The finances

In contrast to the Roman Empire and many contemporary ones, including the Arab and later Ottoman Empires, European kings had originally no right to tax their subjects; on the contrary, having to pay taxes was considered to be an expression of unfree status.

The king was supposed to ‘live from his own’, meaning his landed estates, fees for various services, rights to various kinds of rent and payment for services he provided, for instance, jurisdiction. To this were added incomes from rights he had in his capacity as a feudal lord, such as to act as a guardian during the minority of a vassal or to decide about the marriage of a female heir. In other words, the king’s incomes were largely of the same kind as those of other great landowners. With the development of a stronger monarchy from the twelfth and thirteenth centuries onwards, these incomes clearly became insufficient and had to be supplemented. This was the origin of taxation. The typical argument for the introduction of this was necessity: the country was threatened by external enemies; it was the king’s duty to defend it; consequently, it was in everybody’s interest to pay the necessary taxes. The Crusades were an important factor in developing this ideology. When a king promised to go on the Crusades, he got the pope’s permission to tax the Church and of course also had a strong argument for demanding taxes from his other subjects. In practice, however, the money did not always go to the Holy Land, and beside, the king might argue that not only the Holy Land was in need of defence but also his own. Was not the king the Lord’s anointed and did not the good Christian kingdoms of England or France also belong to God?⁴⁰

The king of England repeatedly succeeded in convincing his subjects of this from the thirteenth and fourteenth century onwards. This led to the development of Parliament, which normally granted the king at least a part of the sum he asked for, but often in return for various concessions.

In addition, the increasing importance of trade opened new possibilities. The king might levy sales tax or tolls on the import or export of various commodities or he might profit from his minting monopoly. As we have seen, Otto of Freising regarded the royal monopoly on minting as an expression of tyranny, but most kings managed to achieve such a monopoly from the thirteenth century onwards. In most cases, they restored the monopoly that had existed in Carolingian times, either abolishing the right of nobles and prelates to strike coins or forcing them to issue them in accordance with the king’s own practice.

The practical problems in gaining these incomes were considerable.⁴¹ Even today, with extensive and professional bureaucracies, computers, telecommunication, fast transport and masses of information about salaries, revenues, sales and profits, large sums escape taxation in the most advanced democracies, not to speak of the many countries without these benefits. Under medieval and early modern conditions, the problems were formidable. The simplest form of direct taxation was the hearth tax: every household had to pay a fixed sum. This was of course manifestly unjust, as a poor peasant would pay the same as a great lord. It also had the disadvantage from the king’s point of view that the sum in question had to be very low. Nevertheless, in a country with a large population, such as France, it might yield a substantial sum. Another practice was to demand a percentage of the movable fortune, a tenth or a fifteenth, as was done in England. This in principle meant that wealthy people would pay more than poor ones, but, in practice, it was difficult to assess the individual fortune, and wealthy people of course had greater possibilities to cheat or bribe the tax officials.

Indirect taxes had some practical advantages over direct ones. The Republic of Genoa introduced a tax on import and export in 1274, which turned out to be very profitable. However, the republic of Genoa had only one port and a very small coastline, so import and export could easily be controlled.

By contrast, the tax King Edward I introduced on the export of wool at about the same time created greater problems. England had a long coastline which was difficult to control. In the beginning, the tax yielded a very small profit, which eventually forced the government to limit export to a few ports and from 1363 only one for most of it, namely, Calais, conquered in 1347. In the following period, this tax was very profitable; without it, England would not have been able to fight the Hundred Years War. From the late fifteenth century, however, the export of wool declined, because of the development of the textile industry. Still, however, the speaker in the House of Lords is seated on a sack of wool, in memory of the importance of this commodity.

