1 Advances in Political Economy - Department of Political Science

EDITOR’S PROOF

1 2 3 4 5 6 7 8 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

36

37

38

39

40

41

42

43

44

45

46

A Collective-Action Theory of Fiscal-Military

State Building

Luz Marina Arias

Where benefits are not earmarked, ‘somebody else should pay’

is always a powerful motivation in tax policy.Alt (1983, p. 194)

The emergence of the fiscal-military state in the eighteenth century granted the cen-

tral government new and unprecedented roles. In England, fiscal collection was in-

creasingly centralized and put in the hands of a new and efficient fiscal bureaucracy,

an army was created, and the navy acquired world-renown reputation (O’Brien 1988

and Brewer 1989 ). Tax proceeds as a percentage of national income rose from 3.5

percent in the 1670s to over 12 percent by the end of the eighteenth century.^1 Even

though parallel attempts at fiscal modernization in Spain met with limited success

until the early nineteenth century, in colonial Mexico public officials succeeded at

strengthening the central administration with fiscal bureaucrats and a proficient ac-

counting system. Mean growth for the Mexico City Treasury averaged almost 60

percent in each of the decades between 1770 and 1800.^2 Other European states fol-

lowed in the late eighteenth and early nineteenth centuries.

Prior to this transition, most monarchs depended to a large extent on economic

and local elites for the collection of tax revenue and defense. Fiscal capacity was

(^1) O’Brien (1988,Table2).
(^2) Klein (1985, 566–574).
I am grateful to an anonymous referee, David Baron, B. Douglas Bernheim, Paul David, Alberto
Díaz-Cayeros, Marc Dincecco, Rafael Dobado, Avner Greif, Luis Jáuregui, Yadira Gonzalez de
Lara, Steve Haber, Margaret Levi, Carlos Marichal, Romans Pancs, Alvin Rabushka, Gavin
Wright, and the participants at the II International Conference on Political Economy and
Institutions in Baiona, the Social Science and History Workshop at Stanford University, and the
Workshop on Endogenous Institutions and Political Conflict at UC Berkeley’s Center on
Institutions and Governance. This work would have not been possible without the financial
support from the Stanford Institute for Economic Policy Research, the John M. Olin Program in
Law and Economics, Stanford Law School, and the Center on Democracy, Development, and the
Rule of Law (CDDRL) at Stanford University.
L.M. Arias (B)
CEACS, Juan March Institute, C/Castello 77, Madrid 28006, Spain
e-mail:[email protected]
N. Schofield et al. (eds.),Advances in Political Economy,
DOI10.1007/978-3-642-35239-3_3, © Springer-Verlag Berlin Heidelberg 2013
47