Did warfare and expenditures on military forces stimulate or retard British economic development from ca. 1750 to 1815? Completed by: YOUR NAME University of Outline 1. Abstract 2. Introduction 3. The costs of the warfare 4. Increased trade as the means of raising funds for the warfare a. Where did the money go to? b. Other methods of raising funds for the warfare c. Warfare as an instrument of commerce 5. Conclusion 6. References Abstract This paper investigates how warfare and expenditures on military forces influenced British economic development from ca. 1750 to 1815. This work analyzes a number of sources dealing with historical reconstruction of the making of national strategy in an industrializing state. The political management of the British Empire, as it was formulated by government officials and sanctioned by Parliament, was conditioned by several distinct but interrelated influences. They included: the transforming national economy; contemporary knowledge of this economy, including the policy prescriptions that emerged from the field of later eighteenth-century political economy; particular parliamentary forces concerned with imperial policymaking; and the political alignments and perceptions of ministers and MPs. Introduction In this paper, we argue that expenditures on military forces and warfare in the eighteenth and early nineteenth centuries positively influenced the development of the British economy. The specific factors affecting British imperial policy interacted within an evolving geopolitical order that was characterized in the eighteenth century by almost regular warfare and keen economic competition with other states. Within this system, European leaders and their citizens understood that global ascendancy was inexorably connected to economic performance. For Britons in 1763, including statesmen like Lord Rockingham and Charles Jenkinson and political economists like James Steuart and Arthur Young, this collective realization took on a particular form and importance in the aftermath of the nation's recent economic and military experience. Their conception of the relation between international authority and economic growth necessarily molded imperial objectives in the postwar decade. In this broad sense, the economics of war shaped the politics of peace . Between 1689 and 1783, England fought five major wars with France. The two powers spent thirty-six of these ninety-four years in expensive combat. During the war years, the British government devoted an average of 67 percent of its total expenditures to military purposes. If we include debt service charges, the proportion of total public outlay committed to war costs rises to between 75 and 85 percent in each of the thirty-six years . Clearly, being a world power in an evolving system of states entailed the political economy of waging frequent wars. Britain, France, and their shifting coalition of allies fought not just for strategic control of parts of Europe and more distant eastern and western territories, but for economic sovereignty as well—for the power to rule the seas and thus control the bulk of the diverse international trade in agricultural and manufactured goods, for access to raw materials, and for expanding and manageable markets for each nation's output. The costs of the warfare Why were the stakes of these armed contests so high? Why did William Pitt, other British officials, and their French counterparts want controllable markets and reliable inputs? There are geopolitical answers to these questions, responses rooted in the nature of eighteenth-century warfare.
Like World War I, the five conflicts fought between the Glorious Revolution and the Napoleonic Wars were, as historian Paul Kennedy has written, "struggles of endurance" (Kennedy 68). Victory, Kennedy goes on, 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. This was especially true for the Seven Years War, Britain's most costly and tactically sophisticated military effort to date . Fighting on three continents and two oceans, the nation spent over £160 million pursuing simultaneously a maritime strategy and a continental one. This sum was more than twice Britain's gross national product in 1760. In twentieth century calculations, it is analogous to the United States fighting a war with a $10 trillion price tag. The greater part of military expenditures for this eighteenth-century conflict—as for the wars in our own time—was financed by state borrowing . The British Treasury raised money by issuing government stock, usually long-term bonds with a guaranteed annual premium. Each year the Treasury offered stock equal to the difference between military expenditures and taxes that were not earmarked for paying debt service and thus were available to meet running expenses. Department officials such as the duke of Newcastle, who was head of the Treasury during the Seven Years War, coordinated the interest rates on the annual loans as well as the sale of these mass stock issues through a small group of wealthy London investors who underwrote the loan. Together, Newcastle and the financiers worked out an acceptable interest rate and other stock incentives. The underwriters then guaranteed the entire loan, and government officials could be assured of continued funds. The underwriters disposed of much of what they had purchased in bulk to a variety of dealers, who then sold the stock to members of the investing public, to whom the state owed annual premiums. The government's yearly borrowing needs increased at an unprecedented rate over the course of the Seven Years War, climbing from £2 million in 1756 to £12 million in 1762 without significant inflation . Newcastle and others in the finance ministry fretted continuously about the country's ability to float such large loans in the face of the nation's mounting debt. In each of the last two years of the war, the government was forced to borrow more than £12 million. In 1761, when Newcastle first went to the money markets to raise this sum, it represented the biggest single addition to government indebtedness to date—17 percent of GNP. To put these magnitudes in a more modern perspective, consider the president of the United States announcing a federal budget deficit of $850 billion. Increased trade as the means of raising funds for the warfare These numbers seem impossibly high to our modern financial sensibilities, but over the course of the war the British state raised the funds it needed. How did it do this? Through trade, trade, and more trade, both at home and abroad. Unlike every other contest Britain was involved in during the eighteenth century, this war witnessed the growth of the nation's economic interchange with America, Europe, and Asia. With its navy firmly in control of the sea, Britannia ruled not only the waves, but the financial and commercial competition that underlay military success. Between 1756 and 1763, the country suffered none of the usual war induced disruptions of its foreign trade.
