Friday, January 23, 2009

Recycled history paper: Legislative Initiative and State Finances in the 18th Century

Between 1614 and 1789, the Estates General, representative of the elites of France, was never called by the absolutist French monarchy. When it was finally called in 1789, due to the pending bankruptcy of the state, the results were revolutionary. In England, on the other hand, Parliament was repeatedly called (excepting Charles I's personal rule in the 1630s). From 1688 Parliament met on a yearly basis. In Nicholas Henshall's essay “The Myth of Absolutism” this difference is de-emphasized. Henshall describes a system where kings rule with the co-operation of the nobles, with court factions branching out into networks of patronage and clientage binding local elites and the monarchy together. According to Henshall, the legislative system did not distinguish the systems of government in France and England, as in both legislation was a joint effort on the part of monarch and and the elites. Henshall argues that the whole concept of “Absolutism” is meaningless, as the prerogatives of royalty were accepted in both limited and non-limited monarchies, and in both the elites were respected partners of the monarchy. While this view does have merit, Henshall has over-emphasized the similarities between England and France. The existence of Parliament in England and its legislative initiative had a profound impact on relationship between monarch and elites and on the functioning of the state. Specifically, during the 18th century the financial well-being of England and France, dependent on taxes and increasingly on public debt, was strongly affected by the fact England had a Parliament representing the propertied class and that France did not.

When discussing the legislative systems in England and France Henshall does explain the essential difference between them. The English Parliament (the Commons and the Lords) created the laws, which were then approved by the king. The king had the right of veto, but after 1688 it was rarely used. According to Christopher Hill, “William vetoed five Bills before 1696, but they all subsequently became law; after that date he used the veto no more. Anne's solitary veto in 1708 is the last in English history.” Of course, many of the bills passed by Parliament were initiated by the monarch's ministers. But not all laws passed by Parliament were to the monarch's liking, even when the veto was not used. For example, in 1698 Parliament resolved that the all forces in the standing army beyond 7000 men were to be disbanded, and though strongly opposed to the measure William complied. In France, on the other hand, Henshall notes that the “French monarch had the exclusive right of initiating laws.” The legal institutions known as parlements only had the role of promulgating the laws (which they could use to delay the application of the law), though they had the right of sending a remonstrance to the king. The English Parliament, representative of the elites, had the right to initiate legislation, and the king could initiate legislation via his ministers, whereas in France only the king could initiate legislation.

A significant area affected by this difference was the raising of taxes. According to John Brewer, “... by the first quarter of the eighteenth century Englishmen were paying 17.6 livres per capita in annual taxes, while the equivalent figure in France was 8.1 livres” a difference which grew by the 1780s to 46 livres in England vs. 17 in France. How did this difference come about? After 1688, confronted with the price of William's wars against France, Parliament chose a land tax over the government's plan to impose a general excise, choosing a tax which affected the landed wealth represented in Parliament rather than one that affected the general public. According to Brewer, the reason for this choice was that the land tax allowed the Commons to exert control over the collection of taxes, unlike a general excise which would involve a large bureaucracy above and beyond that necessary for existing excises. Not only did the Commons control the king's revenue by the necessity of having it approved every year by the Parliament, but Parliament also controlled the monarch's ability to raise money via extraordinary means. At this point in time Parliament took the initiative in choosing the type of taxes the English would pay, and took control of at least some of the process of taxation. Members of Parliament could request papers and accounts from treasury departments when deciding about financial legislation, and this information was presented even for routine legislation such as the annual bill of supply. Parliament reached an accommodation with the need for a centralized state, balancing between the state's needs and the dangers to their control.

The French government on the other hand had systemic problems with taxes in the eighteenth century. Henshall cites Machault's Twentieth tax as an example of how taxes would be negotiated with institutions such as the parlement of Paris. Even so, Machault dissolved the Languedoc Estates for their opposition to the tax. Colin Jones notes that “the secrecy in which the royal finances were immired meant that the government was unable to demonstrate the fiscal prudence of the measure.” Only in 1781 did Necker publish an account of French royal finances that provided “more transparency ... than any previous ruler or minister had dreamt of.” The fact that the tax had to be negotiated with multiple bodies --- parlements, local Estates, the Assembly of the Clergy for taxes on the Church --- also demonstrates the problems faced by the government, the lack of a centralized national institution to negotiate with. According to James Riley, “the most important feature in French finances ... at every point in the eighteenth century is this: the French detested the tax.” The French government “could not overcome [its] subjects' aversion to paying taxes, and they could not overcome their subject's feelings that their liberties were at stake.”

