The Rise and Fall of the Great Powers

War, Money, and the Nation-State

Let us now summarize the chief conclusions of this chapter. The post-1450 waging of war was intimately connected with ‘the birth of the nation-state’.88 Between the late fifteenth and the late seventeenth centuries, most European countries witnessed a centralization of political and military authority, usually under the monarch (but in some places under the local prince or a mercantile oligarchy), accompanied by increased powers and methods of state taxation, and carried out by a much more elaborate bureaucratic machinery than had existed when kings were supposed to ‘live of their own’ and national armies were provided by a feudal levy.

There were various causes for this evolution of the European nation-state. Economic change had already undermined much of the old feudal order, and different social groups had to relate to each other through newer forms of contract and obligation. The Reformation, in dividing Christendom on the basis cuius regio, eius religio, that is, of the rulers’ religious preferences, merged civil and religious authority, and thus extended secularism on a national basis. The decline of Latin and the growing use of vernacular language by politicians, lawyers, bureaucrats, and poets accentuated this secular trend. Improved means of communication, the more widespread exchange of goods, the invention of printing, and the oceanic discoveries made man more aware not only of other peoples but also of differences in language, taste, cultural habits, and religion. In such circumstances, it was no wonder that many philosophers and other writers of the time held the nation-state to be the natural and best form of civic society, that its powers should be enhanced and its interests defended, and that its rulers and ruled needed – whatever the specific constitutional form they enjoyed – to work harmoniously for the common, national good.89

But it was war, and the consequences of war, that provided a much more urgent and continuous pressure toward ‘nation-building’ than these philosophical considerations and slowly evolving social tendencies. Military power permitted many of Europe’s dynasties to keep above the great magnates of their land, and to secure political uniformity and authority (albeit often by concessions to the nobility). Military factors – or better, geostrategical factors – helped to shape the territorial boundaries of these new nation-states, while the frequent wars induced national consciousness, in a negative fashion at least, in that Englishmen learned to hate Spaniards, Swedes to hate Danes, Dutch rebels to hate their former Habsburg overlords. Above all, it was war – and especially the new techniques which favoured the growth of infantry armies and expensive fortifications and fleets – which impelled belligerent states to spend more money than ever before, and to seek out a corresponding amount in revenues. All remarks about the general rise in government spending, or about new organizations for revenue-collecting, or about the changing relationship between kings and estates in early-modern Europe, remain abstract until the central importance of military conflict is recalled.90 In the last few years of Elizabeth’s England, or in Philip II’s Spain, as much as three-quarters of all government expenditures was devoted to war or to debt repayments for previous wars. Military and naval endeavours may not always have been the raison d’être of the new nation-states, but it certainly was their most expensive and pressing activity.

Yet it would be wrong to assume that the functions of raised revenues, supporting armies, equipping fleets, sending instructions, and directing military campaigns in the sixteenth and seventeenth centuries were carried out in the manner which characterized, say, the Normandy invasion of 1944. As the preceding analysis should have demonstrated, the military machines of early-modern Europe were cumbersome and inefficient. Raising and controlling an army in this period was a frighteningly difficult enterprise: ragtag troops, potentially disloyal mercenaries, inadequate supplies, transport problems, unstandardized weapons, were the despair of most commanders. Even when sufficient monies were allocated to military purposes, corruption and waste took their toll.

Armed forces were not, therefore, predictable and reliable instruments of state. Time and again, large bands of men drifted out of control because of supply shortages or, more serious, lack of pay. The Army of Flanders mutinied no less than forty-six times between 1572 and 1607; but so also, if less frequently, did equally formidable forces, like the Swedes in Germany or Cromwell’s New Model Army. It was Richelieu who sourly observed, in his Testament Politique:

History knows many more armies ruined by want and disorder than by the efforts of their enemies; and I have witnessed how all the enterprises which were embarked on in my day were lacking for that reason alone.91

This problem of pay and supply affected military performance in all sorts of ways: one historian has demonstrated that Gustavus Adolphus’s stunningly mobile campaigns in Germany, rather than being dictated by military-strategic planning in the Clausewitzian sense, reflected a simple but compelling search for food and fodder for his enormous force.92 Well before Napoleon’s aphorism, commanders knew that an army marched upon its stomach.

