Ibn Khaldun, Taxes and the Rise and Decline of Empires

Thursday, May 20th, 2010

Nathan Lewis cites Ibn Khaldun on taxes and the rise and decline of empires:

It should be known that at the beginning of the dynasty, taxation yields a large revenue from small assessments. At the end of the dynasty, taxation yields a small revenue from large assessments.

The reason for this is that when the dynasty follows the ways (sunan) of the religion, it imposes only such taxes as are stipulated by the religious law, such as charity taxes, the land tax, and the poll tax. They mean small assessments, because, as everyone knows, the charity tax on property is low. The same applies to the charity tax on grain and cattle, and also to the poll tax, the land tax, and all other taxes required by the religious law. They have fixed limits that cannot be overstepped.

When the dynasty follows the ways of group feeling and (political) superiority, it necessarily has at first a desert attitude, as has been mentioned before. The desert attitude requires kindness, reverence, humility, respect for the property of other people, and disinclination to appropriate it, except in rare instances. Therefore, the individual imposts and assessments, which together constitute the tax revenue, are low. When tax assessments and imposts upon the subjects are low, the latter have the energy and desire to do things. Cultural enterprises grow and increase, because the low taxes bring satisfaction. When cultural enterprises grow, the number of individual imposts and assessments mounts. In consequence, the tax revenue, which is the sum total of (the individual assessments), increases.

When the dynasty continues in power and their rulers follow each other in succession, they become sophisticated. The Bedouin attitude and simplicity lose their significance, and the Bedouin qualities of moderation and restraint disappear. Royal authority with its tyranny, and sedentary culture that stimulates sophistication, make their appearance. The people of the dynasty then acquire qualities of character related to cleverness. Their customs and needs become more varied because of the prosperity and luxury in which they are immersed. As a result, the individual imposts and assessments upon the subjects, agricultural laborers, farmers, and all the other taxpayers, increase. Every individual impost and assessment is greatly increased, in order to obtain a higher tax revenue. Customs duties are placed upon articles of commerce and (levied) at the city gates, as we shall mention later on. Then, gradual increases in the amount of the assessments succeed each other regularly, in correspondence with the gradual increase in the luxury customs and many needs of the dynasty and the spending required in connection with them. Eventually, the taxes will weigh heavily upon the subjects and overburden them. Heavy taxes become an obligation and tradition, because the increases took place gradually, and no one knows specifically who increased them or levied them. They lie upon the subjects like an obligation and tradition.

The assessments increase beyond the limits of equity. The result is that the interest of the subjects in cultural enterprises disappears, since when they compare expenditures and taxes with their income and gain and see the little profit they make, they lose all hope. Therefore, many of them refrain from all cultural activity. The result is that the total tax revenue goes down, as (the number of) the individual assessments goes down. Often, when the decrease is noticed, the amounts of individual imposts are increased. This is considered a means of compensating for the decrease. Finally, individual imposts and assessments reach their limit. It would be of no avail to increase them further. The costs of all cultural enterprise are now too high, the taxes are too heavy, and the profits anticipated fail to materialize. Thus, the total revenue continues to decrease, while the amounts of individual imposts and assessments continue to increase, because it is believed that such an increase will compensate (for the drop in revenue) in the end. Finally, civilization is destroyed, because the incentive for cultural activity is gone. It is the dynasty that suffers from the situation, because it (is the dynasty that) profits from cultural activity.

If (the reader) understands this, he will realize that the strongest incentive for cultural activity is to lower as much as possible the amounts of individual imposts levied upon persons capable of undertaking cultural enterprises. In this manner, such persons will be psychologically disposed to undertake them, because they can be confident of making a profit from them.

That’s from Ibn Khaldun‘s Prolegomenon, written in 1377 — a few years before Laffer described his curve.

Here Ibn Khaldun sounds a bit like Douglass North or Bruce Bueno de Mesquita:

The ruler and his entourage are wealthy only in the middle (period) of the dynasty.

The reason for this is that at the beginning of the dynasty, the revenues are distributed among the tribe and the people who share in the ruler’s group feeling, in accordance with their usefulness and group feeling and because they are needed to establish the dynasty, as we have stated before. Under these circumstances, their leader refrains in their favor from (claiming) the revenues which they would like to have. He feels compensated for (his restraint) by the control over them that he hopes to establish. They can put pressure on him, and he needs them. His share of the revenues is restricted to the very small (amounts) he needs. Consequently, the members of his entourage and company, his wazirs, secretaries, and clients, usually can be observed to be destitute. Their position is restricted, because it depends on the position of their master, and the authority of (his position) is narrowed down by the competition of the people who share in his group feeling.

Then, when royal authority has come into its own and the ruler has obtained control over his people, he prevents them from getting (any part of) the revenues, beyond their official shares. Their portions shrink, because their usefulness to the dynasty has diminished. Their influence has been checked, and clients and followers have come to share with them in the support of the dynasty and the establishment of its power. At this time, the ruler disposes alone of the whole income from taxes, or the greater part of it. He keeps this money, and holds it for spending on important projects. His wealth grows. His treasuries are filled. The authority of his position expands, and he dominates all his people. As a consequence, the men of his entourage and retinue, the wazir, the secretary, the doorkeeper (hajib), the client, and the policeman, all become more important, and their positions expand. They acquire property and enrich themselves.

Then, when the dynasty starts to become senile, as the result of the dissolution of group feeling and the disappearance of the tribe that founded it, the ruler needs supporters and helpers, because there are then many seceders, rivals, and rebels, and there is the fear of (complete) destruction. His revenues then go to his allies and supporters, military men who have their own group feelings. He spends his treasures and revenues on attempts to restore (the power of) the dynasty. Moreover, the revenue from taxes decreases, as we have stated before because there are many allowances to be paid and expenditures to be made. The revenues from the land tax decrease. The dynasty’s need for money becomes more urgent. The intimates, the doorkeepers (hajib), and the secretaries no longer live under the shadow of prosperity and luxury, as their positions lose importance and the authority of the ruler’s (position) shrinks.

That group feeling he mentions is the asabiyah at the center of Peter Turchin‘s cliodynamics (which I’ve mentioned before).

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