In addition to taxes, the other source of revenue for the state was public debt, used to finance the increasingly expensive wars of the 18th century in both England and in France. Hilton Root argues that the existence of Parliament in England strongly affected the government's expense in raising loans. In England after 1697, the Bank of England had a monopoly on loans to the government, increasing the government's penalties if it defaulted on loans. In 1715, “a political agreement with Parliament established that a specific loan had to be secured by Parliament's vote of a specific tax designed to fund the loan's repayment. As a result of Parliament's backing interest rates on English government bonds fell from 10 percent in 1689 to 3 percent during the eighteenth century.” Root notes that private interest rates in England were about 4 or 5 percent, i.e. the government debt was seen as more secure than private debt. In contrast France paid interest rates twice as high as England, in the period after 1720 when they were actually lower than in the past. In England, where Parliament controlled the debt, it also had less of an interest in repudiating it, as many MPs and their constituents were government creditors. In France, where the debt was directly controlled by the monarch, the government had a motivation to default on its debt, balanced by the lack of trust this would engender in lenders. As Hilton explains, "creditors took into account the king's reputation for repudiating debts and therefore demanded higher interest rates than would otherwise have been needed to elicit loans. Actually, because he was above the law, the king had to pay more for loanable funds than did his wealthy subjects." Necker in 1781 cited the nature of England's government and the access to information about the government's finances as reasons for England's ability to raise immense sums of money.

In both England and France taxes and public loans were necessary ways to raise money to pay for the government's expenses; the king could no longer live on his own. But only in England was the legislative initiative possessed by Parliament. As a representative body of the propertied elites it was able to actively bring about their agreement to financially support the state, a crucial difference from the system in France. Negotiating rights with a variety of corporate groups, while simultaneously claiming unquestionable authority, the French government was unable to raise as much taxes as the English. Furthermore, France had to pay far higher interest rates on loans than did the English government. There were less restrictions on the French government's ability to default on loans, and information about the government's finances and ability to pay interest were considered a state secret, both raising the perceived risk to creditors. The difference between the legislative systems in England and France was thus an important factor in the financial well-being of the state. Paradoxically, the weaker status of the English government led to a stronger fiscal position.


Brewer, John. The Sinews of Power. New York: Knopf, 1989.

Hill, Christopher. The Century of Revolution (2nd edition). New York: W. W. Norton, 1980.

Jones, Colin. The Great Nation. New York: Columbia University Press, 2002.

Jones, J.R.. Country and Court. Cambridge, Massachusetts: Harvard University Press, 1978.

Riley, James C.. The Seven Years War And The Old Regime In France. Princeton: Princeton University Press, 1986.

Root, Hilton L.. The Fountain of Privilege. Berkeley: University of California Press, 1994.

Friday, January 16, 2009

Roadkill on the path to victory

From the Washington Post, Jan 16 2009:

Many Afghans are furious over some actions taken by foreign troops, especially airstrikes that kill unarmed civilians and night raids where unidentified foreigners burst into homes, terrifying families. While the Taliban has swiftly capitalized on such incidents, U.S. and NATO officials tend to initially deny or minimize them, and then fail to publicize investigations or findings.

President Hamid Karzai, the coalition troops' official host, has recently stoked this anger with a series of critical comments about foreign forces, saying they should deploy along the border with Pakistan instead of in Afghan villages. Critics say Karzai is pandering to popular emotion in hopes of winning reelection this year.

I don't get these silly Afghans and their so-called "popular sentiment"; don't they know we're killing them for their own good?

"When the foreign troops first came, every Afghan child said thumbs up, but now, nobody likes them. People have lost their trust," said Fazlullah Mojadeddi, 52, a legislator and former governor of Logar. "They don't want the Taliban back, but they are silent because nobody can guarantee their security. If one or two Taliban fighters come, the people don't inform the authorities for fear the foreigners will start killing innocent people."

Sunday, January 11, 2009

The Great Mall in the Sky

If you want a bird's eye view of the American consumer, SkyMall is the place to start. Trapped on a plane with nothing to do, cramped, cranky and completely bored, sooner or later almost every airline passenger turns to the SkyMall catalog, handily provided in the seat pocket compartment. But what makes this catalog unique?

