The two books reviewed here both come from a series edited by Joel Mokyr on the economic history of the Western world. But they do not seek to provide exclusively economic explanations for economic history; instead, they look to political factors such as territorial organization, taxation, trade, and warfare. Indeed, a key feature of both studies is their critical engagement with issues of sociospatiality, especially terrestrial and maritime distance, the role of city-states and city-state networks, the territorialization of political power, and center–periphery relations.

Although Regina Grafe focuses primarily on the development of the Spanish state over a 150-year period and David Stasavage has a far broader canvass geographically and presents data for a 500-year period, both authors cite the late Stephan Epstein's work on the jurisdictional fragmentation of states and the problems that this fragmentation poses for centralized political control and the capacity to raise revenues through predation and taxation. Conversely, although both authors refer to the new institutional economics of Douglass C. North and Barry R. Weingast on the role of elected assemblies in enabling states to raise revenues from taxes rather than predation, Grafe regards their work as an elegant but historically erroneous model, whereas Stasavage uses game theory and case studies to provide qualified support for their analysis. Each author not only draws on archival research but also deploys original data sets to challenge conventional wisdom (notably about the role of warfare in territorial state formation), to test old ideas, and to develop new insights.

Both Distant Tyranny and States of Credit are excellent examples of transdisciplinary scholarship that employs qualitative and quantitative analysis to produce important revisionist readings of the historical record. This review summarizes the arguments of each text and then draws some general conclusions about the importance of these studies for our understanding of the sociospatiality of state formation and the key role of representation, taxation, and trade in this regard.

Working in the iconoclastic spirit of the economic historian Epstein, Grafe challenges conventional historiographical views about the twin failures of Spain to move from a premodern social formation to a unified nation-state and from a parcelized feudal economy to an integrated market economy. Economic historians have been wont to explain this in terms of 1) the overcentralized character of the Spanish state, rooted in Madrid, which destroyed an integrated network of manufacturing towns in the interior; and 2) high internal transportation costs grounded in the physical geography of the peninsula that limited domestic market integration. In contrast, Grafe argues that it is decentralization, not excessive centralization, that explains Spain's backwardness. She demonstrates that peripheral historical territories and powerful interior towns blocked Spain's economic development by establishing jurisdictional obstacles to trade, which exacerbated the high transport costs. And, second, the early stages of globalization turned coastal regions outward, not inward, further hindering the formation of a national market. An important basis for her analysis in this regard is a unique data set on price trends for bacalao (dried, salted cod) as a new transatlantic staple important for the Spanish diet. Indeed, differential integration into the world market proceeded faster than the formation of a national market. These trends together—one the tyranny of distance, the other the effect of “distant tyrannies” (i.e., the obstructive power of historic territories and major cities)—prevented the development of a paradigmatic “absolutist state.” Above all, Grafe shows that coastal elites resisted the efforts of Madrid to impose national political and economic unity. This had the paradoxical effect that the capacity of local and regional forces to resist centralization for centuries helped to legitimate rule from Madrid by limiting absolutist pretensions, but it also produced the conditions for the eventual “backwardness” of the Spanish economy compared to northern Europe.

Stasavage asks whether two key features of early-modern European state formation—the rise of political representation and public credit—might be correlated. Specifically, he explores the structural coupling between representative assemblies and public borrowing from the medieval into the early modern eras. In addition to several case studies, he draws heavily on a unique database on the interest rates paid by governments over many centuries for different kinds of public funding. In this context, he distinguishes city-states from large territorial states. He shows that the former tended to develop representative assemblies that met frequently and exercised significant fisco-financial controls and, thanks to this (especially where the mercantile classes dominated the assemblies and could structure the rules of the game), could raise cheap, often long-term (even nonredeemable interest-bearing) loans. In contrast, although large territorial states had large populations and could mobilize large numbers of people, they were less well equipped to mobilize money. They lacked representative assemblies that met frequently and they lacked credible controls over state expenditure, making it hard for these states to raise funds through taxation rather than predation and leading to higher interest rates. In this context, Stasavage defined city-states as being more or less juridico-politically autonomous vis-à-vis princely rulers and as being responsible for organizing their own military defenses. Thus, small polities (such as Genoa or Cologne) acquired early fisco-financial advantages over larger territorial states (such as France and Castile). In the long run, however, the mercantile oligarchies that enabled city-states to raise cheap credit were also relatively closed elites, and this acted as an obstacle to technical innovation, transforming these city-states into “rentier republics.” City-states where craft guilds were stronger and some modernizing (rather than predatory) territorial states thus proved more successful economically in the longer term.

