Some volumes in the humanities and social sciences claim to be multidisciplinary when in reality, only slight variations of a single discipline are employed. Wenkai He, on the other hand, presents an authentic integration of concepts and research questions from his home discipline of political science with the methods of the historian and the development economist.
The book attempts to explain why late seventeenth- to eighteenth-century England and Meiji Japan did, and late Qing China did not, develop a “modern fiscal state.” He begins with a theoretical chapter, followed by one case study chapter of England from 1642 to 1752 and two case study chapters each on Japan 1868–1895 and China 1851–1911. The England chapter relies on the vast secondary literature on state-building and public finance in Early Modern England, and focuses on the few decades after the 1688 revolution. The Japan chapters to a large extent rely on Japanese language secondary source material integrated with some primary materials produced during the vigorous debates on monetary and fiscal matters in the 1880s. The two China chapters rely the most heavily on primary source material, in addition to Chinese language secondary material. The chapters are valuable windows into the fiscal and monetary history literature in addition to the author's purposes.
The modern fiscal state, as defined by the author, is a state that directly employs government workers, and not tax farmers, to collect tax revenue, which is then concentrated at the center before being dispersed for local use, as opposed to directed spending at the point of collection. Domestic and international commerce is taxed so that the state is not dependent on land holdings, state-run enterprises, or the selling of titles. The modern fiscal state uses both public and private banks and bills of exchange to quickly and efficiently transfer funds to and from the center. The state gains acceptance for the use of its paper bills. Lastly, the state uses permanent, long-run deficit financing at modest interest rates instead of only taking short-term emergency higher-interest loans from elites. The latter element is seen by the author as crucial to the process of transformation to a developmental state, and thus divergent economic outcomes.
He locates the origin of divergent fiscal state development in the contingency of political events in times of crisis, with probabilities bounded by each country's path-dependent evolution. All three states experienced major fiscal crises derived from internal or external military conflict: England's involvement in European wars after 1688, Meiji Japan's struggles with internal rebellion and western challenge in the 1870s to 1880s, and the Taiping Rebellion in China in the 1850s to 1860s. The crises set in motion a chain of events where the English and Japanese states found it both unavoidable and profitable to centralize and “modernize” public finance, whereas Qing China was able to revive a workable, if not efficient, traditional finance system, thanks to falling silver prices and temporary commercial and revenue revival (through traditional decentralized channels), and was furthermore frightened away from alternatives due to its failed experiment of issuing paper notes during the Taiping Rebellion. Commercialization alone cannot be the key factor in explaining the rise of the modern fiscal state, the author argues, because all three cases shared it. However England's commercial concentration in London did make centralization of tax collection easier versus the wider geographic spread of China's domestic trade in which it was more costly to monitor the flow of goods and transport funds (specie) to the center, at least without commitment to develop a public–private funds transfer system using bills of exchange.
Regarding China and Japan's relatively advanced commercialization and long-distance trade networks, the author is in the same camp with Kenneth Pomeranz, R. Bin Wong, and others in the “Great Divergence” debate, but differs with Pomeranz on the units of comparison. Pomeranz had argued in The Great Divergence that economic historians wishing to compare Western Europe and East Asia should choose corresponding cores, semi-peripheries, or peripheries, not England (a core of Western Europe) with the entirety of China as was commonly done in prior work. Wenkai He justifies his use of political units by arguing for the importance of the fiscal state centralization in economic development, despite the discrepant economic geographies.
The book is a model of clarity and readability, both in the theory and in case study sections, a considerable achievement given the challenging subject. Despite being well-written, the Japan material on the twists and turns of monetary debates among political factions and the ups and downs of various currency crises may be dizzying to a non-specialist. A second reading was required to grasp it all in my case. The China section, the longest of the book, presents no such difficulties and should be illuminating even to China scholars.
