Polish and Swedish Fiscal Policy in the Years 1772-1792. A Short-Run Analysis

This paper compares Poland and Sweden in the second half of eighteenth century, as two, poorly developed, agrarian countries. Sweden secured its existence, but Poland did not manage to break out of a political dependency and ultimately vanished from the map. We would like to discuss the causes of these different outcomes. Contemporary interpretations underline the role of reasonable fiscal policy. We argue that in this particular case this explanation is insufficient. Contrary to that, our analysis shows that in the context of short term political risks, expansive fiscal policy which led to unpayable debt may be more justifiable than policy of balanced budget.