Furies (34 page)

There could be no funded debt without taxes and rights of the sort that generated income, for these alone produced the cash to pay interest on, or redeem, government bonds. Here, in tax revenue, was the other half of the public-finance machine.

Up to about the mid-thirteenth century, rulers had only the income from their domains: their own lands, feudal dues, and the sums reaped from the local administration of justice. Receipts from local tolls also entered this picture, and some princes, like many free
cities, claimed a monopoly over the ancient salt tax. In Spain, a religious frontier, the crown was entitled to a large share of church income, intended for use in warfare against Muslims.

In the fourteenth and fifteenth centuries, the armed extension of territorial boundaries, animated by richer economies and swelling ambitions, raised expenses and demanded a thickening stream of revenue. But nobilities and urban elites used their political weight to avoid taxes on land and income, or to have these treated as levies of last resort. The galloping rises in public revenue thus came chiefly from the so-called indirect taxes: customs duties and levies on every kind of foodstuff, especially on beer and wine, meat and grains, as well as on manufactured goods, notably cloth. These were levies that always weighed heaviest on the poorer classes. A tax on flour, meat, salt, or wool more easily emptied the pockets of the farm worker or the urban craftsman and day laborer.

In generalizing about taxes, we must bear in mind that they varied considerably from one region or country to another. Denmark, Hungary, Bohemia, and parts of Austria and Germany, such as Brandenburg and Saxony, made a point of privileging noblemen and exempted them from direct taxation. The French and Spanish nobilities also enjoyed major tax immunities, and the tenure of office exempted many thousands of rich bourgeois from direct taxes. The French
taille
of the sixteenth and seventeenth centuries, a direct tax on property and income, was levied principally on rural landholders of non-noble status, and in Burgundy no nobleman was ever touched by it. Moreover, much
taille
income in France's frontier provinces (the
pays d'états
) remained there, and did not begin to reach the king's coffers in substantial sums until the 1630s and 1640s. One Castilian tax, the
servicio
, was paid solely by commoners (
pecheros
), marking a clean distinction between them and noblemen.

Moving hand in hand with the incidence and changing face of war, the rise of regular taxation began in the fourteenth century, with sales taxes that were meant to be temporary, such as the
aides
in France, the
alcabala
in Spain, the excise in parts of Germany, and
their equivalents in the Italian city-states. All these raised the prices of food, drink, and goods. Here and there a hearth or poll tax also saw the light. The costs of war gradually turned the sales taxes into permanent levies, which came to be seen as constituting “ordinary” taxation. Parenthetically, since the ports on the Baltic Sea took in very profitable customs duties, they would be fiercely fought for by the Swedes, Danes, and Poles.

The wars of the sixteenth and seventeenth centuries led to an incessant quest for more revenue, as we have noted, so that at certain moments in wartime Spain, France, and Germany, even noblemen felt the fiscal pinch, such as in emergency “contributions” or the freezing of interest payments on their shares in the public debt. In Germany, the Thirty Years War had such an impact on princes, minor though they might be, that they began to hound their reluctant
Reichsstände
(territorial assemblies) for the funds to have their own standing armies: the most costly of all government undertakings. From this time on, in military matters, this would be the main fiscal direction for Europe, and Brandenburg-Prussia soon moved to the forefront of the quest for armed force. More than ever, taxes too came to hold the center point of concerns for the life of politics.

Here, in short, was the birth of the modern state: a tax-hungry polity. And it might be an absolute monarchy, best profiled in eighteenth-century Prussia, or a constitutional and limited monarchy, notably England after 1660, where Parliament was crucially involved in the business of levying taxes. Venice to one side, the new Dutch Republic was the outstanding example of a republican tax-seeking state.

