Abstract
Government finance in pre-industrial Europe was shaped by two forces - continuing economic development and incessant warfare. Continuing economic development increased potential revenue and altered the ways in which it could be mobilized. Incessant warfare exerted constant, often intense, pressure to provide the funds needed for the waging of war. By the end of the sixteenth century, two very different systems of finance were emerging associated with two very different forms of government. In France and Spain, unsustainable borrowing led to default and to the ruin of government credit. With access to financial markets denied, these governments had to resort to expedients that were highly destructive of their economies. In the Netherlands, in contrast, the government slowly reestablished its credit, thereby avoided having to resort to the same harmful expedients. Differences in the systems of finance did much to explain the relative military success of the two types of government and ultimately their survival.
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