FORWARD BASE B

"Pay my troops no mind; they're just on a fact-finding mission."

Tag Archives: central

A Tale of Two Debtors: Britain and France After the American Revolution

By the 1780s, France and Britain had approximately the same debt after spending huge sums fighting over the American colonies.

One recovered and the other collapsed into revolution.

The difference was their systems of finance and taxation.

While the outstanding war debts may have been the same, the interest rates were not.

Bourbon France had to pay twice as much interest on its loans as did the British. And that made all the difference.

To begin with, the English system relied far more on indirect taxes and tariffs for its income.
The French system meanwhile focused on many direct taxes that ended up discouraging economic growth.

The result was that by the time of the French Revolution, England yielded more tax revenue despite having only 1/2 the population of France.

Britain and France were set apart most of all by their systems of credit.

England had relied on the world’s 1st national bank since 1694 to efficiently raise large long term loans. At the same time, new loans kept flowing and interest rates dropped because the English parliament had the power to consistently raise enough taxes. The stability of this system drew in a steady steam of further capital from Dutch investors.

The French crown on the other hand relied on a host of middle men—tax farmers, nobles, high ranked clergy, lenders, and merchants for loans, at high rates of interest.
Without a central source to consolidate its loans, the crown found itself struggling to raise money quickly, keep track of its loans, or pay interest.

Worse, in the French system of direct tax farming, it was more profitable to farm taxes and loan out advances than it was to start businesses and engage in productive industry.
The French system encouraged parasitic plunder while stifling real economic growth that would produce more wealth in the long run.
Wealth ended up being gradually drained from the economy even as the French national debt skyrocketed with each successive war…

Paraphrased and summarized from:

The Rise and Fall of the Great Powers
Paul Kennedy, 1987
Pages 76-86

 

UK public debt from National Bank founding to modern times

 

French Debt Until the French Revolution

French Debt Until The French Revolution

What The Hanseatic League Tells Us About The Present

When governments grow weak, commercial organizations tend to fill the void.

Across a vast region along the Baltic Sea with few strong central authorities in the middle ages, merchant guilds banded together for strength and security until they were effectively their own state with their own military.

Indeed, they clashed with actual kings and princes and because they monopolized trade through the entire region, they usually won.

It was only when centralized government became strong again and the modern concept of a nation-state began to form that the Hanseatic league went into decline.

In our own time:

If I were to ask “Who is the most powerful man in this room?” The answer is not necessarily obvious.

Jobs obama zuckerberg silicon valley dinnger

Presently, we see a weakening of both the physical powers and legitimacy of the state. And predictably, we see a corresponding rise of commercial entities as they increasingly exert control over the state itself or take over functions (i.e. space exploration, education) that were previously the preserves of central state power.

%d bloggers like this: