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Public Finance in Portugal, 1796–1910
Abstract
In the beginning of the nineteenth century, Portugal was an economically ‘backward’ country with a relatively weak state in the context of Western Europe. The turmoil provoked by the wars with France since 1796 and the three Napoleonic invasions between 1807 and 1811 affected, to a considerable extent, the performance of its economy and the functioning of its state. The 1820 liberal revolution and, two years later, the political independence of Brazil, Portugal's main colony, made the situation even more difficult. Such difficulties were largely overcome in the following century, in which important economic, political, and institutional changes occurred. One such important transformation was the development of its own liberal state. This chapter discusses how this transformation occurred and, crucially, how it was financed by taxing the economy and raising debt.
... In the beginning of the XIX century, the taxes levied on the economy did not evidence similar patterns among all the countries. In fact, while the proportion of taxes levied on the French, British and American economies amounted about 10.0%, on average, during the first fifty years of that century, the revenues of the Portuguese crown were little more than a third of those economies, in GDP proportion (Bonney (2010), Cardoso and Lains (2010), Mitchell (1983) and Mitchell (1998)). In fact, the lower proportion of taxes levied on the Portuguese economy at the beginning of the nineteenth century, and compared to other countries, deserves some considerations. ...
... Moreover, and combining the fact the most important share of revenues came from the outside of the metropolis, and the Portuguese economy backwardness had domestic reasons, help to explain the maintenance of an undeveloped tax system and, at the same time, some resistance for economic reforms that could help to improve the Portuguese economic development and, consequently to improve the Portuguese tax system (Amaral (2012)) and Costa et al. (2012)). However, with the consolidation of the liberal regime, the role of the state in the economy had grown and this fact had an extreme importance on the development of taxation and the Portuguese fiscal system during the nineteenth century (Cardoso and Lains (2010) and Costa et al. (2012)). ...
... Further, in the first 30 years of that century, Portuguese authorities opted for the indirect taxation via, which represented between 52% and 65%, despite an also growth in direct taxation, which varied between 13% and 29% (Silveira (1987)). From 1834 to the end of the first half of the nineteenth century, the share of direct taxation nearly triples the value of 1834, while the revenues regarding customs remained practically unchanged, in nominal terms (Cardoso and Lains (2010)). ...
The study of tax systems have been deeply discussed regarding the early modern period. However, there is a lack of comparative historical studies about the last two centuries in what respect the tax state developments. In our article we analyse the tax history of the last two hundred years for five countries, intending to analyse the mechanisms levied by the different governments to efficiently collect more revenues and the power to coerce several economic agents as well as we reflect about the power of those agents to condition the tax political policies.
The First World War was a watershed moment for the development of the modern tax state. Yet, whereas the tax yield strongly increased in this period, little is known about how the tax mix changed, in particular regarding the turn to direct taxation. Examining the two ‘Sister Republics’ Switzerland and the USA, this paper demonstrates that tax reforms in this critical period for modern tax systems were conditioned by coalitions among producer groups, which had already come into existence before the war. Most notably, farmers and their position on international trade were important in shaping coalitions on the turn to direct taxation. The Great War's main role was to temporarily interrupt (Switzerland) or cement (USA) the tax system's reorientation. The paper thus shows that war‐induced tax reforms have a lasting impact on the tax mix only if powerful coalitions support these reforms independently of the war effort. Der Erste Weltkrieg war ein Wendepunkt in der Entwicklung des modernen Steuerstaates. Während das Steueraufkommen in dieser Zeit stark anstieg, ist nur wenig darüber bekannt, wie sich der Steuermix veränderte, insbesondere was die Hinwendung zu direkten Steuern betrifft. Anhand der «Schwesterrepubliken» Schweiz und USA wird in diesem Beitrag gezeigt, dass Steuerreformen in dieser für moderne Steuersysteme kritischen Periode durch Koalitionen zwischen Produzentengruppen bedingt waren, die bereits vor dem Krieg entstanden waren. Vor allem die Landwirtschaft und