Shining a Light on the Mysteries of State: The Origins of Fiscal Transparency in Western Europe
By Timothy C. Irwin
Working Paper from the International Monetary Fund (2013)
Abstract: The extent of fiscal transparency in Western Europe has varied over the centuries. Although ancient Greek, Roman, and medieval governments were sometimes open about their finances, the absolute monarchies of the 1600s and 1700s shrouded them in mystery. Factors that have encouraged transparency include (i) the sharing of political power and rulers’ need to persuade creditors to lend and taxpayers’ representatives to approve new taxes; (ii) the spread of technological innovations that reduce the costs of storing and transmitting information; and (iii) the acceptance of political theories that emphasize accountable government and public discussion of government policy.
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Excerpt: After the dark ages, the trail of fiscal transparency can be picked up again in northern Italy, starting around 1100, when cities such as Florence, Genoa, Milan, Modena, Pisa, and Siena became independent republics governed by their own elite citizens. These cities were ruled by a combination of smaller and larger councils, which at first appointed a small number of consuls to run the cities. After a time, many cities instead appointed a single administrator to manage their affairs. To ensure that the administrator was not allied to any local faction, he was typically chosen from among the citizens of another city, and before he could return home at the end of his term, he was required to undergo an audit reminiscent of the Greek and Roman ones mentioned above. In some cases, he did not receive the last installment of his salary until he had acquitted himself at the audit. Though the rulers of the city-states were secretive about many things, including naturally those related to war, it is reported that the city of Modena’s records including its accounts were stored where they could be viewed and copied by the public. Judging the record of the city-states as a whole, an historian concludes that the people’s participation in government was of the same order as that achieved in ancient Athens.
The independence of the Italian city-states was frequently challenged by the Pope and the Holy Roman Emperor, and the ensuing conflicts stimulated a lively debate about the way cities should be governed. Marsilius of Padua (c. 1275–1343) defended the independence of the city-states by arguing that the city’s rulers should be accountable to the people of the city. Small states, he said, should be governed by their people and their princes should be brought to account, apparently referring to financial audits.
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From a somewhat later time, there is evidence that fiscal transparency could increase simply because financial responsibilities were transferred from a smaller to a larger council. In Venice, the head of state was the Doge, but he had to vow to respect various constitutional restraints, and he shared power with a Council of Ten, a larger Senate, and a Great Council that was larger still. When certain powers over public finances were transferred from the Council of Ten to the Senate in 1583, the French ambassador reported that secrecy in Venice’s finances would no longer be possible. A few years later, a writer spoke of the “manner of open government which [the Venetians] employ at the present time” and said that it was unpopular among the “older and wiser,” but “immensely pleasing” to the general public. The Venetian public also discussed strategies for reducing public debt, which unsettled some of the city’s rulers: one senator’s widely discussed plans for paying back public debt, though eventually successful, initially met with great opposition, partly “for publicly revealing mysteries which perhaps ought to have stayed hidden for the sake of the public good.” The book that told this story was itself suppressed for it contained “maxims of government” too “intimate” to divulge.
Shining a Light on the Mysteries of State: The Origins of Fiscal Transparency in Western Europe
By Timothy C. Irwin
Working Paper from the International Monetary Fund (2013)
Abstract: The extent of fiscal transparency in Western Europe has varied over the centuries. Although ancient Greek, Roman, and medieval governments were sometimes open about their finances, the absolute monarchies of the 1600s and 1700s shrouded them in mystery. Factors that have encouraged transparency include (i) the sharing of political power and rulers’ need to persuade creditors to lend and taxpayers’ representatives to approve new taxes; (ii) the spread of technological innovations that reduce the costs of storing and transmitting information; and (iii) the acceptance of political theories that emphasize accountable government and public discussion of government policy.
Excerpt: After the dark ages, the trail of fiscal transparency can be picked up again in northern Italy, starting around 1100, when cities such as Florence, Genoa, Milan, Modena, Pisa, and Siena became independent republics governed by their own elite citizens. These cities were ruled by a combination of smaller and larger councils, which at first appointed a small number of consuls to run the cities. After a time, many cities instead appointed a single administrator to manage their affairs. To ensure that the administrator was not allied to any local faction, he was typically chosen from among the citizens of another city, and before he could return home at the end of his term, he was required to undergo an audit reminiscent of the Greek and Roman ones mentioned above. In some cases, he did not receive the last installment of his salary until he had acquitted himself at the audit. Though the rulers of the city-states were secretive about many things, including naturally those related to war, it is reported that the city of Modena’s records including its accounts were stored where they could be viewed and copied by the public. Judging the record of the city-states as a whole, an historian concludes that the people’s participation in government was of the same order as that achieved in ancient Athens.
The independence of the Italian city-states was frequently challenged by the Pope and the Holy Roman Emperor, and the ensuing conflicts stimulated a lively debate about the way cities should be governed. Marsilius of Padua (c. 1275–1343) defended the independence of the city-states by arguing that the city’s rulers should be accountable to the people of the city. Small states, he said, should be governed by their people and their princes should be brought to account, apparently referring to financial audits.
From a somewhat later time, there is evidence that fiscal transparency could increase simply because financial responsibilities were transferred from a smaller to a larger council. In Venice, the head of state was the Doge, but he had to vow to respect various constitutional restraints, and he shared power with a Council of Ten, a larger Senate, and a Great Council that was larger still. When certain powers over public finances were transferred from the Council of Ten to the Senate in 1583, the French ambassador reported that secrecy in Venice’s finances would no longer be possible. A few years later, a writer spoke of the “manner of open government which [the Venetians] employ at the present time” and said that it was unpopular among the “older and wiser,” but “immensely pleasing” to the general public. The Venetian public also discussed strategies for reducing public debt, which unsettled some of the city’s rulers: one senator’s widely discussed plans for paying back public debt, though eventually successful, initially met with great opposition, partly “for publicly revealing mysteries which perhaps ought to have stayed hidden for the sake of the public good.” The book that told this story was itself suppressed for it contained “maxims of government” too “intimate” to divulge.
Click here to read this article from the International Monetary Fund
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