Stimulated by the exigencies of battle, demand for British manufactures and re-exports in America, Prussia, India, and Ireland grew more than 33 percent, from £11.6 million at the onset of the fighting to £14.7 million in the last year of the war. Imports also climbed substantially, from almost £8 million to £11.1 million over the course of the conflict, a 39 percent increase . Customs receipts escalated in tandem—some 35 percent over the war years. Activated in part by war-related increases in aggregate demand, domestic economic activity also accelerated, and this pushed excise revenues up considerably . These receipts grew 31 percent, from £3.6 million in 1756 to £4.8 million at the close of the war. Where did the money go to? Treasury officials needed this revenue to service wartime borrowing, and perhaps more important, to assure creditors—bond purchasers in London and Amsterdam—a competitive return on their investments. In the first decades of the eighteenth century, most of the income needed to service the national debt and guarantee lenders a profitable return on their investments had come from direct taxation in the form of the land tax. But beginning in the last years of the War of Spanish Succession (1702-13), indirect taxes, specifically excise and customs levies, became much more important sources of state revenue . By 1760, the midpoint of the Seven Years War, excise and customs taxes accounted for 68 percent of the government's revenue. Undoubtedly this growth in the importance of indirect levies as a proportion of the state's revenue was linked to the corresponding rise in the nation's indebtedness, which expanded with the frequency and scale of its military commitments. Practically as well as politically, the land tax could not support the financial burden imposed on Britain by the exigencies of eighteenth-century geopolitics. Other methods of raising funds for the warfare Other forms of economic enterprise, especially manufacturing and trade, had to finance most of the nation's borrowing. Burke and others recognized that this shifting pattern of fiscal imposition carried significant consequences for the politics of imperial decision making. As the relative contribution of duties on ale, candles, sugar, tobacco, and other goods to state revenue rose, so too did the demands of manufacturers and merchants for a voice in how their country's commercial empire was to be governed. Adam Smith bemoaned "the clamor and sophistry of merchants and manufacturers" in affecting regulation of the imperial economy (Smith 143). But he and his immediate predecessors—political economists, such as Josiah Tucker, writing in the 1750s and 1760s—could not ignore the increased stakes and significance of the trading interest of England in policymaking. Warfare as an instrument of commerce Government ministers, stockholders, and commercial writers during the Seven Years War and early periods of the nineteenth century saw just as clearly how profit was converted into international influence. They understood that in large measure Britain owed its military victory and its position in the global order to the power of commerce and to the changing, growing economy that supported it . This collective understanding shaped imperial policymaking after the war. Most of those who formulated and enacted these policies agreed that the burgeoning economy of empire was to be managed toward geopolitical ends—toward maintaining and expanding the commercial and fiscal foundations of power.
In the grand sweep of diplomatic and military history, this was not an altogether novel development. Some three centuries before the commencement of the Seven Years War, Renaissance rulers, early modern merchants, and commercial commentators had been aware of how a country's wealth influenced its strategic position within the international order. Statesmen had been trying to harness economic resources to military power even before Ferdinand and Isabella financed Christopher Columbus's venture in 1492. What was novel about contemporary knowledge of the relation between commerce and national preeminence in the aftermath of the Great War for Empire was the particular form this connection took in the collective political consciousness of the British citizens—in and outside government—who tried to influence government regulation of the empire. First, the empire was to be governed with the end of selling more manufactures at home and abroad than Britain's rivals. Second, the nation's finances were to be administered to keep the mother country more consistently solvent—more able to raise men and money— than other states . Conclusion What was so special about the warfare of the eighteenth and early nineteenth centuries? How did it transform political priorities, shape public debates, and influence policymaking? In geopolitical terms, the military alignments had assumed the general form of other eighteenth-century European contests. Britain and France faced each other on the battlefield and the ocean. The difference was in the unprecedented breadth and scope of the Seven Years War. From 1759 Britain had the strategic advantage and, as important, the economic resources, in the form of the efficient fiscal machinery of the English state and the nation's expanding economy, to exploit its superior position . In America and India, military success nourished national commerce. With its navy in control of the seas, Britain's trade in exports, imports, and re-exports rose markedly over the conflict. In the context of eighteenth century warfare this was unprecedented, and it stimulated the country's imperial ambitions. Britons had done the previously impossible: they had managed to simultaneously fight and trade profitably. According to Thomas Pownall, this achievement heralded Britain's commercial preeminence: "This lead in commerce seemed at the beginning of the late war to oscillate between the English and the French, and it was in this war that the dominion also has been disputed. The lead is now in our hands, we have such connection in its influence, that, whenever this lead becomes the foundation of a dominion, that dominion must be ours” Inescapably coupled with this bold confidence, however, was a collective insecurity about the nation's accomplishments. In 1763 British citizens worried about the cost, size, and future of their vast new empire. Some of these anxieties were of long standing. In the aftermath of preceding wars, Treasury officials had confronted large fiscal problems. The British state and citizenry had grappled with the social and economic effects of demobilization following the Nine Years War (1689-97), the War of Spanish Succession (1702-13), and the War of Austrian Succession (1739-48). But Britain's experience during the Seven Years War, including the scale and scope of its victory, heightened the importance of these older worries and added novel fears to the collective consciousness. From its onset the Seven Years War had been a costly conflict, the most expensive in the country's history. By the close of 1762, the state had spent approximately £160 million fighting on two oceans and three continents.
Most of these expenditures were financed through additions to the national debt, which grew almost 75 percent over the course of the conflict, to the unprecedented level of £132 million . Interest charges on state indebtedness climbed in tandem, rising from £2.7 million in 1756 to £4.6 million in 1763 and fueling fears of peacetime tax increases. Throughout the war and after, officials, journalists, and others worried about the nation's capacity to finance its debt without damaging Britain's geopolitical position. Powered by a growing economy, by expanding, freer trade with an independent America and the far East, and by men—such as Shelburne, Burke, Fox and the younger Pitt—who understood the interrelations between the nation's commercial strength and its global status, Britain in the coming years was to see ever more sunlight shine on its dominions. Imperial historians have credited British ascendancy between 1783 and 1813 to these economic and political factors. Overall, scholars have concluded that warfare of the eighteenth and nineteenth centuries had a positive impact on the development of the British economy during this period.