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Civil War Finance and the American State

Samuel DeCanio

in Democracy and the Origins of the American Regulatory State

This chapter examines the influence of Civil War finance policy on American state formation. More specifically, it considers the two financial instruments used by the Treasury Department to fund the ... More

This chapter examines the influence of Civil War finance policy on American state formation. More specifically, it considers the two financial instruments used by the Treasury Department to fund the Northern war effort: the “greenback” paper currency and the national banking system. It first discusses Eastern financiers' preferences, particularly those of New York banks associated with the New York Clearing House Association, regarding the federal government's funding strategies. It then explores how voter ignorance influenced the Democrats' shift to supporting inflationary currency policy in the elections following the Civil War. It also shows how greenbacks and the national banking system unintentionally helped establish federal control over the money supply, giving rise to a regulatory state that is bureaucratic in nature.Less

How States Pay for Wars

Rosella Cappella Zielinski

in How States Pay for Wars

This chapter explains how states confront the costs of fighting a war. In 1749, the poet Samuel Johnson had written that wars result in such vast sums of debt that they bankrupt the state, while Adam ... More

This chapter explains how states confront the costs of fighting a war. In 1749, the poet Samuel Johnson had written that wars result in such vast sums of debt that they bankrupt the state, while Adam Smith, a quarter century later, claimed that war is the only means to which the state can raise taxes avoiding said debt. This chapter provides a framework for understanding the tension between Johnson's poem and Smith's claim. In attempting to reconcile these two conflicting notions, the chapter first provides a foundation for the study of war finance, before offering a theory to account for war finance policies chosen.Less

Conclusion

in Spending Without Taxation: FILP and the Politics of Public Finance in Japan

This concluding chapter discusses what this study of the Fiscal Investment Loan Program (FILP) reveals about the nature of Japanese political economy and the larger theoretical implications for the ... More

This concluding chapter discusses what this study of the Fiscal Investment Loan Program (FILP) reveals about the nature of Japanese political economy and the larger theoretical implications for the study of the politics of public finance. It underscores the need to take policy finance seriously. Public finance lies at the critical nexus between democratic politics and market economies, and all governments must make difficult trade-offs in balancing their political and economic priorities. As this study shows, policy finance can be an important means of financing public goals and constitutes a part of the larger “public effort.” In the case of Japan, while the government has kept budget spending relatively modest, this is only a part of the picture because it has also relied very heavily on FILP. Policy finance also matters because it presents governments with a potential means of dealing with one the most enduring political problems: revenue extraction.Less

Inflation as Capital

Mark Metzler

in Capital as Will and Imagination: Schumpeter's Guide to the Postwar Japanese Miracle

This chapter discusses the inflationary reconstruction policy championed by minister of finance Ishibashi Tanzan. Tanzan was among the visionaries of Japan's postwar growth. During his term as ... More

This chapter discusses the inflationary reconstruction policy championed by minister of finance Ishibashi Tanzan. Tanzan was among the visionaries of Japan's postwar growth. During his term as finance minister, much of the business world became deeply indebted to him for the funds he directed their way. For the same reasons, Ishibashi was purged by U.S. authorities in May 1947 after only a year in office. To forestall deflation, he proposed his own positive policy consisting of five points: (1) special promotion of pivotal industries; (2) reconstruction finance; (3) industrial rationalization (not a “negative contraction of operations” but a “positive” promotion of increased productivity in order to increase incomes); (4) an unemployment policy; and (5) economic democracy.Less

Introduction

in Spending Without Taxation: FILP and the Politics of Public Finance in Japan

This introductory chapter discusses the book's main findings. First, it demonstrates that the Fiscal Investment Loan Program (FILP) enabled the Japanese government to run a distinctive neoclassical ... More

This introductory chapter discusses the book's main findings. First, it demonstrates that the Fiscal Investment Loan Program (FILP) enabled the Japanese government to run a distinctive neoclassical fiscal policy based on low budget spending from the end of the 1940s through 1970. Second, it shows that the government's policy of budget restraint and pork barrel spending were two sides of the FILP coin. Third, this study reveals that, while the government's early commitment to budget restraint initially delivered economic benefits, it came at a very high long-term cost: heavy state intervention in finance, deferred fiscal burden, and the political challenge of reforming the mechanism that made it all possible. An overview of the subsequent chapters is also presented.Less

Making Money, Making War

Rosella Cappella Zielinski

in How States Pay for Wars

This introductory chapter discusses the topic of war finance and the significance of its study, arguing that military power stems from an economic base. Without wealth, soldiers cannot be paid, ... More

This introductory chapter discusses the topic of war finance and the significance of its study, arguing that military power stems from an economic base. Without wealth, soldiers cannot be paid, weapons cannot be procured, and food cannot be bought. States, however, do not act in a vacuum. They are constrained by domestic and international politics. Understanding how states finance war is essential to understanding the extent to which state capacity and leaders' preferences affect a state's ability to meet its foreign policy goals via military and economic power as well as its pursuit of domestic macroeconomic stability. In doing so the chapter lays out the groundwork for a discussion into the variations of war finance policies.Less

