Modern history


On a warm morning in 1783, in the Atlantic harbor of Brest, René de Chateaubriand had a vision. By his own account already a young Romantic, he was nonetheless unprepared for the kind of exaltation he was to feel at the sight of Louis XVI’s navy returning to port.

One day, I directed my walk to the far end of the port, on the sea side. It was hot and I stretched out on the shore and slept. Suddenly I was awoken by a magnificent sound; I opened my eyes like Augustus when he saw the triremes appear in the Sicilian roadsteads after the victory of Sextus Pompey. Cannon fire sounded over and again; the harbor was crowded with ships: the great French fleet had returned after the signature of the peace [of Versailles]. The vessels manoeuvred under full sail; blazing in fire and light; decorated with flags; presenting prows, poops and sides; stopping and casting anchor in the midst of their course or continuing to ride on the waves. Nothing has ever given me a higher idea of the human spirit…

For many of Chateaubriand’s contemporaries the success of the French arms in both the Atlantic and the Indian oceans (for Suffren was the greatest hero of all) was indeed thrilling. In 1785, for example, the Estates of Brittany (which had not enjoyed the best of relations with the Bourbons) voted to erect a statue of Louis XVI in glorification of his role in restoring the prowess of the navy. And it was decided to place the image beside the hill of the Château de Brest so that it would be seen, like the Colossus of Rhodes, by all ships entering the great harbor.

But the pleasures of witnessing British imperial disarray and the belated satisfaction for the defeats of the Seven Years’ War carried an expensive price tag. In a single year – 1781, the year of Yorktown – 227 million livres were spent on the American campaign, of which 147 million were for the navy alone. That was nearly five times the amount customarily allotted for the peacetime navy, even at the rebuilt strength of Louis XVI’s standards. This force was being asked to perform four equally arduous tasks. Its first job was to convey troops to America and keep them supplied. Second, it had to thwart any attempt at British reinforcement, if necessary by aggressively seeking engagements. Third, it had to guard the major naval installations at home (a lesson of the previous global war); and finally, Vergennes and his naval ministers hoped to shorten the war by either threatening or actually carrying out a seaborne invasion of Britain in 1779. It was the distinctly imperfect success that the French fleets enjoyed in carrying out all these assignments that added to the length and hence the cost of the war. After the disastrous Battle of the Saints, there was a hasty appeal for a “patriotic subscription” to refit the fleet and, as in 1762, various public and private bodies stepped into the breach. Among others, the Chamber of Commerce at Marseille contributed over a million livres toward the construction of a formidable seventy-four-gun ship of the line that was named, in gratitude, Le Commerce de Marseille. Such was the patriotic ardor of the aldermen and bourgeois of the Midi port that they added another 312,414 livres to support families of seamen who had perished. Other institutions followed, like the Estates of Burgundy and Brittany, and even the much reviled private tax company of the Farmers-General, whose ship was called, unblushingly, La Ferme. But it was no more possible to wage war by patriotic donation in the 1780s than at any other time before or since. And it was to the much less altruistic loan market that Louis XVI’s Controllers-General had to go to support their military obligations. For while the previous naval war had been funded partly from loans but partly from new, temporarily imposed direct taxes, levied on all classes of the population, 91 percent of the monies needed for the American war came from loans.

The best estimates of the costs of the American alliance in both its surreptitious and openly military forms – from 1776 to 1783 – come to 1.3 billion livres, exclusive of interest payments on the new debts incurred by the government as a result. So that, without much exaggeration, it can be said that the costs of Vergennes’ global strategy policy brought on the terminal crisis of the French monarchy. For the pursuit of a “forward” policy in the Atlantic and Indian oceans was not meant to be at the expense of France’s traditional role of sustaining the balance of power in dynastic Europe. To support that “old” diplomacy still required an army of at least 150,000. No other European power attempted to support both a major continental army and a transcontinental navy at the same time. (And, arguably, none ever has without long-term costs debilitating its financial stability.) More than any inequity in a society based on privilege, or the violent cycles of famine that visited France in the 1780s, the Revolution was occasioned by these decisions of state.

If the causes of the French Revolution are complex, the causes of the downfall of the monarchy are not. The two phenomena are not identical, since the end of absolutism in France did not of itself entail a revolution of such transformative power as actually came to pass in France. But the end of the old regime was the necessary condition of the beginning of a new, and that was brought about, in the first instance, by a cash-flow crisis. It was the politicization of the money crisis that dictated the calling of the Estates-General.

