After the global financial crisis of 2008 economics has seen an increasing interest in studies on financial history analyzing the origins as well as the solution of historical financial crises. It is in this context that also the notion of a "Hamilton moment" came up, meaning that innovative modes of dealing with public debt may trigger new justifications, intensifications, or transformations in the structures of political power. In this paper, I analyze whether and to what extent this conjecture can be used for studies in the interaction between dealing with public debt and the emergence of the modern state before 1800. While the literature has done this so far mainly with a view on the development of the modern tax state, I present the concept of the debt state as an alternative that may be able to include a broader range of fiscal and political options. The paper has a special focus on the political economy of the Holy Roman Empire after the Westphalian Peace Treaties, a subject that has so far hardly been studied from the perspective of the debt state. If one would like to point out special events as significant for creating a new institutional debt state arrangement in the sense of a "Hamilton moment" this would certainly be the "Glorious Revolution" of 1688 in the case of England and the Revolution of 1789 in the case of France. In the case of the Holy Roman Empire the structural equivalent event that had a long-lasting influence on the handling of public debt within most territories of the Empire was then the new regulation for the Imperial Aulic Council in 1654. The way how it set institutional structures for dealing with debts of the smaller territories became a central element of the imperial power until the end of the Empire.
The paper starts with a view on public debt as a current and historical phenomenon. Then follows a short review of traditional explanations for the debt-state link. Three different approaches are distinguished, the first one building on institutional economics, the second one on applications of sociology on historical development patterns, and the third one developing several theories of stages that all end with the modern tax state as put forward by Joseph Schumpeter. The concept of the tax state will then be contrasted with the concept of a debt state whose political, economic, and institutional structures can be studied in an analytical framework developed by David Stasavage. When applying these considerations to the Holy Roman Empire one must highlight the essential role of the Imperial Aulic Council et its debt commissions. They created a surprisingly stable institutional framework that permitted a high degree of capital mobility among the territories of the Empire and at the same time helped to stabilize the authority of the Emperor as the protector of the many smaller and weaker members of the Empire. Finally, it is shown by some selected examples how the problems of public debt all over Europe before 1800 contributed to the development of economics as a science and how the new scientific knowledge also influenced political decision-making within the debt state and during its transition to the modern tax state.
Prof. Dr. Rainer Klump