Armies and taxes, then, were the cardinal concerns of the early modern state, and this of course would also include navies where called for. Tax money was the first and most urgent business of the state. With taxes it paid for war, and with its armies the state sought territory, security, influence, commercial interests, and new sources of taxation. Yet it farmed taxes out to financiers, thus putting one of the chief functions of the modern state, the collecting of taxes, into private hands. Here a crucial aspect of administration was alienated,
and the state lost both income and degrees of control. To be sure, tax farming put cash up front for the debtor state, enabling it to get on with its war-making for a while longer. But the farming out of taxes was always an expedient, something of a short-term solution, a remedy—though not necessarily seen as thus—for administrative failure; and it was costly, because much of the revenue was drained away in private profit. In the late seventeenth century, England snatched taxes away from the tax farmers and made the collecting of taxes an integral part of the state's expanding bureaucracy.

France's Italian Wars (1494–1559) carried the crown's expenses to unprecedented heights, even though its armies in Italy were meant to live largely off the occupied lands. The gap between revenue and spending widened inexorably, and from the early 1520s, agents of King Francis I began to seek cash from foreign bankers at the fairs of Lyon. Some of the sources of royal revenue were offered as collateral. At one point the king was in debt to eighty-seven different Italian bankers, among whom were forty-five from Florence and seventeen from Lucca. The government also started to finance long-term debt by selling
rentes
, bonds in the royal debt, promising a steady return of annual income for buyers. But neither these nor bankers' loans nor the unencumbered taxes brought in the income to meet war costs. Now, with far-reaching consequences for the French state, ministers began to sell government offices, gradually turning this recourse into an important source of cash. Officials had already hit on this stratagem in the fifteenth century, but it became big business only after 1520 and went on to the eighteenth century.

Yet all the ready cash and credit raised by the different means fell far short of enabling kings to pay their way. In 1559, France's public debt amounted to 43 million
livres
: three times its annual income,
with interest eating up 8 million
livres
per year, or over half of yearly revenue. Just the year before, King Henry II had managed to field an army of nearly fifty thousand men, of whom more than twenty thousand were expensive German and Swiss mercenaries. Large numbers in that army, however, would go unpaid. No wonder, then, that in 1559 the crown was squeezed into halting the payment of interest to its creditor bankers and possessors of
rentes
. It was a declaration of bankruptcy. From this time on, periodically, the government would have trouble selling
rentes
or securing loans from bankers, unless it agreed to pay exorbitant interest charges.

And then the outbreak of France's Wars of Religion (1562–1598) all but tore the country apart fiscally, as commanders in the field, Huguenots as well as royalists, simply grabbed and spent any tax money that could be diverted their way. By 1576 the royal debt had climbed to 100 million
livres
. Cramped without remission by the wars, the kings of France could not beg enough money or credit, however strident their pleas, to send out armies strong enough to defeat the Huguenots and to bring the wars to an end. Verging repeatedly on bankruptcy, their ministers occasionally halted interest payments on
rentes
, such as in 1585 and nearly so again in 1598. Later there would be outright bankruptcies in 1602–1604, 1648, and 1661, with moments of disabling fiscal strains in the 1630s and 1650s.

Meanwhile, the sale of offices went on, the numbers of proprietary officeholders climbing from 4,041 in 1515 to 11,000 by 1600, then leaping to 46,047 by 1665, with another jump to about 60,000 before the end of the century. Many of these men, such as in the courts, were trained in law and sprang from moneyed, socially ambitious families. But there were also venal
officiers
in the treasury, in the tax network, in administration, and even at lower levels socially, including some who held office as fishmongers.

Venal officeholders cross the middle of the fiscal scene here, not only because the money to buy office put substantial sums into the royal coffers—in the first half of the seventeenth century, about 28
percent or more of ordinary revenue—but also because they were sometimes forced to make loans to the crown in return for
rentes
, especially during the middle and later years of the century. They thus became cogs in the country's public-finance machine. They received an annual income (
gages
) on the investment made in the purchase of their offices. But fiscal emergencies often suspended the payment of
gages
, or, if not this, the officeholders might be obligated to accept
rentes
as payment. In a further twist, they could buy the right to will their offices to heirs by paying an annual fee. Obviously, then, they had a vital interest both in the liquidity of the state and in milking it. The contradiction here pitted war and sovereign debt against the private income, honor, and tax exemptions that came with the holding of office.