To do them justice, the ministers of Louis XVI were painfully impaled on the horns of a dilemma. It was quite reasonable for them to wish to restore France’s position in the Atlantic since they correctly saw that it was in the sugar islands of the Caribbean and the potential markets of the Anglophone colonies that the greatest fortunes were being made. In this sense, prudent economic strategy demanded a policy of intervention on the side of the Americans. Both during the war and after the peace of 1783 official statements defended that intervention as designed not to annex imperial possessions but rather to secure freedom of commerce. And it was in that guise – as the protector of free navigation – that Louis XVI appears on most celebratory engravings. There can be no doubt that in the short run these aims were accomplished, for Atlantic trade from Nantes and Bordeaux to the French West Indies reached an unprecedented height of prosperity in the decade before the Revolution. In this sense, military investment in the spoils of empire had paid off handsomely.

The financial consequences of that same policy, however, made it a pyrrhic victory. For the ballooning of the deficit so weakened the nerfs – the sinews – of state that by 1787, its foreign policy was robbed of real freedom of action. For in that year sheer financial exigency prevented France from intervening decisively in the civil war in the Dutch Republic to support its own partisans, themselves going by the name of “Patriots.” Paradoxically, then, the war that had been intended to restore the imperial power of France ended up compromising it so badly that king and patrie seemed to be two different, and before long irreconcilable, entities. It was not much longer before this process was taken even further, so that the court itself seemed a foreign parasite feeding off the body of the “true” Nation.

It needs to be stressed that it was policies – fiscal and political as well as military – that brought the monarchy to its knees. Excessively influenced by the obsolescence implied by the nomenclature of the ancien régime (a term not used until 1790 and then, in Mirabeau’s letter to the King, meaning “previous” not “archaic”), historians have been accustomed to tracing the sources of France’s financial predicament to the structure of its institutions, rather than to particular decisions taken by its governments. Heavy emphasis on both institutional and social history at the expense of politics has reinforced the impression of administrations hopelessly trapped inside a system that, some day or other, would be doomed to collapse under the strain of its own contradictions.

As we shall see, nothing of the sort was true. What, seen from the vantage point of the Revolution, might look incorrigibly inflexible was in fact open to a number of approaches in coping with French financial problems. The trouble lay rather in the political difficulties in sustaining those policy decisions to the point where they might have paid off, and in the repeated retreats of the King to what he judged was the temporarily least painful political alternative. If anything, as de Tocqueville pointed out, it was not an aversion to reform but an obsession with it that made consistent financial management difficult if not impossible. Where de Tocqueville erred, though, was in supposing that French institutions were themselves intrinsically incapable of solving the regime’s fiscal problems. In this view, there were no short-term problems, only deepseated structural ones that could not be changed – even by the Revolution – for he thought he saw the same ills of centralization and the heavy hand of bureaucratic despotism recurring endlessly and hopelessly through French history.

How grave was France’s financial predicament after the American war? It had, it is true, run up an imposing debt, but one that was no worse than comparable debts incurred in fighting the other wars deemed equally essential to sustain the nation’s position as a great power. Those quick to condemn the ministers of Louis XVI for their hopeless prodigality might pause to reflect that no state with imperial pretensions has, in fact, ever subordinated what it takes to be irreducible military interests to the considerations of a balanced budget. And like apologists for powerful military force in twentieth-century America and the Soviet Union, advocates of similar “indispensable” resources in eighteenth-century France pointed to the country’s vast demographic and economic reserves and a flourishing economy to sustain the burden. Indeed the prospering of that economy was, they claimed, contingent on such military expenditure, both directly in naval bases like Brest and Toulon, and indirectly in the protection it gave to the most rapidly expanding sector of the economy.

