28 November 2015

Some Thoughts on Books I read in 2015 - Part 2

Political maps are deceiving. As a kid, when you look at political maps showing the neat little borders of powerful states in the past, you inevitably wonder why they couldn't expand in a certain direction, or how in the world they were defeated by another state so much smaller than them or sometimes by those who didn't even possess states! One of the reasons I like reading military history is that it helps me fill in these whys. But the military is just one, albeit important, aspect which influenced a state's fortunes. Strong governments and armies ultimately have to have some sort of economic backing, and I'm embarrassed to admit how late it was until I truly understood this. As a teen who was more interested in science than business or economics, I'd be satisfied by simple comments such as "trade flourished" or "economy was prosperous" in pop. history books. I never questioned the details of trade, how exactly governments collected revenue, or financed policies. I think the turning point was when I read a few books about the decline of the Spanish empire. Although there were cultural and demographic factors which also contributed to the empire's decline, Spain's poor economic policies which failed to improve its fiscal soundness and develop its economy unlike England or the Netherlands was what left the strongest impression on me. So now I'm slowly but steadily trying to get into economic history (hence the choice of books in this post) and it's fantastic because I'm starting to see a whole new way of viewing the past. If you're like me and ignored the interplay of economics and political history, I highly encourage you to do so as well.

Public Debt and the Birth of the Democratic State: France and Great Britain, 1688-1789
Imagine you're a medieval king trying to main stability. Things might be going fine and dandy in your kingdom right now, but who knows when war, plagues, or a bad weather that destroys harvests might break out? Your most important concern is structuring your kingdom so it can withstand future shocks. And so you go about storing a % of harvest in granaries, training troops, and saving wealth for when shit hits the fan. But saving wealth is easier said than done. Trade imbalances (in the form of outflow of precious metals) or accumulating large reserves of metal coins will lead to a shortage of precious metals for the society at large. As the commodity value of your coins rise higher than their nominal value, more and more people choose to hoard coins which only serves to increase the problem. The resulting currency shortage hampers development of urbanization and market economy, thus reducing income from manufacturing and trade sectors, as well as increasing tax inefficiency as you're now more likely to collect taxes in kind rather than in cash. This, combined with high military expenditures required to maintain a strong army, will make you wrack your head about how to secure more wealth. One option is to increase taxes, but you know that both peasants and nobles alike are willing to take arms if they feel the tax burden is too high. Another option is simply minting more coins but since the supply of precious metals is limited, the only way to realistically mint more coins is to resort to currency debasement. But debasement is only a temporary solution as it inevitably leads to inflation and the reduction of future income if you have any source of income fixed at specific values. And most importantly, none of your citizens, especially the soldiers, are going to like that the real-value of their wages have been slashed. As you can see, running a stable kingdom is a lot harder than a game of Civilization or Europa Universalis might lead you to think.

Now imagine if instead of forcibly extracting higher and higher taxes from your populace at the cost of increased unrest, your subjects willingly loaned you money as long as you eventually paid them back with interest. And maybe you could even use that loan to finance conquests that pay for themselves or further develop the economy so as to expand your future income source. Now THAT is an absolute game-changer. All of a sudden, an empty treasury or running a deficit won't equate to an immediate collapse. Not only can your kingdom now actually take a punch from whatever misfortunes the future has in store, it can even punch above its weight against larger countries who either haven't established this system of public debt or do have it but at the cost of cripplingly high interest rates. Now I'm not trying to defend Keynesian deficit-financing or anything like that. I'm merely highlighting just how revolutionary the birth of public debt and expansion of credit is to human history. Although we take it for granted today, it emerged relatively late and initially only in specific parts of the world. Just as it's important to analyze the impacts of gunpowder or the printing press and ask why they were more or less pronounced depending on each country, similar questions need to be asked about public debt. How and why did it come to be, where and when it did?

That is where David Stasavage's Public Debt and the Birth of the Democratic State comes in. He examines what factors were involved in the birth of public debt, and if they can satisfyingly explain why it had greater trouble gaining traction in France as opposed to Great Britain. In doing so, he pays equal attention to the role of representative institutions as well as partisan politics, as he concludes that the difference between Britain's parliamentary system and France's absolute monarchy is necessary but not sufficient to explain their divergent fortunes. Although he makes use of game theory mathematical models in addition to typical historical evidence to back his views, the book's clear and concise arguments make it worth reading even if you can't understand the math (I'd be lying if I said if I could fully understand them).

