Paths toward the Modern Fiscal State: England, Japan, and China by Wenkai He (review)

In this interesting study, Wenkai He joins the small but growing list of scholars engaged in comparing trajectories of state development in Western Europe and East Asia. His specific goal in focusing on England, Japan, and China is to explain when and why a modern fiscal system appears—modern in this case referring to centralized state collection of indirect taxes that are leveraged for long-term finance. England around the time of the Glorious Revolution and Meiji-era Japan are the successes to be explained and late Qing China the contrasting failure. After rejecting several potential explanations involving the presence of industry, representative political institutions, or territorial size as an obstacle, He proposes a two-part argument to account for the variation observed in his three cases: In the first part, he suggests that the creation of modern fiscal states was a consequence of crises in which governments made excessive use of short-term liabilities or issues of paper currency. Since not all such crises can be expected to give birth to modern state finance, He adds, in the second part of his argument, that only crises that occur in the presence of “appropriate socioeconomic circumstances” lead to this outcome (22). These circumstances can vary in form.

After an initial theoretical excursion, He briefly discusses the United Kingdom before offering a much more substantial treatment of the Chinese and Japanese cases, for which he employs a much broader range of sources. The presentation of the argument is clear, but the conclusions are frustrating. The role of “appropriate socioeconomic circumstances” turns out to be a vague theoretical category on behalf of which certain previously dismissed alternative explanations reappear in a new guise when needed. For example, He states, “The unique position of London in the English economy facilitated government attempts to centralize the collection of taxes” (53), attributing London’s advantage to England’s relatively small size compared to China’s. Size, however, was dismissed earlier as a causal explanation. Similarly, territorial size may well have been one of the socioeconomic circumstances that permitted the extensive development of private financial networks in Japan. In the case of China, He suggests that appropriate socioeconomic circumstances for reform were absent because internal violence and rebellion during the nineteenth century led to severe disruption of the private economy.

In the end, the most important lesson of this book may be to remind scholars of a simple fact that is frequently overlooked: Successful state building depends heavily on the stability of the private economy. In an era showing considerable renewed interest in the subject of state capacity, this point is well worth remembering. This accessible book will interest scholars from multiple academic disciplines, including history, sociology, economics, and political science.