Symbiosis

Looking back, one cannot help but be struck by the seemingly symbiotic

relationship existing between the state, military power, and the private

economy’s efficiency in the age of absolutism. Behind every successful

dynasty stood an array of opulent banking families. Access to such bourgeois

resources proved crucial to the princes’ state-building and centralizing

policies. Princes also needed direct access to agricultural resources, which

could be mobilized only when agricultural productivity grew and an effective

administrative and military power existed to enforce the princes’ claims. But

the lines of causation also ran in the opposite direction. Successful statebuilding

and empire-building activities plus the associated tendency toward

concentration of urban population and government expenditure, offered the

private economy unique and invaluable opportunities to capture economies of

scale. These economies of scale occasionally affected industrial production

but were most significant in the development of trade and finance. In addition,

the sheer pressure of central government taxation did as much as any other

economic force to channel peasant production into the market and thereby

augment the opportunities for trade creation and economic specialization.

Jan de Vries comments on the symbiotic relationship between state-building and economic development in the early modern period:

“Looking back, one cannot help but be struck by the seemingly symbiotic relationship existing between the state, military power, and the private economy’s efficiency in the age of absolutism. Behind every successful dynasty stood an array of opulent banking families. Access to such bourgeois resources proved crucial to the princes’ state-building and centralizing policies. Princes also needed direct access to agricultural resources, which could be mobilized only when agricultural productivity grew and an effective administrative and military power existed to enforce the princes’ claims. But the lines of causation also ran in the opposite direction. Successful statebuilding and empire-building activities plus the associated tendency toward concentration of urban population and government expenditure, offered the private economy unique and invaluable opportunities to capture economies of scale. These economies of scale occasionally affected industrial production but were most significant in the development of trade and finance. In addition, the sheer pressure of central government taxation did as much as any other economic force to channel peasant production into the market and thereby augment the opportunities for trade creation and economic specialization.”