EH207 – China since 1800: Culture,
Institutions and Economic Growth
State Capacity
What does the state do? Why is state
capacity important?
▪ The state allocates resources.
▪ The state can be particularly effective where there is market
failure.
▪ The state deploys coercive power to extract revenue to finance
its needs.
▪ State capacity is crucial for modern economic development
through public goods provision.
Research on State Capacity
• European state formation is often used as a
model for modern states, but historical
paths varied.
• Charles Tilly offers a broad definition of the
term, he says: "Let us define states as
coercion-wielding organizations that are
distinct from households and kinship groups
and exercise clear priority in some respects
over all other organizations within
substantial territories" ( 1990: l ).
State Formation: Expectations and
Perspectives
• Challenges:
• Comparing initial conditions:
• China: Warring States Period fragmentation (475–221 BCE).
• Europe: Feudal decentralization (1000–1500 CE).
• Explaining political trajectories:
• China: Centralized unification under the Qin and Han Dynasties.
• Europe: Gradual centralization post 1648 (Treaty of Westphalia).
• Avoiding cultural oversimplifications (e.g., attributing Chinese unity
solely to Confucianism).
Key Dynamics in State Formation
• Political Power:
• China: Qin legal reforms, land redistribution, and standardization policies.
• Europe: English and French monarchs centralizing fiscal control post 1500s.
• Control Mechanisms:
• Coercion: Roman legions.
• Persuasion: Han-era Confucian legitimacy.
• Exchange: European nobles trading loyalty for privileges.
• Competition:
• China: Warring States Period drove state capacity innovations.
• Europe: Hundred Years’ War (1337–1453) spurred fiscal and military
advances.
Early Empires & Their Legacies
• Roman Empire:
• Incorporated elites (e.g., granting citizenship to conquered peoples).
• Relied on extensive infrastructure but collapsed due to overextension.
• Imperial China:
• Qin: Unified weights, measures, and governance.
• Han: Integrated local elites through Confucian education.
• Outcomes:
• Europe: Fragmented competitive states (e.g., Venice, Florence).
• China: Long-term imperial unification (e.g., Tang and Song
dynasties).
Divergent Paths of Political Change
• Europe:
• Magna Carta (1215): A foundation for limiting royal authority.
• Parliamentary representation fostered legal frameworks.
• China:
• Confucian exams integrated elites, creating centralized bureaucracies.
• Peasant welfare policies ensured stability but limited social mobility.
• Contrast:
• Europe: Plural claims by nobility and clergy.
• China: Absolute emperor with limited elite opposition.
Challenges and Capacities in State Making
• Europe:
• Thirty Years’ War (1618–1648): Spurred standing armies and fiscal
innovations.
• Diverse elites required negotiation (e.g., Estates-General in France).
• China:
• The Song Dynasty expanded trade networks but struggled
militarily.
• Yuan and Ming dynasties prioritized agrarian tax stability.
Comparative Commitments and Claims
• European Commitments:
• Legal systems reinforcing individual rights (e.g., Glorious
Revolution, 1688).
• Nobles and merchants retained privileges through negotiation.
• Chinese Commitments:
• Land redistribution (Tang Dynasty’s “Equal-Field System”).
• Kangxi Emperor's policies reduced peasant tax burdens for
welfare.
A Eurasian Perspective on Modern State
Making
• Europe:
• Fragmentation allowed institutional experimentation (e.g.,
Dutch banking innovations).
• Civil society emerged independently of centralized authority.
• China:
• Unified governance prioritized large-scale projects (e.g., Grand
Canal construction).
• Confucian ethics tied governance to moral legitimacy and social
harmony.
Key Lessons from State Formation
• China:
• Emphasized long-term stability and centralized authority (e.g.,
Yellow River management).
• Bureaucratic centralization supported vast agrarian populations but
limited adaptability.
• Europe:
• Competitive state system drove innovation (e.g., gunpowder
revolution).
• Persistent elite competition hindered long-term centralization.
What Makes China’s Modern State
“Chinese”?
Origins of the Modern Chinese State (Philip A.
Kuhn)
• China’s modern state evolved over two centuries
in response to internal challenges from the late
empire.
• Even before the Opium War, key constitutional
questions emerged:
• Political Participation – How does it shape
state power?
• State Revenue – How should the state
secure a share of society’s wealth?
• These issues have persisted, though framed in
different terms over time.
The Leiyang Revolt and Its Fiscal Background
• Poor, mountainous county of Leiyang in southern Hunan.
• Corrupt tax collectors.
• Tax collection became a loan business run by the local government.
• Out of career considerations, magistrates prioritized timely tax
collection.
• The crisis of the 1840s: real tax burden soared as silver rose in price.
• The role of “proxy remittance.”
Fiscal Reform and the Trans-Revolutionary
State
• Tocqueville’s Insight: The Old Regime laid the foundation for the
Revolution.
• Continuity in the Chinese State: Evolved during the late empire and
persisted after 1949.
• Longstanding Fiscal Challenges: Issues seen in Leiyang reflect a
broader historical struggle.
• Why Tocqueville? Both Bourbon France and late imperial China were
partially centralized bureaucracies.
Fiscal Reform & State-Building (20th Century)
After the Boxer Rebellion: Key Challenges
1. Extract more revenue from rural society to pay indemnities.
[Link] a constitutional system, modeled after Japan.
Impact on Local Taxation
• New taxation approaches were introduced to support reforms.
• Merchants and literati gained power to levy taxes.
• From the state’s perspective, local self-government became a
competitor for revenue
Fiscal Reform & State-Building (20th Century)
• Early in the Republic, the regular bureaucracy regained control over local
taxes.