Casualties of Credit: The English Financial Revolution 1620-1720
This book is a good companion to the book above. Whereas Stasavage is more of a comparative history that analyzes which type of societies best promote the development of low-interest, long-term public debts, Wennerlind's Casualties of Credit is more of a cultural history which examines the late-17th century English intellectual atmosphere under which proposals for expansion of credit, paper currency, and a national bank were discussed and ultimately implemented.  Reading the writings of intellectuals in this era really makes you appreciate just how big the gap was in transitioning from the traditional concept of money as something that must have intrinsic value (thus coined from precious metals) to one that may not need any intrinsic value as long as the public can trust the creditworthiness of the institution which minted/printed it.

In addition, you get a nice little overview about the foundation of the Bank of England and the sordid story behind the South Sea Bubble which almost put an early end to the great credit expansion experiment (extra credits on youtube had a pretty good video on this bubble too so check it out if you have the time).

Fiscal Regimes and the Political Economy of Premodern States
This book is absolutely fantastic. If you want to get a quick idea why economic history matters, or more specifically, how fiscal structures influence political history, I strongly urge you to read this book. Although far away from being even close to a pop. history book, it is so easily digestible. It's not every day I come across academic works that I can breeze through like fiction (well, maybe not quite like fiction). The book is structured as a collection of essays, with each one focusing on the fiscal structure of a specific state written by a specialist in that area. The states covered are Incas, Aztecs (or more accurately, the Triple Alliance), early Near Eastern states including dynastic Egypt, diadochi empires, Rome (separated into republic, early and late imperial, and Byzantine), China (separated into early and late imperial dynasties), early Islamic states, Ottomans, Tokugawa Japan, greek polis (with a separate chapter just for Athens). As there's something for everyone, if you find yourself not too interested with the chapter on Incas or China, for example, it's perfectly fine to skip over to other chapters (not that I did so). Best of all, none of the chapters require any high level of background knowledge to understand, as each chapter starts off by giving you the necessary background info.

If you're like me and haven't read much, if at all, on premodern fiscal structures, there is just soooo much fascinating information and perspectives to gain here. The chapters on early Islamic states and the Roman republic left the strongest impression on me. Although I don't consider myself a total noob to the general history of these two topics, I certainly felt like one after reading these chapters as I had simply never considered how the very system for state revenue contributed to political stability/instability. I'm not going to bother summarizing the conclusions of any chapter so as to avoid spoiling the fun for any future reader.

Definitely one of my most enjoyable reads of the year.

A Monetary History of the Ottoman Empire
Unlike the previous book, this one is a lot more dense (not that bad though) and can be difficult to read unless you already have a strong interest in learning how premodern states handled currency. That's not to say I'm super into this topic either, but as I've never read a book solely dedicated to currency, I thought I should to gain a wider perspective (plus, it's only a little over 200 pages long if you exclude the footnotes and bibliography). And with regards to that objective, reading book is definitely worthwhile. As the title already implies, the book covers the history of the important coins that were minted by Ottoman empire and how the state tried with varying success and failure to maintain a stable currency. Expensive wars of conquest and defense, janissary coups, jelali revolts, European price revolution, depletion of silver mines, influx of debased foreign coinage, the growth of direct European trade with India and the Far East at the expense of traditional trade routes through Egypt or Anatolia... There were a lot of significant events and trends through roughly five centuries of Ottoman rule that made maintaining a stable metallic currency virtually impossible and it's surprising to read how at different periods, domestic silver or copper coinage simply ceased to exist. It gives you a completely different impression of the "fabulously wealthy" Ottoman empire (whether during its height or at its decline) that you might come across in other books during a cursory mention. However, I would've liked some sort of discussion on exactly what the state policy-makers thought as they attempted to fix their domestic currency. I mean, this is still an era before economics was an established field that people could study in universities or read about in books. Exactly how well did they understand the factors that influenced the value, supply, and demand of their currency? Was there anything inherent in Islamic philosophy that aided or inhibited their understanding of currency? One last thing I do want to mention is this short passage from page 55:
Carlo Cipolla has argued that one possible cause of debasements was the pressure from some social groups for inflation. More generally, the timing and frequency of debasements depended upon the changing power balances between state and society. In 14th century Italian city states, for example, merchants who dominated the governments preferred debasements to increased taxation whenever the government faced fiscal difficulties. This was in part because the prices of goods held by the merchants typically rose together with other prices after a debasement. Moreover, the merchants who lent to the government protected themselves against debasements of the silver currency by demanding, in their loan contract, to be paid in gold ducats. Similarly, the basic struggle for and against debasements in western Europe during the late medieval period took place between the central governments which held the power to issue money and which stood to gain from debasements, and the provincial aristocracy that had rented out their lands to tenants in fixed terms and thus had much to lose from the slide of the currency. The fate of the currency thus depended upon the outcome of the struggle between the centralizing monarchs and provincial aristocracy. 
Before reading this book, I naturally assumed that currency debasements in premodern states were linked with a weakening of state power. The debasements of the Roman denarius and antoninius is one infamous example. I never would have guessed that currency debasements could be a valid strategy in strengthening central authority. Although Pamuk convincingly argues that this wasn't the reason for the debasements ordered by Mehmed II, the architect behind the strong Ottoman central authority, it is definitely something to keep in mind.

