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November 2, 2005
The Transfer of Ideas About Taxation Since 1750
Holger Nehring and Florian Schui

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Holger Nehring is a junior research fellow and tutor in history at St. Peter's College, University of Oxford, U.K. Florian Schui is a postdoctoral research fellow at St. Edmund's College, University of Cambridge, U.K., and currently a government of Ireland postdoctoral fellow at the National University of Ireland, Galway.

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The tax history conference held at the Centre for Research in the Arts, Social Sciences, and Humanities (CRASSH), Cambridge, England, September 16-18, 2005, explored the transfer of ideas about taxation from the mid-18th century to the beginning of the 1950s. That was a period of fundamental change in the ways states organized their finances -- not only did wars and revolutions pose a challenge to state finance, but, particularly in central Europe, it was also a time of state formation and constant reconfiguration of state structures. Moreover, the economic growth during the Industrial Revolution and the economic crises from the late 19th century onwards posed increased challenges for the tax-levying states. Imperial states also created fiscal structures in the colonies as part of their general political and economic policies during that latter period.

Historians and historically minded economists as well as legal scholars have written the financial history of the period mostly from a national perspective. That focus results from the close connection between the emergence of modern nation states and their fiscal systems. However, strictly national perspectives on the history of taxation neglect the importance of international exchanges of ideas about taxation. Those exchanges were often crucial in shaping the national histories of taxation. The conference sought to explore the complex and often paradoxical interplay between transnational flows of ideas and the strengthening of the administrative structures of nation states. It brought together an interdisciplinary group of scholars from Europe and the United States who specialize in different periods to explore the issues in a diachronic and systematic context.

The papers presented at the conference addressed four sets of issues: The institutional, financial, legal, and economic contexts for the transfer of ideas about taxation, especially the ways in which ideas and debates about taxation shaped fiscal institutions and vice versa; the ways in which ideas about taxation were "translated" or adapted to specific national political and cultural contexts; the social, political, and economic conditions that facilitated or blocked the transfer of ideas about taxation; and the ways in which the transfer of ideas about taxation was linked to concepts of good government and to economic theories. The papers also sought to grapple with the methodological issues of transnational and connective history.

After words of welcome by Florian Schui (CRASSH, Cambridge), Ludmilla Jordanova (CRASSH), and Gareth Stedman Jones (Centre for History and Economics, Cambridge), development economist Ha-Joon Chang (Cambridge), in his keynote address, explored the historical interconnections between public finance and economic development. In his historically wide-ranging talk, Chang warned against the unthinking application of neoclassical economic theory to the problems of today's developing countries and argued that transfers of fiscal ideas from industrialized to developing countries have often failed. He pointed out that much of today's economic theorizing and policy advice ignored crucial historical, cultural, and institutional factors that impeded the transfer of fiscal models. Epochal changes in economic thinking and economic development had to be taken into account when looking for the application of historical lessons to developing economies today. He illustrated his argument by giving examples of the failed imposition of foreign tax norms on economies in the 19th century and in the post-World War II period. Those attempts failed because they had ignored the crucial fact that the governments of those developing countries often lacked the ability to tax because there were no state institutions and because they did not enjoy the necessary legitimacy among the population. Before they became free-trading economies in the mid-19th century, economies such as that in Britain had grown while still protected by an extensive tariff system. When urging others to turn to free trade, Britain applied norms to which Britain itself had not adhered. With weak state structures, a lack of economic institutions, and a low degree of legitimacy, governments across history often saw tariffs and duties as the only means available to generate the necessary revenue. The introduction of value added taxes, advocated by the World Bank in the 1970s, faced huge obstacles: It depended on the issuing of receipts, but many developing economies lacked the technology to issue receipts and the concept of receipt was culturally alien to many economic actors. Chang recommended taking the history and technology of institution-building seriously when formulating economic policy recommendations. In particular, he emphasized the importance of a historical analysis of the "black box of the state," and of economic institutions for the development of economic theories and policies.