Officeholders in Spain, too, would nurse the shadowy contradiction between their seeking to maximize the profits of office while also needing a truly solvent state. In Castile alone, by 1665, the holders of venal offices, especially in the municipalities, numbered about thirty thousand men. This made for a ratio of “one officeholder for every 166 inhabitants.” In France, by contrast, with its 46,047
officiers
in 1665, the ratio was “one for every 380 inhabitants.” So that if French owners of office constituted a state within a state, we have to say that the Spanish ratio was far more alarming and pointed all the sooner to an unhealthy body politic.

In the fifteenth century, the great Florentine humanist Leon Batista Alberti accused the members of Florence's merchant oligarchy of treating the state as though it were their shop: a source of business and profit. He declared—and it was true—that they speculated on the republic's consolidated debt, intent on using the profits to dower their daughters. Proprietary officeholders in France engaged in a similar, if more complicated, operation. Their privatizing of office ate away at the centralizing potential of the state, but their corporate interests, swinging in a contradictory direction, also made them want a solvent state. In this extraordinary dialectic, the dangers cut two
ways. In one direction, the holders of venal office went after as much profit from the state as they could get their hands on; but in the other, they themselves ran risks, such as in being obligated to lend money to the state, or in seeing their income from
rentes
and from office suspended for the sake of the state.

Taxes, meanwhile—the ultimate font of public income—were skewed to favor the officeholders and to disfavor the many who could least afford to pay the sales taxes, the special war levies, and the ad hoc charges for the billeting of soldiers. Nevertheless, in the seventeenth century, the country's fiscal pincers would be sharply felt, now and again, by the officeholders too. For the France of Cardinal Richelieu (1624–1642) and Louis XIV (1661–1715) was a chronicle of bigger armies, longer wars, ballooning taxes, awesome public debt, and bristling discontent. In the 1630s and 1640s, the government had to turn its troops against rebellious peasants, and then face a revolt of the nobility, including episodes of civil war from 1648 to 1653 (the Fronde). The causes of these uprisings lay in official corruption, in the violent billeting of soldiers, and in oppressive taxes.

The story of war finance in France, particularly under Louis XIV, has far too many intricacies to present here. Summaries must suffice. The Nine Years War (1689–1698) and the War of the Spanish Succession (1702–1714) saw French armies of 320,000 and 255,000 soldiers take the field. These colossi required sums of money that no degree of ramped-up taxation could find, even with soldiers camped on the backs, so to speak, of their own civilians or of those in occupied foreign territory.

To meet the unforgiving need for money, Louis's finance ministers looked beyond taxes and turned to stratagems that brought in hundreds of millions of additional
livres
. They marketed streams of new
rentes
and life annuities; they debased the coinage; and they employed syndicates of financiers to sell patents of nobility, to invent and sell numerous new offices, and to extract “forced loans … from existing officeholders.” In addition, they halted payments on
rentes
, lowered interest rates, and even slashed the capital sums involved in runs of old
rentes
. Officeholders now saw themselves truly hounded, and in the eighteenth century their obstructionism would often hobble the crown's ability to finance wars.

At the beginning of the seventeenth century, annual revenue amounted to about 98 million
livres
. By midcentury this tally had risen to more than 500 million
livres
. The frontier provinces—e.g., Provence, Languedoc, Dauphiné—had been hammered into line and were now paying much of the take from their
taille
into the royal coffers. With the help of a new poll tax, the rise in revenue continued, but there was no increase in the net usable income. By 1714, Louis XIV's wars had cut this revenue to 27 percent of what actually came in. The rest vanished in “servicing” the debt, in alienated revenue, and in special administrative costs, such as salaries for venal officeholders. On Louis's death in 1715, France saw itself saddled with a debt variously estimated at between 1.7 and 2.5 billion
livres
.