The Richest Man Who Ever Lived: The Life and Times of Jacob Fugger
After the dry, academic tone of the previous book, this was the perfect book to try next. Unlike the other books mentioned in this post, this is a pop. history book written by a journalist and as you'd expect, it pretty much reads like fiction as the author adds his own dramatic flair here and there. For non-Germans, I'd assume the name Fugger would only attract a chuckle (it's not pronounced that way though). If you're like me and play EU4, you might've noticed that Austria has Fugger Banks as one of its national ideas, and so you'd at least know he must've been some famous banker. 

But whether or not you've ever even heard of his name, I think the story of his life is one that everyone should read about. As a larger than life figure, he was more than just a wealthy banker, he was a workaholic businessman who can be seen as a symbol of the creeping advance of capitalism as Europe left its medieval roots further and further behind. And if you're a fan of history, your view of early 16th century Europe isn't complete unless you know about Fugger. Despite my interest in early modern Europe, I'm surprised by how long I've gone on without hearing more about this guy when his life was so intricately involved in the significant events of the early 16th century such as the Habsburg expansion, the Protestant Reformation, or the German peasant's revolt. Granted, while I don't think Jacob Fugger's existence was necessary to ensure any of these major events, I think it's a disservice to skirt over his involvement if you're interested in this era.

One last thing I do want to mention is that as a pop. history book written by a journalist, you should be aware that there are some mistaken information thrown about, such as the popular myth that Europeans loved to use pepper to hide the taste of rotten meat (such a stupid myth), a misattributed quote to Napoleon instead of Voltaire (the one about HRE), that janissaries were paid solely by war loot (though many of them certainly earned way more from war loot than their regular wages), or that Justinian's code was ever applied in England. Now none of these minor mistakes really detract from the book's enjoyment, and I'm certainly not doing this to make fun of Steinmetz. I'm just pointing out that if even a guy like me can spot simple mistakes during a casual read, you should take the conclusions and interpretations of this book with a grain of salt. The author can get caught up at times in trying to heighten the drama or significance of Fugger's life.


  1. Thanks for the recommendations, your review instigated my interest for economic history.

    I am really looking forward to read them soon. Usually i buy all my books but some of these cost way more than i want to spend. Guess i have to sign up for the university library again.

    On a similar topic, a few months ago i read a biography of alexander hamilton.
    Main focus was of course the life of the protagonist(political person) himself.
    Yet a large remainder was written about the military activities during the independence revolution, the struggle and forming of the consitution along with the new federal goverment, the new tax legislation / reforms etc. to fund this federal goverment and all the different struggles they entailed of course.

    1. Well, if you don't mind reading on a computer, I do point out http://gen.lib.rus.ec/ for a reason. I've been reading so much more ever since I found out about this site.

  2. Though i dislike reading for extended periods on a computer, because it strains my eyes, fortunatly there is a remedy for that.

    I already just now checked this site, downloaded and converted a book for my e-book reader and it works just as it should.

    Thanks a bunch, i really appreciate it!

  3. Not my usual interest but worth a read thanks.

  4. Already check out the book you recommend, it's a pretty nice reading.

    p.s. Thanks for your recommendation i can horde more book for the year end reading

  5. Hox, please consider creating a GoodReads account. It would be great for you (and others, such as myself) to keep track of your books, ratings and reviews/thoughts.

    If you do so, please let us know your username so we could follow/friend you. Thanks!

    1. I actually have one but I haven't put much stuff on it. I'll organize it and then post it along with my last some thoughts on books of 2015 part 3 later this month.

  6. I find that Economics is people putting their wallet where their mind really is at.

  7. Hox, if you're interested in this kind of topic you should also learn some more theoretical analysis. As in these kinds of narrative texts you're still just kind of passively accepting the analysis of the author without really understanding the underlying dynamics. If you don't mind a suggestion or two, look up "Essentials of Economics" by Faustino Ballve and "Theory and History" by Ludwig Von Mises.