Financing deficits in the eighteenth century

The competitive state system of early modern Europe was characterized by political and military aggressiveness whose costs exceeded the traditional revenues available to rulers. Taxation authority, elaborated simultaneously with the development toward centralized states, distributed the burden of furnishing resources for dynastic rivalries beyond princely domains but did not provide sufficient revenues. In the same fashion as their predecessors, early modern states employed auxiliary financial devices often marked by arbitrariness and by disruptive consequences for political stability and economic activity. Supplies, manpower, and money were requisitioned; coinage was debased; voluntary and involuntary loans were raised; liabilities were renounced or left unpaid. The fundamental feature of this system of government finance was instability: financial instability in the sense that taxation programs were oriented chiefly toward meeting peacetime rather than wartime requirements, economic instability in the sense that neither taxation nor auxiliary financial techniques was generally used in such a way as to assist economic development, and political instability in the sense that inadequate tax and domain revenues led to tensions surrounding attempts to increase the rate of assessment or exact resources that could not be secured by consent.

To increase tax revenues necessitated, in the first place, conflict with taxpayers, from whom resistance was mounted by numerically small political and social classes with disproportionately large economic resources.