The first panel looked at some specific transfer processes provoked by the increasing demands of war finance in the late 18th and early 19th centuries. In his paper, Florian Schui took the conference delegates on a journey with about 350 French tax inspectors who had been hired by the Prussian government in 1766 to improve Prussian finances after the Seven Years' War had drained the state's resources. The French administrators created a new tax administration in Prussia, the Régie. By increasing the tax burden on elites, the Prussian government sought to raise the funds for ambitious economic, military, and cultural development efforts. Schui elaborated on the hiring process and the social composition of the inspectors, the role in the transfer of fiscal and technical knowledge, and the largely negative perception of the new administration by the taxpayers and the other branches of Prussian administration. Schui highlighted the connections between political legitimacy and the transfer of ideas. The Prussian king looked for expertise from the "laboratory of public finance" that France was at the time, because he could not gain the necessary support and expertise for the drastic measures he sought among his own administration. However, when the French administrators arrived in Prussia, they did not merely apply the French model; they learned from their own mistakes by dissuading the king from implementing a copy of the French system. In 1786 the new king, Frederick William II, abolished the Régie after intensive criticism from the public, but the administrative structure the French inspectors had set up remained in place. By 1786 Prussia had made an important step toward making its elites contribute more to public spending and thus toward a more universal tax system.

In her paper on the transfer of the cadaster system in central Europe during the 18th century, Christine Lebeau (Paris I -- Panthéon Sorbonne) elaborated on the interplay between commentators, practitioners, academics, and bureaucrats in the periphery, especially the role of Piedmont, in developing and spreading the cadaster system. While the first cadasters were developed by geographers, geometricians, and land surveyors, they were not yet used by public administrators to measure the tax base. The practitioners' ideas were taken up only when, faced with increasing demands on their finances, administrators discussed ways of assessing the ability to pay taxes. By the mid-18th century, therefore, cadasters had turned from a technical problem to one of political power. Knowledge of cadasters became part of the arcana of rule and was thus kept secret. While many of the technical transnational discussions had been public, governments conferred secretly to decide which cadaster systems were most useful. Only much later did those discussions reach the public domain. Lebeau highlighted the importance of personal networks among practitioners, scholars, and administrators, from both states and regions. She also stressed that it was difficult to speak about specific models of cadasters, because the role of models was more often a tool of political arguments than an adequate description of content.

Alexander Grab (University of Maine) took those issues into the era of the Napoleonic Wars by exploring the ways in which the French government sought to impose its financial system on the French areas in northern Italy. Like the other speakers, Grab stressed the issue of legitimacy: While Napoleon consolidated the fiscal heritage of the French Revolution and sought to reduce the tax burden at home, he tried to finance his wars by imposing increased burdens on the territories in occupied Europe. Napoleon thus imposed the efficient system of tax collection developed in France onto northern Italy. Napoleon was convinced that Italy was a rich country and that it was able to shoulder the burden. Through his local administrator, Giuseppe Prina, Napoleon increased the existing burdens and created new ones, especially in the area of consumption taxes through licenses and octroys. At the same time, he was unconcerned about the effect of those increased burdens on the legitimacy of his empire among the northern Italian citizenry.

In his comment, Christopher Clark (Cambridge) analysed the papers in the light of recent research on cultural diffusion and political transfer processes, largely following lines of investigation suggested by W. Parsons, D. Dolowitz, and D. Marsh. He highlighted the multilayered and voluntaristic nature of political transfer processes and discussed some methodological problems connected with transnational research. He highlighted the role of states and institutions in mediating transfer processes and cautioned against seeing the history of nation states and transnational history as mutually exclusive. Clark concluded by stressing the "plurality of twisted paths" when looking at the transfer of ideas: It would, he argued, be difficult to assume a clear historical trajectory from fewer to more transfer processes across history.

The second panel examined transfer processes within empires. The first contribution was a talk by Martin Daunton (Cambridge), "Transfers of Ideas About Taxation Within the British Empire." Daunton elaborated on the "export" of taxation from Britain to the colonies, focusing primarily on the late 19th and early 20th centuries. In the 19th and early 20th centuries, an increasing share of domestic expenditure and the expenses for the empire were covered by taxation levied on taxpayers in the colonies. A crucial problem in that context was that taxation imposed by Britain on its colonies was inevitably considered illegitimate by colonial populations, because the colonies lacked representative franchise systems. To create greater legitimacy, Britain followed different routes in different parts of the empire. The British either followed the traditional local patterns of taxation (or rather the patterns that British administrators assumed to be the local patterns), or they imported their own ideas about taxation. Those decisions about colonial taxation were thus closely associated with the type of society that the British considered desirable for the colony. In India, for example, there were conflicting tendencies in the British administration. One view was that taxation should promote the further development of large estates, similar to the situation in Britain. The contrasting view was that of a fiscal pattern that would benefit small farmers and foster the development of a yeoman-type pattern of land ownership. Other paths were pursued in white settler colonies. There, an extended franchise was seen as a way to obtain greater legitimacy for taxation. Many of those debates about taxation and social structure in the colonies were influenced by contemporary debates in Britain. However, as Daunton emphasized, transfers of fiscal ideas ran both ways in the empire: Many of the controversies about taxation in the colonies also fed back to debates about the situation in Britain, especially regarding the question of political legitimacy.

