Fiscal, financial and monetary foundations for the formation of nation states in the west compared to imperial states in the east c.1415–c.1839

Abstract

This speech introduces O’Brien’s research approach to the divergence debate and presents the fiscal capacities of the states as the key condition for ushering in modern economic growth in the pre-industrialization West. The concerns of pre-modern European states (1415–1839) were not with economic development, but with external security and internal stability of their kingdoms. Mercantilism prepared European states for capitalist industrialization. Historical evidence supports the hypothesis that effective command and control over sovereign revenues were what gave Britain and other European states the advantage over their oriental counterparts in providing public goods of external security and internal stability, which made the divergence in economic development inevitable.

Keywords:

• divergence debate
• pre-modern states
• fiscal capacities

Notes

Keynote Speech at the Chinese Economists Society 2012 Conference. This is an abbreviated script of the keynote speech. The full text of the speech can be obtained on request to Bingtao Song ([email protected]).