State-building without taxation : the political economy of government finance in the eighteenth-century republic of Bern
The paradigm of early modern European state-building is predominantly derived from the experience of warring states and their attempts to increase revenue extraction. The Swiss republic of Bern offers an illuminating counter-example. Being free from major wars for over two centuries (1589-1798) offered a conductive situation that allowed the state to run consistent budget surpluses while minimising the tax burden on its citizens. The thesis explores the functions which the Bernese republic performed in the absence of warfare. I am particularly interested in the effect of redistribution of resources by the government, both directly through the fiscal constitution of the state and indirectly through institutions such as property rights, regulation and economic policy. My methodology is based on models from New Institutional Economic History (North 1990; Epstein 2000), fiscal history (Schumpeter 195; Korner 1981; Bonney 1995/1999) and historical sociology (Tilly 1992; Ertman 1997). At the core of the thesis is an empirical analysis of fiscal redistribution, based on data from contemporary accounts of the state which I have collected from the archives. The Bernese republic is analysed in the context of a surplus state model, in which the following elements are mutually dependent and reinforcing: budget surpluses, low defence expenditure, the absence of a national debt, investments and low level of taxation. Overall the canton followed a niche strategy to state building which proved to be cost-effective compared to more coercive fiscal regimes. However, this strategy ultimately depended on the external effects of sustained warfare, taxation and public debts elsewhere in Europe. A particular focus is on how the Bernese state used its structure as a surplus state to invest money on capital markets at home and abroad after 1710. I will use approaches from microeconomics and investor behaviour to analyse the canton's portfolio investments.