 2020

Abstracts submission: stefano.locatelli@manchester.ac.uknuno.palma@manchester.ac.uk

Registration is free; there will be a limited number of accommodation and travel grants available. Priority will be given to speakers without a faculty position (PhDs and Postdocs). Please, indicate in your email if you need financial support.

To submit papers please email the organisers – include your title and an abstract. There is no need to submit a full paper at this stage, although priority may be given those sending a full text. This workshop will bring together researches interested in exploring different policies and strategies adopted by various actors such as rulers, governments and ordinary people in time of monetary ‘crisis’, as well as normal times, between the 16th and 19th centuries. To what extent did political changes of a territory affects its economy and monetary system and vice versa, and what effects did those ‘local’ changes have on the macro level, i.e. on the process of integration of economic and monetary markets? These are key questions of the proposed event, which also aims at providing a comprehensive discussion of monetary and financial ‘crisis’, taking into account different phenomena such as the provision of precious metals, minting policies, money supply, monetary fluctuations, and financial market integration.

This one-day workshop will be organised on 16th October 2020 and will host Francois Velde (Federal Reserve Bank of Chicago) with a contribution on the Neapolitan banks in the context of early modern public banks.

This event is sponsored by the ESRC (Economic and Social Research Council) and the Manchester Jean Monnet Centre of Excellence, and is the second part of a two-part event organised in collaboration with the History Department, the Department of Economics and the Centre for Economic Cultures at the University of Manchester.

Great fish market, by Jan Brueghel the Elder
Great fish market *oil on panel *58,5 x 91,5 cm *signed b.l.: BRVEGHEL / 1603

Visit to the Quarry Bank Mill

As previously mentioned in this blog, every year I take my “Topics in Economic History” students to see the Quarry Bank Mill in Styal, close to Manchester. This year we visited under the expert guidance of Jamie Farrington, a History PhD student who specializes in the history of the Mill, and Anna-Maria Kohnke, who both joined us under my invitation (thanks Jamie and Anna!). Here are a few pictures of this year’s visit, which I post with the permission of the students who appear.

We started by visiting the environment around the mill, including the cottages where workers lived; look at how tiny was the space where an entire family lived:

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We also saw where workers went to school (the primary school is still functioning as such today), and where they went to Church:

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Look at how small were the beds in which the children lived (there would be 2 children per bed) and about 60 in a not-so-large room (without toilets of course; notice the potty below each bed):

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We saw how children were treated when they were ill, including a live demonstration with leeches:

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We then finally visited the Mill. We saw how technology evolved, from a spinning wheel:

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to more advanced machines, such as the spinning jenny, and those for weaving:

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the staff was helpfully demonstrating how the machines worked:

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We saw how power was produced – mostly a giant waterwheel (100 horsepower), though a (mcuh less potent) Watt steam machine was also present for the days when the water flow wasn’t sufficiently strong (later, more advanced steam engines were also installed, but they were always less powerful than the waterwheel). Here, we are looking at one of the steam engines:

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We then walked a bit on the outside, from where we could see the general view of the mill:

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The yellow house above at the left is the home of the Gregs, the owners of the factory. We visited their home, which has recently opened. Check out their curved door (it was steamed so that this effect was achieved):

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Can autocracy promote literacy? evidence from a cultural alignment success story

What can the XXth century Portuguese experience teach us about the interaction between political regimes and literacy attainment?

Here’s a recent paper on this topic by Jaime Reis and myself. The CEPR version is gated, but you can find a free access version here. Here’s the abstract:

“Do countries with less democratic forms of government necessarily have lower literacy rates as a consequence? Using a random sample of 4,600+ individuals from military archives in Portugal, we show that 20-year old males were twice as likely to end up literate under an authoritarian regime than under a democratic one. Our results are robust to controlling for a host of factors including economic growth, the disease environment, and regional fixed effects. We argue for a political economy and cultural explanation for the success of the authoritarian regime in promoting basic education.”

In a sense, this is a paper in the spirit of Edmund Burke’s argument that social change needs to be gradual, and cannot be changed by top-down design overnight.

To contextualize the paper further, note that Portugal during the first half of the XXth century was very poor. In 1910 it had a GDP per capita of international GK $1228, compared with 4,611 for England, and hence closer to that of Côte d’Ivoire today (1,195 in 2010). Even as late as 1950 Portugal, at IGK $2,086, was behind Mozambique today (with IGK $1876 in 2010), and was clearly poorer than Cape Verde today its last avaliable data year, 2008 (IGK $2,735). Source: the 2013 Maddison Project. (I haven’t updated these numbers using the new MPD but the general pattern won’t have changed much).

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