And I want to argue that taxation is really the measure of this new kind of power. Taxation is the best measure in the sense of the effective political authority and institutional development. Taxation is a reflection both of the legitimacy of the state and its capacity to impose that. Oliver Wendell Holmes said it very nicely, taxes are the price that we pay for civilization. That is taxes are the cost that we have for engaging in a public life, for living in a collective where everyone pays something for the benefit of all. Taxes both represent and augment the strength of the state as measured by the capacity to enforce centralized rule on a territory in its population. That is, taxes are a reflection of the state's capacity to demand of all members of this collective that they pay their part. And, of course, they augment the strength of the state because that very capacity to tax makes the state ever-stronger, and perhaps more legitimacy. Now, assuming that most people will not freely part with their resources in exchange for a set of public goods, which they could maybe get without paying, and with no guarantee of delivery, and great possibilities of free-riding, the ability to extract such resources reflects a state's strength. Not just its organizational and coercive strength, but its, if you will, its spiritual strength. Its legitimacy. Taxes can even be seen as an expression of citizenship. They are, in the words of Ewan Stein, the economic expression of the individual's cohesion with the nation. That is, taxes represent the nation's entire civic sense on the economic plane. Taxes represent our civic responsibility as expressed by these payments to this organization. The history of taxation is therefore the history of the state. How a state taxes may hate to, may help define how it fights and vice versa. How it fights may help define how it is able to tax and what manner it chooses to tax. Now in case, except in the case of kleptocracies, states will need to, will try to get as much resources as they need to survive and prosper. Again in the cases of kleptocracy, for example, Mobutu, Zaire, states only wish to tax and extract from the population for the benefit of a few. At least in theory, for non-kleptocracies, what states do is they try to extract the very resources that they need in order to survive. So in one extreme, again Mobutu, Zaire, we can envision a state providing absolutely no services, and with no perceptions of danger. On the other hand, we can envision a revolutionary regime that might seek to restructure the entire society and feel threatened by every side. And those kinds of regimes are going to be the ones that are going to construct new taxation systems in order to assure their survival. So, taxes are in a sense, a concrete expression of the ideological orientation of the state. Show me how much is taxed, who is taxed, how are they taxed, and I will get a very good sense of what the orientation is of that state to the society. Now, the cost of taxation can be measured economically and politically. In order to extract resources, the state must pay for these in a variety of ways. It must produce some kinds of services and it must, in a sense, pay the price of collecting taxes. In fact the big part of revenue can actually just go to the creation of that same revenue. So states have often to increase the efficiency of their fiscal capture, in order to assure the best return on their taxing investment. Taxation does not occur free, so we want to make sure that it is as efficient as possible in any organizational way. The political costs are a little bit more difficult to measure, but we can appreciate them. Based on a population's estimate, a preference for services, the quality expected, the perceived availability of alternatives, the willingness to pay a premium for the state for delivery in views of the fairness, if you will, of this whole bargain. Those are all going to influence the capacity of the state to be able to tax. So it's not just an organizational issue, but in a sense, if you will, it's a marketing issue. How this capacity to tax is sold to a population. For each relevant social sector involved, these estimates must be multiplied by their respective actors' political capacity to protest or enforce a bargain. Think about this. The state not only faces this broad audience. Each one of those audience members, their capacity to be taxed. Their capacity to resist the tax, their taxation, how they feel about that taxation, must be measured and must be taken into account. So, we must take into account these kinds of conflicts between and amongst these actors. The bottom line is taxing is difficult. what, but what helps taxing helps the state. This is important. I want you to imagine again, if we need taxation in order to have states and wars can help contribute to taxation, then wars that way can contribute towards the state. I want to argue that wars generate greater needs for resources, while also providing a temporary decline in the state's social constraints. That is, wars both require this need for obvious resources, but they also legitimize that need by saying, if we do not do this, we will not survive as a society. Moreover, war also provide an organizational focus around which the state's organizational capacity may improve. War is, in a sense, conserved as the organizational germ for that larger institutional growth from which a state is going to arise. Finally armies raised for war might also serve as a means with which to collect resources. That is the very army that you have created in order to protect yourself from external threats, can also represent a way of reassuring your own, or the state's own, monopoly of the means of violence. And therefore, monopoly over the means of taxation in a particular territory. Now, the positive link between war and the rise of taxes in early modern Europe is exhaustive, and we have lots of historical studies about this. For example, in a whole variety of cases analyzed by lots of scholars, tax systems are seen as the product of negotiations between royal houses and their respective societies during times of war or preparation thereof. The history of taxation, in a sense, is a history of these bargains between the state, or the representative of the state, and the various members of the society, about their ability to provide these kinds of resources. The birth of modern tax systems in western Europe is tied to the military transition beginning with the Hundred Years' War. And the link between war and the rise of taxes in the Unites States is incredibly obvious, and all so obvious. There is a parallel history of American wars and American government revenues. As we track, as we track the role of the government inside this society, we see that follows very much its bellic history. Wars promote expenditure, which requires some form of taxation. Again, that is the beautiful logic of this link between war and state development. The alternative is to default on war-related debt, which works for short periods of time, but cannot serve as the basis for any long-term military power. That is, in a temporary emergency, you might be able to default, but then again, realize that your reputation is going to be damaged, and your ability to raise those kinds of resources, the next time, and is going to be very, very difficult. The rise of Britain in the 18th century has been partially attributed to the systematic nature of both its debt structure, and its capacity to pay back those loans. Unlike the French, unlike certainly the Hapsburgs for example, the British Crown was seen as good for its debts. And that not only made those debts less onerous, because they would have to pay less of a premium, but it assured that more and more customers for that debt would be available, because they realized they would get their money back. Now, after a war is over, state expenditure does not decline to the original level. That is, we do not see this jump in, in expenditure and then goes back to the pre-bellic levels. After every war, in a sense, the state gets bigger and the type of taxes change. Let me give you an example. Custom taxes are often the easiest and least politically and organizationally demanding to extract. All you need, in a sense is a few soldiers or a few policemen at ports able to extract from ship captains or whatever it might be, their due for those, those goods. At a certain point, however, the demands of war so escalate, that the state must penetrate inside that society. It can no longer simply rely on these custom tolls, if you will. But it's gotta develop its bureaucratic reach and extract directly from the population via property and income taxes. This again, makes the state more powerful, more able to practice war, more able to tax, and on, and on, and on. Wars led to both the creation of the British state in the 18th century, and the American state in the 19th. You cannot understand the histories of these societies without understanding the role that war played. War both allow, allowed these states to increase the amount of revenue, which again, never returned to pre-bellic levels, and to increase their relative importance of domestic and direct taxes. Military conflicts, therefore, allow and enforce the state to depend less on administratively simple, but very inelastic custom taxes, and to rely on the much more politically challenging, but potentially much more lucrative, domestic sources of revenue. The greater bureaucratic complexity required this process is at the very heart of the institutional legacy for war. [BLANK_AUDIO]