A tax on export sounds strange to modern ears; we are used to taxes on import, which serve to protect trade and production within the country. However, at this time, there was no concern for protection of trade and manufacture in the European kingdoms; only city states, governed by the merchants themselves, would conduct such a policy. For the king, the main purpose of the tax was financial, to get money for his own purposes, not economical. To the extent that the king interfered in the economy, his purpose was to secure sufficient provisions at favourable prices for the inhabitants of his country. Export of local products might endanger this, as it was likely to lead to higher prices. Therefore, the king of France forbade a number of exports between 1274 and 1305.

An important source of income for the states of southern Europe, France, the Spanish kingdoms and the Italian urban communes, was the tax on salt. Salt is a necessary addition to the diet for people living from cereals, which, although not rare, cannot be produced everywhere. Moreover, its production is capital-intensive. It is heavy and thus difficult to transport over land and it needs to be stored for three or four years before it is ready for consumption.

Salt therefore became a monopoly of the Italian city communes and formed a cornerstone of their economy. Somewhat later, in 1259, Charles of Anjou introduced such a monopoly in his kingdom of Sicily and Southern Italy, after which it was introduced in Castile and in France in the fourteenth century.

Finally, kings could exploit their control of minting. The use of coinage was based on the idea that a coin contained a certain amount of gold or silver — mostly the latter — and thus could be used to buy some amount of merchandise. However, a coin differed from the same amount of metal in raw form; the king’s stamp gave it an extra value. This, of course, meant some profit for the king, although relatively small. Far greater profit could be obtained by striking coins with metal of lower value than the official rate, which kings often did, particularly in periods of crisis. This led to inflation and of course to complaints from the people. Some kings, including Philip IV of France who practised this, nevertheless found that the problems caused by such complaints were less than those caused by direct taxation.

The various methods medieval kings used to finance their government are relatively well known to the historians. It is more difficult to detect their actual incomes. The annual English royal revenues in 1377—89 are estimated at 770,000 florins (one florin = 6,99 gram gold), the French in 1418 at 2.6 million, those of Burgundy under Philip the Bold (1363—1404) at 365,000 and those of Hungary in the second half of the fifteenth century at around 1 million. The high revenues of Hungary may be explained partly by the gold mines in this country and partly by its expansion during the reign of Mathias Corvinus (1458—90). The relative financial strength of some polities at the end of the fourteenth century is estimated in the following way: Papacy = 1, France = 15, England = 4.5, Burgundy 2, Sicily = little more than 1, Pisa = little less than 1. Most striking here are the low incomes of the papacy, which will be discussed later, combined with the high ones of small units like Sicily and Pisa.

The wealthiest Italian city states, like Venice, Genoa, Florence and Milan, no doubt must have had considerably more than Pisa. Actually, the revenues of Venice are estimated to have been 60 per cent higher than those of France in the mid-fifteenth century.⁴² The proportion between France and England corresponds approximately to the size of the population of the two countries; that of France may have been up to four times that of England. Later, as we shall see, the size of the incomes changed drastically in favour of England.

Absolute numbers give only a limited picture of the kings’ finances; we also need to know their expenses, how easily the money became available and the possibility of credit. As we have seen, the general impression of late medieval and early modern kings is that they were permanently short of money, as illustrated by the numerous bankruptcies, mutinous armies and wars and expeditions that had to be broken off because of lack of money. On the other hand, some of these features also illustrate the strength of the kings. Charles V, Francis I and Philip II could continue borrowing money despite their bankruptcies; they had numerous ways of rewarding or harming their creditors. For a long time, they could continue to spend large sums on warfare as well as festivities and building projects. In the long run, however, from the seventeenth century onwards, even the mightiest princes, the emperor and the kings of France and Spain, came to face serious problems. Historians have for a long time discussed the Crisis of the Seventeenth Century, which for a period marked a reversal of the recovery after the plagues from the mid-fourteenth century onwards. A likely explanation is the expansion of the state, mainly the costs of warfare but also the building projects, lavish courts and the growth of the bureaucracy.⁴³

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Source: Bagge Sverre H.. State Formation in Europe, 843-1789: A Divided World. Routledge,2019. — 306 p.. 2019

The finances

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