Moreover, on each occasion following the wars of the eighteenth century, there had been a period of painful but necessary adjustment to allow the finances of the realm to be brought into manageable order once more. The wretched end to Louis XIV’s wars, for example, saw simultaneously the specter of bankruptcy, the virtual disintegration of the French army in the field, tax revolts and mass famine. And by 1714 the debt was calculated at around 2.6 billion livres tournois or, in a population of twenty-three million, 113 livres – about two-thirds the annual income of a master carpenter or tailor – for each subject of the Sun King. In the sobering aftermath, there was an attempt to learn from the “victorious” Anglo-Dutch side by importing their banking principles into French public finance. An enterprising Scotsman, John Law, was given the opportunity to manage and eventually liquidate the French debt in return for exclusive license to a newly created Bank of France. Unhappily, Law used the capital subscribed to the Bank to speculate in phantom American land companies and when the inflated bubble burst, so did the principle of a Bank-managed national deficit. In fact, Law’s speculations were no more outrageous or indeed reprehensible than identical gambling by the South Sea Company in Britain. But the principle of a public Bank survived the debacle better there because such financial institutions were transferred more strictly to parliamentary control. In France, there was no comparable institution that could act as a dependable watchdog and so reassure future depositors and creditors of the government. It has been well said by Michel Morineau that the difference between the two debts is that the French deficit was burdened by being broadly conceived by the public as “royal” while the British debt was held to be “national.”

Short of a Bank-managed loan system, there were still financial strategies open to French governments to keep their debt at a manageable level. Controllers-General of the period of the Regency following Louis XIV’s death indulged in a drastic writing-down of the scale of debt and intervened radically in redemption schedules. This was, to be sure, a kind of bankruptcy by installments but, perhaps surprisingly, it did not seriously impair the future credit of the French crown. As long as there was capital, both within and outside the country, looking for yields that were even marginally higher than other kinds of domestic investment, France did not lack for lenders. By 1726 the French budget was more or less in balance, and with the help of inflation reducing the real value of the debt, the nation’s finances even survived the War of Polish Partition in the 1730s without excessive new burdens.

It was quite otherwise, however, with the two major wars that then followed: the War of Austrian Succession from 1740 to 1748 and, still more spectacularly, the Seven Years’ War from 1756 to 1763. The first conflict, essentially on land, cost around 1 billion livres and the second, both a naval and land war, 1.8 billion. By 1753 the principal of the deficit had shot up to 1.2 billion and annual interest to 85 million livres, already 20 percent of current revenue. Yet the postwar Controller-General Machault d’Arnouville projected that the deficit might be paid off within fifty to sixty years, assuming no further wars. That was, of course, like assuming there would be no France or, more seriously, no Britain. After the next war, in 1764, the deficit was up to 2.324 billion livres in principal with debt service alone taking something like 60 percent of the budget, or twice the proportion of the 1750s. In thirteen years the debt had grown by 1 billion livres.

While this makes grim (if familiar) reading for accountants, it did not of itself set France on a trajectory to revolution. The mid-eighteenth century had witnessed an enormous expansion, both quantitative and qualitative, in the scale and sophistication of warfare, which had taken a heavy toll of all major belligerent powers. Hohenzollern Prussia, which we are accustomed to think of as a success story of bureaucratic militarism, was in a desperate plight at the end of the Seven Years’ War even though it had been kept afloat by British subsidies. Its remedy for ills was in fact to import the French system of tax management: the régie, which actually returned it to some degree of fiscal soundness. Not even neutrals escaped, for the Dutch Republic, which itself had been busy funding any and all customers, went into serious depression in 1763– 64. And Britain, held up as the other major example of fiscal competence, went into debt (as it would during the American war) on precisely the same scale and magnitude as its archenemy. Not only do we now know that the British per capita tax burden was three times heavier than in France, but by 1782, the percentage of public revenue consumed to service Britain’s debt – on the order of 70 percent – was also considerably greater than the French equivalent.

So in absolute terms, even after the immense fiscal havoc wrought by the American war, there are few grounds for seeing the scale of the French deficit as necessarily leading to catastrophe. But it was the domestic perception of financial problems, not their reality, that propelled successive French governments from anxiety to alarm to outright panic. The determining elements in the money crisis of the French state, then, were all political and psychological, not institutional or fiscal. On each occasion – after the expensive midcentury wars, for example – there were serious debates about debt management and the relative desirability of new taxes as against different loan possibilities. These led to apparently minor technical alterations of financial strategy that were, as James Riley has argued in a brilliant history of the problem, disproportionately damaging. One such change was the growing concern with the schedule of amortization. Eagerness to capture that most elusive of all will-o’-the-wisps – redemption of principal – persuaded French governments to shift loan offers from so-called “perpetual annuities” (which could be passed on beyond the term of a single life) to “life annuities” terminating with the holder. While this might have seemed a good idea to redemption-minded managers, it meant in practice that the crown was now paying 10 percent to its creditors rather than 5 percent on the perpetual loans. This added immensely to the real burden of service for the future.

