Portugal financed the extraordinary expenditures of the First World War in the same way as many other countries, i.e. running budgetary deficits, issuing debt, and printing money. By the end of the war, all nations were facing the same dilemma - they could either adopt a deflationary monetary policy or embark on a fairly aggressive policy of currency devaluation. Due to political weakness, successive Portuguese governments accepted the latter. This inflationary policy penalized mostly private savings and the share of the population relying on fixed incomes, but it also slowed down the contraction of the economy. ; publishersversion ; published
This article demonstrates how public control over the street was at the origin of modern urban planning in Lisbon. The increased pressure over the street in the nineteenth-century city demanded increased public intervention, which was at the roots of urban planning as practice and as a body of theory. The strategic character assumed by urban planning derived from the fact that it was at the crossroads of the most important problems that nineteenth-century cities experienced: sanitation, circulation, and beautification. The preparation of the first Portuguese law on urban planning (1864) and the first improvement plan (1881) resulted from this need to exercise public monopoly over the use of the city streets. However, the financial, political, and technical conditions defined the scope of possibilities for the programme of improvement and beautification of the Portuguese capital. This article analyses the compromises between the forces driving modernisation and the limits of the possibilities. ; info:eu-repo/semantics/publishedVersion
Having stated the approach, this introduction proceeds with the outline of the paper, provides a quantitative overview of the period 1555-1910 (section 1.2) and explains the role of the Cortes in fiscal and monetary developments since the XIV century (section 1.3). Section 2.1 emphasises the role of domain revenues. Section 3.3 uses the structure of state revenue to reveal how the entrepreneurial domain state undermined the contractual basis of taxation, hindering reform and delaying economic development in the late XVIII century. The three following sections correspond roughly to the XVII, XVIII and XIX centuries. Guiding the analysis in the different subsections are changes in the monetary or fiscal regime, largely a reflection of the pressure coming from foreign invasions, let alone successive wars or revolutions at home. In section 2, the pressure helps understand the build-up against the end of union with Spain and the fiscal and monetary effects of the restoration war, respectively the early introduction of an income tax in 1641 (section 2.2) and successive currency debasements until 1688 (section 2.3). Section 3 presents monetary and fiscal developments following the discoveries of gold in Brazil, beginning with a characterisation of the bimetallic monetary regime which preserved currency convertibility and stability until 1797 (section 3.1). The drop in tax revenues from foreign and colonial trade and the risks of further involvement in the Seven Years war led to a major reform of fiscal institutions in 1761 (section 3.2). The impact of Napoleonic wars ( 1796-1808) on the tax system was most apparent in the efforts to overcome the tax immunities enjoyed by nobility and clergy. The tax debate achieved almost the same salience as it did in pre-Revolutionary France. But it did not bring about an efficient, equitable and simple tax system. Instead, mounting budget deficits resulted in the issuance of public internal debt. The transition to constitutional rule in 1820 was fraught with financial instability, including the first experience with inconvertibility followed by the transfer of the crown to Brazil and currency devaluation. After the Brazilian declaration of independence in 1822, social unrest continued and led to a civil war (section 4.1). The redefinition of property rights and state functions is at the core of the political debates and actions attempting to build up a liberal state. Nevertheless, the establishment of representative institutions did not provide a new legitimacy for taxation. On the contrary, the liberal revolution was associated with the loss of social confidence and financial reputation, making the coexistence of political and financial freedom difficult, to the point that a major tax reform was introduced during civil war (sections 4.2 and 4.3). Up to the 1850s, many financial schemes designed to raise government revenue were tried, including debt issue, tax reform, forced debt, forced donations from the mercantile community, property confiscation and privatisation of state property. Eventually, there was a peaceful change in economic regime, involving compromises that softened political conflicts and maintained political and financial freedom for forty years. Yet systematic resort to deferred taxation via external borrowing narrowed the domestic tax base and made the financing of public infrastructures unsustainable. Domestic political instability returned and the Baring crisis of 1891 was sufficient to force Portugal off the gold standard, keeping the real and then the escudo inconvertible for the next hundred years (section 4.4). Section 5 concludes, stressing how forgetting the inheritance of the real may hurt Portugal's prospects in the eurozone. ; info:eu-repo/semantics/publishedVersion
The inheritance of the real (the current y of the Kingdom of Portugal. from 1415 to 1910) on national fiscal and monetary institutions is presented as a response to the challenge of foreign invasions and of their aftermath. The Portuguese crown had to preserve national sovereignty over borders defined in the XIII century in the face of external military threats from neighboring states. The social contract enforced by the crown until the early XX century relied on the ability to obtain increasingly expensive warfare. The pressure to raise revenue became a motive for fiscal change since medieval times, as war provided social legitimacy for tax reform or currency depreciation. Tax reform involved the creation of new taxes (the sisa and the deeima) with a comprehensive base, well before they were acknowledged to be part of a modem fiscal system. New methods of taxation, including the incidence of the decima on interest income, profits and even wages in order to improve the efficiency of the fiscal system were also introduced and the immunities enjoyed by the nobility and by the church were reduced. In spite of those modem features, for most of the period state finance was primarily based on domain revenues, coming from monopolies established on trade and other colonial resources. One of them, gold, was also used as money and powerfully affected the link between war and taxes. In particular, the amount and continuity of gold inflows allowed taxation to fall and remain low throughout the 1700s. The high share of customs in tax revenues and the concentration of other taxes (like the excise) in Lisbon were other peculiar attributes of the system. The fiscal collapse of the early 1800s shows how sensitive to fluctuations in foreign trade both domainial revenues and customs duties were. The importance of domainial revenues may also explain why institutional reforms did not develop in XVIII century Portugal as early as might be expected. The crown was unable to extend the modern features of its financial system and to resort to higher levels of consolidated public debt, the only way to deal with extraordinary expenditures. Wealth-holders did not support the modernization of state finance through the creation of a bank responsible for managing public debt and issuing convertible paper money. Perhaps the government's commitment to upholding property rights was not credible enough. The increase in military expenditures was followed by the fall in colonial commerce due to the loss of Brazil. Either one of the shocks would have been sufficient to bring about a large budget deficit. The resort to inconvertible monetary creation in 1797 was responsible for a period of raging inflation lasting until the 1820s. Moreover, it engendered problems in monetary circulation up to the 1850s. Money creation was only disciplined with the reform of the monetary system and the adhesion to the gold standard in 1854. Compared with the previous period of monetary and financial instability, the almost forty years that elapsed until the declaration of inconvertibility in 1891 allowed living standards to catch up with the European average. The resort to foreign public debt as a way to finance short-term public deficit was based on the assamption that in the long term the increase in tax revenues would balance the deficit. The constitutional agreement that pacified the country in 1852 and the globalisation in the capital markets associated with the heyday of the classical gold standard also enabled this experience of convergence. Outside the gold standard, Portugal endured renewed financial and political difficulties. In 1910, a revolution created a republic and a new inconvertible currency. If, for the monarchy, convertibility had been the rule rather than the exception, the pressure of war remained and so did the difficulties in tax administration. Indeed the resilience of the latter may be the only acknowledged inheritance of the real. ; N/A