But these physical restrictions applied at the national level, too, especially in raising funds for war. No state in this period, however prosperous, could pay immediately for the costs of a prolonged conflict; no matter what fresh taxes were raised, there was always a gap between governmental income and expenditure which could only be closed by loans – either from private bankers like the Fuggers or, later, through a formally organized money market dealing in government bonds. Again and again, however, the spiralling costs of war forced monarchs to default upon debt repayments, to debase the coinage, or to attempt some other measure of despair, which brought short-term relief but long-term disadvantage. Like their commanders frantically seeking to keep troops in order and horses fed, early-modern governments were engaged in a precarious hand-to-mouth living. Badgering estates to grant further extraordinary taxes, pressing rich men and the churches for ‘benevolences’, haggling with bankers and munitions suppliers, seizing foreign treasure ships, and keeping at arm’s length one’s many creditors were more or less permanent activities forced upon rulers and their officials in these years.

The argument in this chapter is not, therefore, that the Habsburgs failed utterly to do what other powers achieved so brilliantly. There are no stunning contrasts in evidence here; success and failure are to be measured by very narrow differences.93 All states, even the United Provinces, were placed under severe strain by the constant drain of resources for military and naval campaigns. All states experienced financial difficulties, mutinies of troops, inadequacies of supply, domestic opposition to higher taxes. As in the First World War, these years also witnessed struggles of endurance, driving the belligerents closer and closer to exhaustion. By the final decade of the Thirty Years War, it was noticeable that neither alliance could field armies as large as those commanded by Gustavus and Wallenstein, for each side was, literally, running out of men and money. The victory of the anti-Habsburg forces was, then, a marginal and relative one. They had managed, but only just, to maintain the balance between their material base and their military power better than their Habsburg opponents. At least some of the victors had seen that the sources of national wealth needed to be exploited carefully, and not recklessly, during a lengthy conflict. They may also have admitted, however reluctantly, that the trader and the manufacturer and the farmer were as important as the cavalry officer and the pikeman. But the margin of their appreciation, and of their better handling of the economic elements, was slight. It had been, to borrow the later words of the Duke of Wellington, a ‘damned close-run thing’. Most great contests are.

3

Finance, Geography, and the Winning of Wars, 1660–1815

The signing of the Treaty of the Pyrenees did not, of course, bring to an end the rivalries of the European Great Powers, or their habit of settling these rivalries through war. But the century and a half of international struggle which occurred after 1660 was different, in some very important respects, from that which had taken place in the preceding hundred years; and, as such, these changes reflected a further stage in the evolution of international politics.

The most significant feature of the Great Power scene after 1660 was the maturing of a genuinely multipolar system of European states, each one of which increasingly tended to make decisions about war and peace on the basis of ‘national interests’ rather than for transnational, religious causes. This was not, to be sure, an instant or absolute change: the European states prior to 1660 had certainly manoeuvred with their secular interests in mind, and religious prejudice still fuelled many international quarrels of the eighteenth century. Nevertheless, the chief characteristic of the 1519–1659 era – that is, an Austro-Spanish axis of Habsburg powers fighting a coalition of Protestant states, plus France – now disappeared, and was replaced by a much looser system of short-term, shifting alliances. Countries which had been foes in one war were often to find themselves partners in the next, which placed an emphasis upon calculated Realpolitik rather than deeply held religious conviction in the determination of policy.

The fluctuations in both diplomacy and war that were natural to this volatile, multipolar system were complicated by something which was not new, but was common to all ages: the rise of certain states and the decline of others. During this century and a half of international rivalry between Louis XIV’s assumption of full authority in France in 1660–1 and Napoleon Bonaparte’s surrender after Waterloo in 1815, certain leading nations of the previous period (the Ottoman Empire, Spain, the Netherlands, Sweden) fell back into the second rank, and Poland was eclipsed altogether. The Austrian Habsburgs, by various territorial and structural adjustments in their hereditary lands, managed to remain in the first order; and in the north of Germany, Brandenburg-Prussia pulled itself up to that status from unpromising beginnings. In the west, France after 1660 swiftly expanded its military might to become the most powerful of the European states – to many observers, almost as overwhelming as the Habsburg forces had appeared a half-century earlier. France’s capacity to dominate west-central Europe was held in check only by a combination of maritime and continental neighbours during a series of prolonged wars (1689–97; 1702–14; 1739–48; 1756–63); but it was then refashioned in the Napoleonic era to produce a long line of Gallic military victories which were brought to an end only by a coalition of four other Great Powers. Even in its defeat in 1815, France remained one of the leading states. Between it in the west and the two Germanic countries of Prussia and the Habsburg Empire in the east, therefore, a crude trilateral equilibrium slowly emerged within the European core as the eighteenth century unfolded.