ihre Position in internationalen Handelsfragen spielte eine wichtige Rolle bei der Bildung von Koalitionen für die Hinwendung zu direkten Steuern. Die Hauptrolle des Ersten Weltkriegs bestand darin, die Neuausrichtung des Steuersystems vorübergehend zu unterbrechen (Schweiz) oder zu zementieren (USA). Der Beitrag zeigt also, dass kriegsbedingte Steuerreformen nur dann einen nachhaltigen Einfluss auf den Steuermix haben, wenn mächtige Koalitionen diese Reformen unabhängig von den Kriegsanstrengungen unterstützen. La Première Guerre mondiale a été un moment décisif pour le développement de l'État fiscal moderne. Pourtant, alors que le rendement fiscal a fortement augmenté au cours de cette période, on sait peu de choses sur la façon dont la composition des impôts a changé, en particulier en ce qui concerne le passage à la fiscalité directe. En examinant la Suisse et les États‐Unis, cet article démontre que les réformes fiscales de cette période ont été conditionnées par les coalitions entre les groupes de producteurs, qui avaient déjà vu le jour avant la guerre. Le rôle principal de la Grande Guerre a été d'interrompre temporairement (Suisse) la réorientation du système fiscal ou de la cimenter (États‐Unis). L'article montre donc que les réformes fiscales induites par la guerre n'ont un impact durable sur le mix fiscal que si des coalitions puissantes soutiennent ces réformes indépendamment de l'effort de guerre.
Fiscal Capacity and the Colonial State in Asia and Africa, c.1850–1960 - edited by Ewout Frankema December 2019
Fiscal Capacity and the Colonial State in Asia and Africa, c.1850–1960 - edited by Ewout Frankema December 2019
Two of the most defining trends of the nineteenth century were the growth of international trade and the increased role of government activities in the economy. In the conjuncture between these developments lie taxes on foreign trade. Sweden was one of the examples where customs revenue became the single most important source of revenue before WWI. This article sets out to test how this source of revenue could increase as much
as it did. The analysis focuses mainly on trade policy and how tariffs were set and how that affected revenue. The results show that Swedish liberalisation of trade forced a switch in the fiscal structure of tariffs, moving revenue to fewer commodities. Increased importance was given to consumption goods with lower elasticity of demand. Trade continued to increase under fiscal taxation, which led to increases in revenue. During
the early period increased revenue was achieved with higher tariffs on a few key commodities. Towards the end of the century tariffs on agricultural and capital goods became more fiscally relevant, which could have clashed with protectionist intentions. The article highlights that more work is needed on this fiscal component of trade policy.
The main purpose of the book is to introduce the work of Alan S. Milward and to acknowledge the full magnitude of his scientific contribution to contemporary British and European history. The book is a collection of essays which provide a better understanding of Alan Milward’s extensive intellectual work for future scholars and facilitate the knowledge and transmission of his published work to present and future generations of students, scholars in the various disciplines concerned, and the general public. The series of original contributions which this book contains are related to or reflect critically upon Milward’s own contributions to the fields of political, diplomatic, and socio-economic history, political science, economics, international relations, and European Studies in general. This book honors Alan Milward through a better understanding of his many pioneering contributions in the fields of contemporary European history in general, and the history of European integration in particular. Although the volume does not aim to be a substitute for Milward’s work itself, it illuminates and assesses his creative process along fifty years of continued and intense work, as well as the impact of his main work, and the continuing relevance of his main theses today.
We present new evidence about the long-run relationship between state capacity – the
fiscal and administrative power of states – and economic performance. Our database is novel
and spans 11 European countries and 4 centuries from the Old Regime to World War I. We
argue that national governments undertook two political transformations over this period:
fiscal centralisation and limited government. We find a significant direct relationship between
fiscal centralisation and economic growth. Furthermore, we find that an increase in the state’s
capacity to extract greater tax revenues was one mechanism through which both political
transformations improved economic performance. Our analysis shows systematic evidence that
state capacity is an important determinant of long-run economic growth.