• Under Chiang Kai-Shek's Nanjing government, provincial authorities
removed local elites from taxation, labeling them “local bullies and evil
gentry.”
• Local government expanded further into the countryside, with new
administrative units like townships (xiang).
• Mao’s government retained some Republican-era innovations.
• Across the 20th century, all regimes continued the monarchic goal of
eliminating unauthorized tax middlemen
Collectivization & Agricultural Control
• Collectivization as an urgent priority of the modern Chinese state.
• Collectivization offered a new method of relating agricultural revenue to
industrialization.
▪ The challenge of accessing the farmers’ surplus production.
▪ The task of raising agricultural production.
• “Land Reform” (1950-1952)
▪ Landlords and rich farmers had their land taken away and distributed
among the landless.
▪ A class of state agents replaced by men drawn from the poorest stratum
of farmers.
Collectivization & Agricultural Control
• Mao’s top officials rejected eliminating private ownership, but he pushed
for expanded collectivization.
• Urban food supply issues made market purchases too costly for Beijing.
• The state abolished private agricultural markets and introduced a
compulsory grain purchase system.
• “Unified Purchase”: Government agencies took over all buying and selling
of grain.
Collectivization & Agricultural Control
• Mao (1953): Collectivization as an essential precondition for “raising productive
power and completing the country’s industrialization.”
• Mao (1955): Only rapid collectivization could support industrial growth.
• Collectivization:
▪ No more direct relationship between the state and the individual household.
▪ Speed of tax collection increased.
▪ The chiefs of the collectives became the state’s tax agents.
▪ Land and residence linked in “bounded villages”.
▪ Market system was obliterated.
The Great Leap Forward
•Highly effective grain extraction system, but excessive procurement
led to famine during the Great Leap Forward.
•Policy failure or deliberate strategy? Debate over whether mistakes or
intent drove the crisis.
•Post-famine adjustments:
•Some collectives dismantled, others downsized to villages or
neighborhoods.
•1960s: Communes shifted into local administrative and social
service units.
•Bureaucratic control persisted even as socialism weakened.
Fiscal-Historical Roots of Collectivization
• A bit monocausal?
• How an old agenda can express itself in a new context.
• Collectivization was an illustration of how that old imperative operated
in a particular context.
• Social engineering to furnish resources for an industrial economy.
• Social engineering fashioned on a revolutionary Marxist-Leninist
template of class struggle and the socialization of agriculture.
• The persistent theme: the state and local agents compete for control
of the farmers and their surplus production.
Discussion Question
• How did state capacity in China evolve in response to internal and
external challenges, and how does this compare to the European
experience?
• Consider:
- China's long-term state-building strategies (centralization, fiscal reforms,
governance).
- Key historical moments (Leiyang tax crisis, post-Boxer Rebellion reforms,
collectivization).
- Differences and similarities with European state formation
(decentralization, elite negotiations, parliamentary representation).
Additional readings
• Charles Tilly (1975). “Reflections on the history of European statemaking”. In: The
formation of national states in Western Europe. Vol. 38. Princeton, 1975.
▪ The formation of national states in
western Europe.
▪ What processes and preconditions
brought powerful national states
into a dominant position in western
Europe.
▪ Experience of major European states
between 1500 and 1900 with respect
to warmaking, policing, taxation,
control of food supply, and
recruitment and training of
professionals and officials.
• Wenkai He (2013). Paths toward the modern fiscal state. Cambridge, Mass.: Harvard
University Press, 2013.
• Examines the birth of the modern fiscal state, which is characterized by an
institutional innovation of using centrally collected indirect taxes to mobilize
longterm financial resources from the markets.
• Uses historical cases to investigate the complete process of the emergence of a
new institution.
• Comparative historical analysis: England between 1642 and 1752, Japan between
1868 and 1895, and China between 1851 and 1911.
• Why did the modern fiscal state emerge in England and Japan but not in China?
• Roy Bin Wong (1997). China Transformed: Historical Change and the Limits of
European Experience. Cornell University Press, 1997, Chapters 7 & 10.
• Chapter 7. The Chinese State after 1850
• The interstate and domestic axes together define the space within which groups reproduce
and transform their states.
• The domestic axis of Chinese state making in the nineteenth and twentieth centuries
commands our attention.
• Chapter 10. State Making, Fiscal Negotiations, and Tax Resistance
• Tax resistance persisted as a common form of collective action, growing more common in the
nineteenth century and continuing into postimperial times.
• Patterns of tax resistance in China capture changing statesociety relations in late imperial and
postimperial history.
Models credible commitment problem: absolutist rulers cannot commit to not confiscating agents wages.
• Debin Ma and Jared Rubin (2019). “The Paradox of Power: Principalagent problems
and administrative capacity in Imperial China (and other absolutist regimes)”.
Journal of Comparative Economics 47.2, 277–294
• Principalagent model of rulers and administrators.
• Models credible commitment problem: absolutist rulers cannot commit to not
confiscating agents wages.
• Solution to commitment problem is low investment in administrative capacity,
so ruler does not know what is available for confiscation.
• Timothy Besley and Torsten Persson (2009). “The origins of state capacity:
Property rights, taxation, and politics”. American economic review 99.4,
1218–44.
• Economists generally assume that the state has sufficient institutional capacity to
support markets and levy taxes.
• “Policy choices" in market regulation and taxation are constrained by past investments
in legal and fiscal capacity.
• Legal and fiscal capacity are typically complements.
• common interest public goods, such as fighting external wars, as well as political
stability and inclusive political institutions, are conducive to building state capacity.