But the really significant alterations in the Great Power system during that century occurred on the flanks of Europe, and even farther afield. Certain of the western European states steadily converted their small, precarious enclaves in the tropics into much more extensive domains, especially in India but also in the East Indies, southern Africa, and as far away as Australia. The most successful of these colonizing nations was Britain, which, domestically ‘stabilized’ after James II was replaced by William and Mary in 1688, steadily fulfilled its Elizabethan potential as the greatest of the European maritime empires. Even its loss of control over the prosperous North American colonies in the 1770s – from which there emerged an independent United States of formidable defensive strength and considerable economic power – only temporarily checked this growth of British global influence. Equally remarkable were the achievements of the Russian state, which expanded eastward and southward, across the steppes of Asia, throughout the eighteenth century. Moreover, although sited on the western and eastern margins of Europe, both Britain and Russia had an interest in the fate of the centre – with Britain being involved in German affairs because of its dynastic links to Hanover (following George I’s accession in 1714) and Russia being determined to have the chief voice in the fate of neighbouring Poland. More generally, the governments in London and St Petersburg wanted a balance of power on the European continent, and were willing to intervene repeatedly in order to secure an equilibrium which accorded with their interests. In other words, the European states system was becoming one of five Great Powers – France, the Habsburg Empire, Prussia, Britain, and Russia – as well as lesser countries like Savoy and declining states such as Spain.1

Why was it that those five powers in particular – while obviously not possessing exactly the same strengths – were able to remain in (or to enter) the ‘major league’ of states? Purely military explanations are not going to get us very far. It is hard to believe, for example, that the rise and fall of Great Powers in this period was caused chiefly by changes in military and naval technology, such as might benefit one country more than another.* There were, of course, many small-scale improvements in weaponry: the flintlock rifle (with ring bayonet) eliminated the pikeman from the battlefield; artillery became much more mobile, especially after the newer types designed by Gribeauval in France during the 1760s; and the stubby, shorter-ranged naval gun known as the carronade (first built by the Carron Company, of Scotland, in the late 1770s) enhanced the destructive power of warships. There were also improvements in tactical thought and, in the background, steady increases in population and in agricultural output which would permit the organization of far larger military units (the division; the corps) and their easier sustenance upon rich farmlands by the end of the eighteenth century. Nonetheless, it is fair to say that Wellington’s army in 1815 was not significantly different from Marlborough’s in 1710, nor Nelson’s fleet much more advanced technologically than that which had faced Louis XIV’s warships.2

Indeed, the most significant changes occurring in the military and naval fields during the eighteenth century were probably in organization, because of the enhanced activity of the state. The exemplar of this shift was undoubtedly the France of Louis XIV (1661–1715), where ministers such as Colbert, Le Tellier, and others were intent upon increasing the king’s powers at home as well as his glories abroad. The creation of a French war ministry, with intendants checking upon the financing, supply, and organization of troops while Martinet as inspector general imposed new standards of training and discipline; the erection of barracks, hospitals, parade grounds, and depots of every sort on land, to sustain the Sun King’s enormous army, together with the creation of a centrally organized, enormous fleet at sea – all this forced the other powers to follow suit, if they did not wish to be eclipsed. The monopolization and bureaucratization of military power by the state is clearly a central part of the story of ‘nation-building’; and the process was a reciprocal one, since the enhanced authority and resources of the state in turn gave to their armed forces a degree of permanence which had often not existed a century earlier. Not only were there ‘professional’, ‘standing’ armies and ‘royal’ navies, but there was also a much more developed infrastructure of war academies, barracks, ship-repair yards, and the like, with administrators to run them.

Power was now national power, whether expressed through the enlightened despotisms of eastern Europe, the parliamentary controls of Britain, or the later demagogic forces of revolutionary France.3 On the other hand, such organizational improvements could be swiftly copied by other states (the most dramatic example being Peter the Great’s transformation of Russia’s army in the space of a couple of decades after 1698), and by themselves provided no guarantee of maintaining a country’s Great Power position.

Much more important than any of these strictly military developments in explaining the relative position occupied by the Great Powers in the years 1660–1815 were two other factors, finance and geography. Taken together – for the two elements frequently interacted – it is possible to gain some larger sense of what at first sight appears as a bewildering pattern of successes and failures produced by the many wars of this period.

The ‘Financial Revolution’

The importance of finance and of a productive economic base which created revenues for the state was already clear to Renaissance princes, as the previous chapter has illustrated. The rise of the ancien régime monarchies of the eighteenth century, with their large military establishments and fleets of warships, simply increased the government’s need to nurture the economy and to create financial institutions which could raise and manage the monies concerned.4 Moreover, like the First World War, conflicts such as the seven major Anglo-French wars fought between 1689 and 1815 were struggles of endurance. Victory therefore went to the power – or better, since both Britain and France usually had allies, to the Great Power coalition – with the greater capacity to maintain credit and to keep on raising supplies. The mere fact that these were coalition wars increased their duration, since a belligerent whose resources were fading would look to a more powerful ally for loans and reinforcements in order to keep itself in the fight. Given such expensive and exhausting conflicts, what each side desperately required was – to use the old aphorism – ‘money, money, and yet more money’. It was this need which formed the background to what has been termed the ‘financial revolution’ of the late seventeenth and early eighteenth centuries,5 when certain western European states evolved a relatively sophisticated system of banking and credit in order to pay for their wars.

