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States, Debt, and Power'Saints' and 'Sinners' in European History and Integration$
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Kenneth Dyson

Print publication date: 2014

Print ISBN-13: 9780198714071

Published to Oxford Scholarship Online: August 2014

DOI: 10.1093/acprof:oso/9780198714071.001.0001

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The Dynamics of Public Debt in Historical Perspective

The Dynamics of Public Debt in Historical Perspective

The Limitations of Formal Economic Reasoning

(p.191) 7 The Dynamics of Public Debt in Historical Perspective
States, Debt, and Power

Kenneth Dyson

Oxford University Press

This chapter looks at public-debt dynamics in a long historical perspective. It uses historical analysis to raise questions about reliance on formal debt sustainability analysis, suggesting the value of narrative synthesis as practised by Hume and Smith. It then provides a set of detailed historical case studies, analysing historical data. They include Austro-Hungary, Belgium, Britain, Ireland and Scotland, Italy, the Netherlands, Prussia and Germany, Spain, and the United States. Finally, the chapter seeks to draw some general lessons from history. These lessons relate to war and the threat of war; welfare-state development; and financial crises. Historical analysis suggests the pivotal importance of state capacity and ideological commitment to extract taxes and deliver infrastructural and social investment that helps generate economic growth and build social solidarity and political inclusivity. Formal debt sustainability analysis fails to capture this key insight.

Keywords:   debt sustainability, formal analysis, historical patterns, Austro-Hungary, Belgium, Britain, France, Germany, Italy, Spain

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