Conscripting Money: Beliefs, Political Regimes, and Fiscal State-Building in the Age of Total War.

This paper examines how states create financial power in major wars. When states embark on warfare, they make concrete policy choices between three revenue sources: taxation, borrowing, and money creation. The paper contends that such policies are shaped by two independent variables: the wartime policymakers’ beliefs and the political regimes that shape their policymaking environment. First, officials’ beliefs about the political costs of inflation shape their preferences over the level of tax increases. Policymakers favor dramatic tax increases only when they believe that wartime inflation incurs political costs at home. Second, the supply of liberal democratic institutions determines the extent to which state officials can implement their desired tax increases (in particular, direct taxes). Liberal democratic institutions enable politicians, citizens, and organized interests to resolve the distributional conflict over their tax burdens. The paper investigates four cases of war finance in the twentieth century: Great Britain in the two world wars; Imperial Germany in World War I; and Nazi Germany in World War II. ???? [ABSTRACT FROM AUTHOR]