This book contains a collection of essays comparing the evolution of the fiscal and monetary regimes of the Old World colonial powers - England, France, Spain, Portugal and the Netherlands - from the seventeenth to the nineteenth centuries with the experiences of several of their former colonies in the New World of the Americas: the United States, Canada, Mexico, Colombia, Brazil and Argentina. The objective is to see how such fiscal and monetary institutions were modified or replaced by new ones. The case studies in the collection consider the experience of the colonies after they became independent countries; they examine the factors that allowed efficient fiscal institutions to develop in some countries, while in others such development turned out to be unsuccessful; and they consider why some governments were able to live within their means and provide public goods, while for others expenditures frequently exceeded revenue, often leading to fiscal crises.
The Portuguese Constitutional Public Finance and civil wars (1833-1845)
This article discusses the use made of political economy in Portuguese parliamen- tary debates throughout the second half of the nineteenth century. This case-study highlights the popularization of political economy in the discussion of economic and financial policies, concerning issues such as the implementation of transport sys- tems, the reform of the fiscal system, the nature of monetary regimes and financial crises, the control of public debt, the emergence of social problems, the allocation of colonial resources or the choice between free trade and protectionist policies.
Political economy played an important role, providing persuasive arguments to justify certain policy options. However, the very same arguments also proved them- selves as rhetoric abuses, given the propensity of the members of the Parliament to quote economic writers without a thorough knowledge of their work.
Hispanic American Historical Review 80.4 (2000) 839-864
The breakdown of the Portuguese-Brazilian empire has been a topic of controversy for a long time. The dispute has converged on matters of fact as much as on matters of interpretation. Historians on both shores of the Atlantic have failed to present a common perspective on basic issues, such as the nature and scope of the growth that preceded the collapse, or the timing, duration, and intensity of the crisis itself. Thus a variety of explanations have been offered for this major turning point, as scholars tried to analyze the consequences of the collapse of the old colonial system.
However, beyond the controversy, the crucial significance of this period for the now diverging history of the two countries must be universally admitted. For Brazil, of course, this was the time of the birth of the nation, when crucial choices were made and many possible lines of historical development were discarded. Similarly, for Portugal this turn of events was very important. It meant that for the first time in nearly four hundred years the country had to sustain itself without an empire. The remaining colonies, that is, the trading posts and fortresses in Africa and in Asia, had virtually no economic or financial relevance. For almost a century the empire, or what remained, played a minor role in the Portuguese economy and, wishful expectations to the contrary notwithstanding, could not compensate for the loss of the vast American colony. As a result, Portuguese society had to undergo fundamental socioeconomic adjustments to accommodate this historical development.
The climacteric nature of this historical process is unquestionably related to the contentious character of the interpretations it has elicited. Bearing this in mind, this essay presents the facts and reviews the main topics of this historiographical controversy. As an active participant in the controversial debates on this topic, I will refrain from restating my former arguments, although this certainly is an excellent opportunity to make them accessible to an English-speaking audience. My aim is to offer a fresher analysis of the available evidence, with the assistance of the most recent research, and thus extend our knowledge of this critical period in the history of Portugal, Brazil, and the Atlantic world.
For the Portuguese empire, the beginning of the second half of eighteenth century spelled disaster. In 1755 a tremendous earthquake and the ensuing fire destroyed the best part of the city of Lisbon as well as the cargo of the fleet from Brazil, which was stored in the customs warehouses. The damages were huge and they had scarcely begun to be assimilated when a second blow caused another shock. Gold remittances from Brazil, which had been for some decades the most important financial resource in the empire and had become the major driving force behind its integration into the Atlantic economy, began faltering. The decline, which could already be felt in 1760, became very serious after 1766. This problem led to significant financial strains in the mother country and caused an inadequate supply of hard currency that was required to settle international payments, a difficult task for a country with a chronic trade deficit. Consequently, the government of the marquis of Pombal hastened the economic reforms it had already initiated in the previous decade.
