Institutional Foundations of Financial Power 7 or printing money.Borrowing can be further broken down into voluntary and in- voluntary forms.The former usually involves the sale of government bonds or,in earlier periods,short-term loans to the crown;the latter involves coerced loans or forced savings plans.Any of these strategies can raise significant funds in the short term,and states have historically relied on a mix of funding mechanisms in times of war.19 Over the course of an extended rivalry,however,one strategy is clearly superior in terms of promoting economic efficiency:raising public debt through voluntary borrowing.It is here that liberal states have enjoyed a systematic advan- tage relative to their illiberal rivals. Public Debt and Financial Power The importance of public debt in determining the outcomes of international com- petition has been known for some time.In the seventeenth century,the rivals of the Dutch Republic expressed "despairing admiration"at that country's seemingly inexhaustible supply of cheap credit in wartime.20 Likewise,French officials in the eighteenth century came to envy the ease with which Great Britain could raise money at low interest rates.21 By 1795,Immanuel Kant would consider public debt to be so vital to the conduct of war that his "fourth preliminary article for perpetual peace among nations"proscribes the raising of debt for use in foreign affairs.22 More recently,scholarship on the rise and fall of world leaders has iden- tified the key role played by public borrowing.The most explicit formulation comes from Rasler and Thompson,who surveyed the experiences of Portugal,the Dutch Republic,and Great Britain and concluded that ..early winners in the struggle for world leadership owed a significant pro- portion of their success to their ability to obtain credit inexpensively,to sus- tain relatively large debts,and in general to leverage the initially limited base of their wealth in order to meet their staggering military expenses.23 Moreover,Rasler and Thompson suggest that the losers of these contests,notably France and Spain,failed to maintain uninterrupted access to credit and experi- enced frequent bankruptcies.24 19.For an excellent cross-national analysis of war finance during World Wars I and II,see Fujihira 2000. 20.Barbour1950,81-82. 21.Sargent and Velde 1995. 22.Kant 1983,109.At the outbreak of the Crimean War,William Gladstone,then Britain's chan- cellor of the exchequer,tried to integrate this philosophy into his policy of war finance.He argued in the House of Commons that paying for war with loans obscured the true costs of war and that reliance on taxes alone would serve as a "salutary and wholesome check"on "ambition and lust of conquest." Six weeks later,the Treasury sold f6 million in bonds,and,in his final weeks as chancellor in 1855, Gladstone was contemplating borrowing f12 million more.Anderson 1967,195-97. 23.Rasler and Thompson 1983,490. 24.Rasler and Thompson 1983.Institutional Foundations of Financial Power 7 or printing money. Borrowing can be further broken down into voluntary and in￾voluntary forms. The former usually involves the sale of government bonds or, in earlier periods, short-term loans to the crown; the latter involves coerced loans or forced savings plans. Any of these strategies can raise significant funds in the short term, and states have historically relied on a mix of funding mechanisms in times of war." Over the course of an extended rivalry, however, one strategy is clearly superior in terms of promoting economic efficiency: raising public debt through voluntary borrowing. It is here that liberal states have enjoyed a systematic advan￾tage relative to their illiberal rivals. Public Debt and Financial Power The importance of public debt in determining the outcomes of international com￾petition has been known for some time. In the seventeenth century, the rivals of the Dutch Republic expressed "despairing admiration" at that country's seemingly inexhaustible supply of cheap credit in wartime." Likewise, French officials in the eighteenth century came to envy the ease with which Great Britain could raise money at low interest rates." By 1795, Immanuel Kant would consider public debt to be so vital to the conduct of war that his "fourth preliminary article for perpetual peace among nations" proscribes the raising of debt for use in foreign affair^.'^ More recently, scholarship on the rise and fall of world leaders has iden￾tified the key role played by public borrowing. The most explicit formulation comes from Rasler and Thompson, who surveyed the experiences of Portugal, the Dutch Republic, and Great Britain and concluded that . . . early winners in the struggle for world leadership owed a significant pro￾portion of their success to their ability to obtain credit inexpensively, to sus￾tain relatively large debts, and in general to leverage the initially limited base of their wealth in order to meet their staggering military expenses.'" Moreover, Rasler and Thompson suggest that the losers of these contests, notably France and Spain, failed to maintain uninterrupted access to credit and experi￾enced frequent bankr~ptcies.'~ 19. For an excellent cross-national analysis of war finance during World Wars I and 11, see Fujihira 2000. 20. Barbour 1950, 81-82. 21. Sargent and Velde 1995. 22. Kant 1983, 109. At the outbreak of the Crimean War, William Gladstone, then Britain's chan￾cellor of the exchequer, tried to integrate this philosophy into his policy of war finance. He argued in the House of Commons that paying for war with loans obscured the true costs of war and that reliance on taxes alone would serve as a "salutary and wholesome check" on "ambition and lust of conquest." Six week5 later, the Treasury sold £6 million in bonds, and, in his final weeks as chancellor in 1855, Gladstone was contemplating borrowing £12 million more. Anderson 1967, 195-97. 23. Rasler and Thompson 1983, 490. 24. Rasler and Thompson 1983