W. Elliott Brownlee (University of California, Santa Barbara) then examined the transfers of ideas and fiscal specialists between the United States and Japan between 1945 and 1952 and focused on the developments associated with the "Shoup Mission," headed by the American economist Carl S. Shoup. Brownlee argued that the Japanese government successfully resisted many of the changes proposed by the Shoup Mission. Most of the changes adopted by the Japanese, he argued, would have been implemented even without the presence of the Shoup Mission. The Japanese government's success in blocking a fundamental change of the tax system was largely due to previous political decisions taken by the United States. To create a stable Japanese government amid the perceived threat of the Soviet Union and China, the United States had opted to keep most of the Japanese civil administration in place and backed a liberal- democratic government in Tokyo. The crucial role of legitimacy for the success of transfers in an imperial setting clearly emerged in Brownlee's contribution. Brownlee concluded by highlighting two principal long-term effects of the Shoup Mission. First, the mission triggered a broad debate about fiscal policy in Japan in which the American mission served as a political argument. Second, despite the problems of the Shoup mission, the reputation of fiscal missions was greatly bolstered among the tax policy community in the United States. The Shoup Mission thus had a strong influence on similar U.S. tax missions carried out subsequently by the United States, but also on international institutions such as the International Monetary Fund.

In his comments, Sunil Amrith (Cambridge) stressed that both Daunton's and Brownlee's papers brought out the problems of competing policy imperatives in the context of transfers of taxation. In India and in West Africa, the British often failed to change the fiscal system substantially, as they lacked legitimacy and adequate state capacities in the colonies. Similarly, U.S. efforts to change fiscal patterns in Japan were frustrated because the lack of legitimacy prevented the United States from antagonizing the Japanese government. Amrith concluded by stressing the lack of political legitimacy as a crucial problem for transfers in a context in which one country exercises control over another territory.

In his paper about the transfers of ideas about taxation between the United States and Germany c. 1880-1914, Holger Nehring (Oxford) examined the importance of German economic ideas and concepts for the American debate about a federal income tax. Nehring used the income tax debates in both countries as a window into federal state-building in both countries at the turn of the 19th century. The adoption of federal income taxes in the United States and in Germany in 1913 constituted a break with previous traditions and was perceived as such, despite predecessors in times of war and on the state level in both countries. At their core, the American and German debates about a federal income tax in both were about how the federal state should interfere in people's lives and about negotiating the boundaries between the private and the political. It was that element that created the conditions for concepts to travel from Germany to the United States. After elaborating on the political, economic, and fiscal conditions in which the American and German income tax debates took place, Nehring highlighted the role of experts in transferring ideas across the Atlantic. Increasingly, those from the American progressive movement advocating a federal income tax had a say in Congress and provided politicians with new forms of social knowledge. American reformers such as Edwin R. A. Seligman had all studied with members of the so-called Historical School of Economics in Germany. That allowed them to assume a more positive role for the state under what they regarded as specific social circumstances. Income taxation meant that states looked for a transparent system that would be used to determine what the person received as income, how it was spent, and what share the state could reasonably claim. It was in the realm of perceptions of the state's role that German and American experiences differed substantially, because of the different political systems.