Both studies rely on pointed historiographical critiques and detailed historical analyses but there are important differences between them. Grafe begins her study with the question: Why did some European states become more autonomous, stronger units much earlier than others, and how did this drive, or was driven by, the integration of domestic markets? Paraphrasing, one could say that Stasavage's question is: Why did many city-states survive in the face of the trend toward territorial state formation and how was this driven by, or act as a driving force for, intensive political participation by urban elites and enable access to cheap, long-term credit for economic, political, and military purposes? In formulating his answer, Stasavage tends to accept the view of the new institutional economics (NIE, especially as advanced by North and his collaborators) that the predatory tendencies of the state and state officials must be limited so that the natural propensity of humankind to truck and barter can flourish. He uses game theory to model this proposition, and his principal aim is to identify an important mechanism whereby the role of representative assemblies can satisfy this requirement in the case of some city-states. In contrast, Grafe is very critical of the NIE position, emphasizing the weakness of its assumptions about spontaneous market forces and the “greed” of an unconstrained state, and she mobilizes extensive evidence from the Spanish and French cases to support and extend this critique.

Likewise, whereas Stasavage tends to endorse with qualifications the claim by historical sociologists that military competition was an important driver of territorial state formation, Grafe offers a nuanced critique based on a more dialectical mode of reasoning, theoretical argument, and historical cases.

A third important difference is that Grafe locates Spanish state formation and market integration in the context of early-modern globalization, noting, in particular, that Spanish colonies in Europe and the Americas contributed far less to the Spanish treasury than is often assumed (distant tyrannies again) and that world market integration was a brake on the integration of the national market. In contrast, Stasavage focuses primarily on domestic fisco-financial politics and does not dwell on colonial or imperial questions. This said, his analysis of the weakness of the Castilian state's fisco-financial position is similar, but narrower in focus, to that offered by Grafe.

By way of conclusion, I offer five observations based on these insightful, provocative studies. First, the two studies clearly show the limits of methodological ‘nationalism’ (which, to avoid anachronism, can be defined here as taking territorial state formation for granted as the core feature of modern political systems). Both authors follow Epstein (Freedom and Growth, 2000) in emphasizing the historical significance of jurisdictional fragmentation in early-modern state formation. In addition, Grafe shows the crucial role of an outward rather than internal market orientation, as well as the importance of core–periphery relations in supposedly unified states; and Stasavage demonstrates that city-states had some crucial advantages over large territorial states, survived far longer than the conventional myth of the Westphalian state suggests, and could also be important sites of technological and economic innovation.

Second, in contrast to the conventional wisdom that the formation of large, centralized territorial states was driven by military competition, Stasavage shows that the access to cheap credit by city-states made it easier to defend cities against inefficient armies that had to be expensively funded by territorial states—at least until military technologies shifted against such defensive tactics. This historical-sociological interpretation is also criticized by Grafe, both in general terms and for the Spanish case, in part on the grounds that military competition provides an exogenous cause for state transformation that distracts attention from endogenous causes.

Third, both studies show that city-states and/or networks of cities (including those that cross-cut national boundaries) have important roles in limiting the power of national territorial states. Fourth, they also show the importance of forms of political organization, political representation, and public finance in early-modern and modern state formation and, in doing so, illustrate the need for more detailed comparative institutional analysis that combines detailed archival and quantitative analysis with bigger macrohistorical questions. Finally, and generally, these studies show that however well established the conventional wisdoms, there is always scope for revisionism, especially when the authors are armed with novel data sets and alternative hypotheses.