There was, it is true, a second and nonmilitary reason for the financial changes of this time. That was the chronic shortage of specie, particularly in the years before the gold discoveries in Portuguese Brazil in 1693. The more European commerce with the Orient developed in the seventeenth and eighteenth centuries, the greater the outflow of silver to cover the trade imbalances, causing merchants and dealers everywhere to complain of the scarcity of coin. In addition, the steady increases in European commerce, especially in essential products such as cloth and naval stores, together with the tendency for the seasonal fairs of medieval Europe to be replaced by permanent centres of exchange, led to a growing regularity and predictability of financial settlements and thus to the greater use of bills of exchange and notes of credit. In Amsterdam especially, but also in London, Lyons, Frankfurt, and other cities, there arose a whole cluster of moneylenders, commodity dealers, goldsmiths (who often dealt in loans), bill merchants, and jobbers in the shares of the growing number of joint-stock companies. Adopting banking practices which were already in evidence in Renaissance Italy, these individuals and financial houses steadily created a structure of national and international credit to underpin the early-modern world economy.

Nevertheless, by far the largest and most sustained boost to the ‘financial revolution’ in Europe was given by war. If the difference between the financial burdens of the age of Philip II and that of Napoleon was one of degree, it still was remarkable enough. The cost of a sixteenth-century war could be measured in millions of pounds; by the late seventeenth century, it had risen to tens of millions of pounds; and at the close of the Napoleonic War the outgoings of the major combatants occasionally reached a hundred million pounds a year. Whether these prolonged and frequent clashes between the Great Powers, when translated into economic terms, were more of a benefit to than a brake upon the commercial and industrial rise of the West can never be satisfactorily resolved. The answer depends, to a great extent, upon whether one is trying to assess the absolute growth of a country as opposed to its relative prosperity and strength before and after a lengthy conflict.6 What is clear is that even the most thriving and ‘modern’ of the eighteenth-century states could not immediately pay for the wars of this period out of their ordinary revenue. Moreover, vast rises in taxes, even if the machinery existed to collect them, could well provoke domestic unrest, which all regimes feared – especially when facing foreign challengers at the same time.

Consequently, the only way a government could finance a war adequately was by borrowing: by selling bonds and offices, or better, negotiable long-term stock paying interest to all who advanced monies to the state. Assured of an inflow of funds, officials could then authorize payments to army contractors, provision merchants, shipbuilders, and the armed services themselves. In many respects, this two-way system of raising and simultaneously spending vast sums of money acted like a bellows, fanning the development of western capitalism and of the nation-state itself.

Yet however natural all this may appear to later eyes, it is important to stress that the success of such a system depended on two critical factors: reasonably efficient machinery for raising loans, and the maintenance of a government’s ‘credit’ in the financial markets. In both respects, the United Provinces led the way – not surprisingly, since the merchants there were part of the government and desired to see the affairs of state managed according to the same principles of financial rectitude as applied in, say, a joint-stock company. It was therefore appropriate that the States General of the Netherlands, which efficiently and regularly raised the taxes to cover governmental expenditures, was able to set interest rates very low, thus keeping down debt repayments. This system, superbly reinforced by the many financial activities of the city of Amsterdam, soon gave the United Provinces an international reputation for clearing bills, exchanging currency, and providing credit, which naturally created a structure – and an atmosphere – within which long-term funded state debt could be regarded as perfectly normal. So successfully did Amsterdam become a centre of Dutch ‘surplus capital’ that it soon was able to invest in the stock of foreign companies and, most important of all, to subscribe to a whole variety of loans floated by foreign governments, especially in wartime.7

The impact of these activities upon the economy of the United Provinces need not be examined here, although it is clear that Amsterdam would not have become the financial capital of the continent had it not been supported by a flourishing commercial and productive base in the first place. Furthermore, the very long-term consequence was probably disadvantageous, since the steady returns from government loans turned the United Provinces more and more away from a manufacturing economy and into a rentier economy, whose bankers were somewhat disinclined to risk capital in large-scale industrial ventures by the late eighteenth century; while the ease with which loans could be raised eventually saddled the Dutch government with an enormous burden of debt, paid for by excise duties which increased both wages and prices to uncompetitive levels.8