Understanding the FILP system

in Spending Without Taxation: FILP and the Politics of Public Finance in Japan

The Fiscal Investment Loan Program (FILP) is a government-run financial system that mobilizes and allocates savings in the form of investments and loans that serve public policy purposes. This ... More

The Fiscal Investment Loan Program (FILP) is a government-run financial system that mobilizes and allocates savings in the form of investments and loans that serve public policy purposes. This chapter provides an overview of the FILP system: what it is, how it has functioned, how it has changed, and what existing research has illuminated about it. It compares the FILP system to policy finance systems in other countries. Finally, it lays out the analytic framework for the remainder of the study.Less

Full Flowering of Financial Activism

Elizabeth Thurbon

in Developmental Mindset: The Revival of Financial Activism in South Korea

This chapter documents and explains the wholesale expansion of policy financing under Lee Myung-bak. The expansion was part of Lee's decision to extend and intensify the balanced growth developmental ... More

This chapter documents and explains the wholesale expansion of policy financing under Lee Myung-bak. The expansion was part of Lee's decision to extend and intensify the balanced growth developmental strategy initiated by his predecessor, albeit under a new banner: “Green Growth.” The Lee administration's internationally admired Green Growth initiative necessitated the aggressive expansion of policy lending by the nation's policy finance institutions (PFIs). By the end of Lee's reign, state-owned PFIs would account for fully one-quarter of all loans in the Korean financial system. Between 2008 and 2012, large volumes of these loans were channeled to local firms in strategic industries, typically on a performance-linked basis. The chapter concludes by considering the future of such financial activism under current President Park Geun-hye.Less

Interlude (Deflation)

Mark Metzler

in Capital as Will and Imagination: Schumpeter's Guide to the Postwar Japanese Miracle

This chapter focuses on the credit restriction program that was imposed under U.S. orders and directed by American Bankers Association president Joseph M. Dodge in 1949. Dodge launched this program ... More

This chapter focuses on the credit restriction program that was imposed under U.S. orders and directed by American Bankers Association president Joseph M. Dodge in 1949. Dodge launched this program immediately on his arrival to Tokyo in February 1949, enforcing a “one-stroke” stabilization plan that ended government price subsidies and ended lending by the Reconstruction Finance However, Dodge's restriction of credit did not end the Japanese government's policy of subsidized priority investment. Rather, it displaced it into private banking channels, which Dodge left unregulated. This set in place the final piece of the integrated state-bank mechanism that would form the financial core of the High-Speed Growth system. The sources and control of capital thus assumed the distinctive forms of the classical age of Japanese capitalism.Less

What Future for Financial Activism in Korea and Beyond?

Elizabeth Thurbon

in Developmental Mindset: The Revival of Financial Activism in South Korea

This concluding chapter briefly looks at the findings revealed in the previous chapters and discusses the significance of these findings for broader debates. These debates include the inevitability ... More

This concluding chapter briefly looks at the findings revealed in the previous chapters and discusses the significance of these findings for broader debates. These debates include the inevitability of deindustrialization in more developed economies, especially under conditions of financialization, and the enduring possibilities for financial activism in an era of financial globalization. The chapter argues that revival of financial activism in Korea can be seen as part of a broader resurgence across the globe. State-owned policy finance institutions in a number of Asian, Latin American, and European countries are playing an increasingly important developmental role, especially in financing the transition toward more sustainable energy systems.Less

Distrust, management and the long road to Iraq

Lewis Minkin

in The Blair Supremacy: A study in the politics of Labour's party management

In practice, as illustrated here and in Chapter 15, behind ‘the end of control freakery’, management, was unchanged in process and method. It also became bolder and more clearly defensive of Blair ... More

In practice, as illustrated here and in Chapter 15, behind ‘the end of control freakery’, management, was unchanged in process and method. It also became bolder and more clearly defensive of Blair against Brown. There was increasing union distrust of Blair’s direction of travel and of his leadership behaviour Yet, as shown, the resentful unions came up with a major financial support in 2002 to assist the party without financial pressure on policy. This apparently puzzling conjunction is closely examined. Growing distrust of Blair’s management and managers by the unions was paralleled by a deepening public ethos of anti-manipulative distrust of politicians, especially Blair. That feature is given detailed investigation. Leader and management found it difficult to improve their adverse party and public reputation for manipulation, especially as both realism and managerial success after 2001 pointed them towards benefits in continuing their behaviour, as did the new delivery pressures from the strong Leader. Managerial successes continued; crucially, the voice of the wider Labour Party over Iraq was systematically restricted and distorted by the management. .Less

Confronting the Costs of War, 1823–2003

Rosella Cappella Zielinski

in How States Pay for Wars

This chapter seeks to lay the foundation of future war finance studies through a series of descriptive statistics using a novel data set. The data set encompasses all interstate war principal ... More

This chapter seeks to lay the foundation of future war finance studies through a series of descriptive statistics using a novel data set. The data set encompasses all interstate war principal belligerents in wars over six-months long from 1823 to 2003. Principal belligerents are those states considered major decision makers in the war, those whose contributions to the fighting force (i.e., number of troops) are sufficient to make them independent decision makers about the course of the war. The data presented seek to commence the debate on several war finance questions, which can then be used to explore the effect of war finance on prominent topics in political science.Less