SkyMall is defined by the breadth of its target audience. Most advertising mediums aim for as much specialization as possible: why spend precious advertising money to reach the wrong audience? Even TV shows allow specialization: one can advertise to MythBusters viewers in Boston, or General Hospital viewers in Boise. SkyMall is different. Most anyone is likely to fly sooner or later, excepting the bus-traveling poor. As a result, very little can be said about the readers of the catalog: they have some minimal amount of spending power, and they are likely to be Americans, since most flights in the United States are domestic. An advertiser in SkyMall is targeting the broadest possible audience, an undifferentiated mass of the archtypical American Consumer.

The advertisers in SkyMall are similarly diverse. Those large-scale events that do reach a broad audience are far too expensive for most advertisers. The Super Bowl is the domain of megacorporations able to afford the vast sums required for a 30 second ad slot. SkyMall is far more affordable, including advertisements from a large number of merchants, ranging from the fairly large Sharper Image to small, single-product retailers. As a result, the catalog cannot allow the slightest whiff of provocative, controversial or offensive advertising that might be acceptable in a more specialized medium, since other advertisers will also be implicated.

SkyMall products are sanitized, wholesome mirror images of the everyday desires of the American consumer. And if there is one iconic product that summarizes everything one can learn about the American consumer from reading SkyMall, that product can only be the Creo Mundi Intentional™ Hoody. Also available as a T-shirt ($36), the $79 hoodie is printed with "over 200 positive words in 15 different languages" on the inside. "Fact: Research shows that written words on containers of water can influence the water's structure for better or worse depending on the nature or Intent of the word. Fact: The human body is over 70% water. What if positive words are printed on the inside of your clothing?"

This is what Creo Mundi, which as it turns out is a Canadian company, has taught me about American consumers: they are impressed by science, but aren't educated or smart enough to tell bullshit from the real thing. They are perennial optimists, fervent believers in the power of positive thinking. They are willing to spend money to improve their lives, though that money is often not well spent. In short, nothing much has changed since 1922, when Sinclair Lewis wrote the classic novel Babbitt:

The advertisements were truly philanthropic. One of them bore the rousing headline: "Money! Money!! Money!!!" The second announced that "Mr. P. R., formerly making only eighteen a week in a barber shop, writes to us that since taking our course he is now pulling down $5,000 as an Osteo-vitalic Physician;" and the third that "Miss J. L., recently a wrapper in a store, is now getting Ten Real Dollars a day teaching our Hindu System of Vibratory Breathing and Mental Control."

Ted had collected fifty or sixty announcements, from annual reference-books, from Sunday School periodicals, fiction-magazines, and journals of discussion. One benefactor implored, "Don't be a Wallflower—Be More Popular and Make More Money—YOU Can Ukulele or Sing Yourself into Society! By the secret principles of a Newly Discovered System of Music Teaching, any one—man, lady or child—can, without tiresome exercises, special training or long drawn out study, and without waste of time, money or energy, learn to play by note, piano, banjo, cornet, clarinet, saxophone, violin or drum, and learn sight-singing."


"Well—well—" Babbitt sought for adequate expression of his admiration. "I'm a son of a gun! I knew this correspondence-school business had become a mighty profitable game—makes suburban real-estate look like two cents!—but I didn't realize it'd got to be such a reg'lar key-industry! Must rank right up with groceries and movies. Always figured somebody'd come along with the brains to not leave education to a lot of bookworms and impractical theorists but make a big thing out of it. Yes, I can see how a lot of these courses might interest you. I must ask the fellows at the Athletic if they ever realized—But same time, Ted, you know how advertisers, I means some advertisers, exaggerate. I don't know as they'd be able to jam you through these courses as fast as they claim they can."

"Oh sure, Dad; of course." Ted had the immense and joyful maturity of a boy who is respectfully listened to by his elders. Babbitt concentrated on him with grateful affection:

"I can see what an influence these courses might have on the whole educational works. Course I'd never admit it publicly—fellow like myself, a State U. graduate, it's only decent and patriotic for him to blow his horn and boost the Alma Mater—but smatter of fact, there's a whole lot of valuable time lost even at the U., studying poetry and French and subjects that never brought in anybody a cent. I don't know but what maybe these correspondence-courses might prove to be one of the most important American inventions.

"Trouble with a lot of folks is: they're so blame material; they don't see the spiritual and mental side of American supremacy; they think that inventions like the telephone and the areoplane and wireless—no, that was a Wop invention, but anyway: they think these mechanical improvements are all that we stand for; whereas to a real thinker, he sees that spiritual and, uh, dominating movements like Efficiency, and Rotarianism, and Prohibition, and Democracy are what compose our deepest and truest wealth. And maybe this new principle in education-at-home may be another—may be another factor. I tell you, Ted, we've got to have Vision—

So what are you waiting for? Buy yours now!