Andreas Thier (Zürich) explored the diffusion of the income tax among the federal states within the German empire. The introduction of the income tax in German states -- as in the United States and many other countries -- marked a fundamental fiscal innovation. That change occurred almost simultaneously in the German states, although the introduction of an income tax was not imposed by the central government. In Thier's historical analysis, the simultaneous change can be explained by transfers on three levels. First, the Verein für Socialpolitik played a crucial role in the diffusion of the income tax ideas among German social experts. That association was closely linked to the German Historical School, which also influenced the income tax debate in the United States. Through academic work and political lobbying efforts, economists and social reformers such as Adolph Wagner promoted fiscal reform. Although Thier acknowledged that their public influence was evident, he did not see any concrete effects of the experts' ideas on governmental decisionmaking in Prussia and other German states. Second, the suggestions for an income tax were discussed as part of the political and administrative processes in the central state and the federal governments. State and federal governments exchanged legislative drafts and reports. Thier argued that there was some, not necessarily conclusive, evidence of vertical exchanges that developed in the dynamic interaction between the central government and federal state governments. The competition for revenue between the two levels of government was crucial in this dynamic. Third, Thier argued that the fiscal needs of the federal states worked as a strong motivation for the introduction of the income tax. All federal states found themselves in a tax competition for revenue with the central government and with local government.

In his comment, Peter Becker (Linz) emphasized the methodological and theoretical implications for the research on transfers of fiscal ideas that emerged from Nehring's and Thier's papers. Becker argued that the analysis of the transfer processes needed to include a close look at the type of knowledge that was transferred and generated and the networks through which knowledge was diffused. In particular, he highlighted the importance of technical and administrative knowledge -- how to collect taxes and how to organize their collection -- as crucial for enabling the transfer of specific tax concepts. Becker suggested classifying transfer processes according to three types of exchanges: observation, communication, and assimilation.

Discussions throughout the conference focused not only on the specific issues, but also on the methodological issues connected to transfer history. All discussants agreed that transfers were difficult to pin down and often the transfer took the form of mutual observations. Those observations could take place in different settings, such as conferences or diplomatic missions, or through newspapers and scholarly journals. The transfer of ideas and models and the application of those models had to be clearly distinguished. Therefore, the results of the conference suggest that the findings of sociological and political science research on the diffusion of ideas too easily assumed that similar challenges would lead to the almost natural adoption of similar policies across different political, institutional, and economic settings.

Participants also discussed whether ideas and models were really transferred as distinct packages, as much of the research on the transfer of ideas has implied, or whether the talking about models was embedded in specific political contexts. Similarly, participants agreed that "ideas" always had to be placed in their economic, political, and cultural settings and could not be regarded as monads that were shifted as distinct packages from one place to the other. The interrelation between fiscal ideas and the economic and administrative reality was highlighted as one of the crucial issues for the understanding of transfer processes. The question whether transfer processes became easier or more difficult during the period under consideration also assumed a prominent role. Discussants disagreed, however, whether the increase in transnational communications over the last 200 years has made transfer processes easier. During that period of increased transnational communications, the existence of well-established administrative routines and economic structures have made the transfer of models and concepts much more difficult because new concepts could not easily fit into the old historical frameworks.

The conference was generously funded by the Centre for History and Economics, Cambridge, CRASSH, and the Trevelyan Fund of the Cambridge History Faculty. Publication of the conference proceedings and the establishment of an international research network for those interested in the history of taxation are planned. The conference was organized by Holger Nehring and Florian Schui. Contact address: Florian Schui, CRASSH, 17 Mill Lane, Cambridge CB2 1RX, UK. Email: Holger Nehring, St. Peter's College, Oxford OX1 2DL, UK, Project homepage:

Speakers and Commentators:

Dr. Sunil Amrith, Trinity College and Faculty of History, Cambridge, U.K.

Prof. Peter Becker, Faculty of History, University of Linz, Austria

Prof. W. Elliott Brownlee, Faculty of History, University of California at Santa Barbara, U.S.

Dr. Ha-Joon Chang, Faculty of Economics, Cambridge

Dr. Christopher M. Clark, St. Catharine's College and Faculty of History, Cambridge

Prof. Martin Daunton, Trinity Hall and Faculty of History, Cambridge, U.K.

Prof. Alexander Grab, Faculty of History, University of Maine, Orono, U.S.

Prof. Christine Lebeau, Faculty of History, Université de Paris I -- Panthéon Sorbonne, France

Dr. Holger Nehring, St. Peter's College and Faculty of History, Oxford, U.K.

Dr. Florian Schui, CRASSH, St. Edmund's College and Faculty of History, Cambridge, U.K.

Prof. Andreas Thier, Faculty of Law, University of Zürich, Switzerland