The making of a fiscal state in S ong C hina, 960–1279

Abstract

In light of theSchumpeterian paradigm, this article explores the rise of the tax state in eleventh‐centuryChina and its further transition towards a fiscal state until theMongol conquest in 1279. By the late eleventh century in the Song dynasty, two‐thirds of state revenues came from taxing non‐agricultural sectors, especially from the collection of excise. TheSong state became the first sustainable tax state in global history, as manifested in three major aspects: monetization; indirect taxation; and centralization and professionalization in the tax administration. The boundary of theSong tax state was largely confined to urban settlements. In rural areas, the state gave up the collection of commercial taxes by farming out this right to local elites. In the twelfth century, as traditional tax revenues fell far short of supporting military defence, theSong administration utilized credit instruments. Around 1200, the amount of redeemable promissory notes first exceeded that of annual tax revenues. This shift from tax‐based public finance to credit‐based public finance completed the transition towards a fiscal state. Nonetheless, this development in the fiscal state was still at an early stage and proved to be unstable. Toward the end of theSouthernSong, hyperinflation caused by the over‐issuance of promissory notes seriously threatened the economy.

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