The government aimed first at the reorganization of both the colonial trade and the main export sector in the metropolitan economy. It specially regulated the sugar and tobacco trade (1756) and created three monopolistic companies, two of which were granted exclusive rights over shipping and trade with specific regions of Brazil while the third was entrusted with the control over the marketing of Port wine. Pombal tried to secure a tighter control over long-distance trade (although the fleet system to Brazil was abolished), which he wished to see concentrated in the hands of a smaller mercantile elite (presumably more adept at competing with the foreign merchants). The main purpose of this program was to cutback the large deficits of the balance of trade. To this effect, he later encouraged import-substitution, and devised an ambitious plan to promote manufacturing...
The history of public finances in Portugal from the middle of the nineteenth century to World War I is distinguished by the
pursuit of an ambitious programme of public investment in infrastructure, and by the negative financial consequences this
elicited, culminating in the 1892 default. In this article we approach the Portuguese financial history of this period with
a relatively new methodology for evaluating financial sustainability, which emphasises the inter-temporal nature of government
budgeting. The results obtained allow us to quantify the distance that separated Portuguese finances from a sustainable path
throughout the period. Although the generational imbalance of Portuguese finances at the time seems massive in the context
of today's benchmarks, its economic and financial impact should have been more limited, given the government's relatively
low weight in the economy and the favourable demographic pattern.
Among Patrick O’Brien’s enduring contributions to the economic history of Britain is his work documenting the steady rise of central government taxation in the eighteenth century, even though Britain was already one of the highest-taxed economies in the world by 1688.1 While the successive rises in taxation, either by widening the tax base to include more sources of taxation or by increasing the rates of existing taxes, were clearly driven by the wars of the eighteenth century, the puzzle he put to the profession was, ‘How was the British government able to do this?’ The puzzle arose from the constraints placed upon the monarchy by an elected parliament that had complete control over tax policy and was loath to tax its members, comprised of landed gentry and wealthy burgers. Moreover, given the splendid isolation of Britain from the land mass of Europe and the professional armies that ranged over it from the fifteenth century on, it was never clear that Britain had to be committed to participation in any of the dynastic wars continually erupting on the continent. Provisionally, O’Brien and Mathias in an earlier article had suggested that the answer lay in Britain’s increasing reliance upon indirect taxes, at least until the imposition of the income tax by Pitt the Younger in 1799.2 Until the threat of French domination of the continent motivated the British ruling classes to tax themselves, they argued, excise taxes were the tax of choice, rather than customs revenues.
In 1891 a financial crisis led Portugal to abandon the gold standard and to partially default by cutting interest payments on domestic and foreign debt. As a consequence, the country was banned from borrowing in international financial markets, until an agreement with foreign bondholders was reached in 1902. That financial crisis was the result of large current account and government deficits. Yet the abandonment of the gold standard and default were not imposed by financial difficulties only. This paper shows that such options were taken because of the growing domestic consensus regarding the need for a change in monetary policies. The concern about the domestic economy was more important to the Portuguese governments than the fear of a negative reaction of foreign bondholders. Insufficient information about the sustainability of government debt and lack of cooperation between borrowers left the Portuguese governments with space to manoeuvre according to their domestic political interests.
Aspectos da evolução das finanças públicas portuguesas nas primeiras décadas do século XIX (1800–27)
- Silveira
Reflexões sobre a história das finanças públicas portuguesas no século XIX
- Pinheiro
O crowding-out em Portugal, 1879–1910
- Esteves
Crise financeira, dívida pública e capitalistas
- F Costa
- Dores