Second, it was in the aftermath of both the Austrian and the Seven Years’ wars that Controllers-General who attempted to perpetuate temporary wartime direct taxes ran headlong into powerful and articulate political resistance. The reason for all that indignation in the name of French “liberties” was that these taxes were levied on all sections of the population, irrespective of social rank. It may seem odd to us that the French “public” (for there was already such a thing called “public opinion”) did not see this opposition as motivated by the selfish protection of privileged tax exemptions. But in the 1750s and the 1760s, when these attacks on “ministerial despotism” were launched, that political “public” consisted, for the most part, either of people already within the system of privilege or those who had a good chance of entering it. And in these circumstances, “privilege” became synonymous with “liberties.” A “modern” position by which the crown might have appealed over the heads of the privileged groups for public support of its no-exemption taxes was not yet conceivable. Even in 1789, it did so with the utmost reluctance. Twenty years before, it was quite out of the question. Controller-General Silhouette, for example, in 1759, had proposed a tax on luxury items like gold and silver plate, jewelry, carriages – as well as on celibacy – and was drummed out of office for his temerity, amidst a chorus of execration. In his last, uncharacteristically determined years, Louis XV was prepared to push through unpopular financial measures by the royal fiat of the lit de justice. But since his grandson was more sensitive to the issue of popularity, Louis XVI’s ministers tried to avoid anything that suggested arbitrary rule. “No bankruptcies, no taxes, no loans” was the optimistic formula by which Turgot announced his policies in 1775. And Jacques Necker, the Genevan Director-General of Finance, determined to finance the American war overwhelmingly by loans rather than taxes. The real difference between the British and French predicaments following that war was that William Pitt could raise revenue from new taxes without threatening a major political crisis, an option that was not open to his French counterparts.

For a long time now, historians have argued that what ministers of the French crown did or didn’t do about the debt is of minor importance. For it was the nature of the old-regime monarchy itself that was the real problem. Hamstrung by privilege, how could a government consisting of men who bought or inherited their offices hope for even a modicum of bureaucratic efficiency? Even with the best will in the world, and with able public servants (neither of which could be counted on), French government was a vacuum presiding over a chaos. Add to this its monstrous deficit, and the wonder is not that it ended badly, but that it survived as long as it did.

But is this argument valid? It assumes, to begin with, that to work adequately, the eighteenth-century state should have approximated some early version of “civil service” government. This might be defined as a polity in which public functions are the monopoly of salaried officials, trained for the bureaucracy, hired by merit, disentangled from any private interest in the jurisdiction they serve and accountable to some sort of disinterested sovereign body. It is true enough that the outlines of such a bureaucratic mechanism were articulated in the eighteenth-century “science” of “cameral government” and that, for the first time, professors of such Kameral-und-polizeiwissenschaft – what we would call government and finance – were occupying specially created chairs at universities, especially in the German-speaking world. But it takes no more than a glance at the reality of eighteenth-century government throughout Europe to see that these principles were most honored in the breach. The celebrated Prussian bureaucracy, for example, was riddled with corruption, was the creature of dynasties of nobles who settled in swarms on its offices. And in that state, local government officers were appointed not for their separation from, but adhesion to the local society of land-owners. By comparison the French intendants were models of integrity and objectivity. Even in Britain, Hanoverian government was notorious for sinecures created to generate chains of political loyalty. I don’t mean to suggest that bureaucratic competence was not possible within such a system, but the same holds true for French government as much as any other.

It is in the forests of privilege which grew so luxuriantly in France that it is said the purposes of government most seriously lost their way. Privilege, after all, was defined by tax exemption. And the immunity of the nobility and clergy to direct taxes most obviously denied the royal Treasury desperately needed funds. But it is misleading to see the privileged classes en bloc removed altogether from the revenue base of the state. Nobles were subject to the capitation poll tax, and the several direct property taxes like the “vingtième,” levied at 5 percent of theirproperty. In some cases they were even subject to the taille: the major direct tax of the old regime. For while in some areas the taille fell on persons, in others it fell on property. So that if, for example, a young nobleman came into possession of a property as part of a dowry from a family that had in origin been bourgeois, he and his heirs would have to pay the taille on the estate. And since a very fluid pattern of property inheritance and exchange between different social groups was becoming more and more common in France, the number of nobles qualifying to pay the taille in all likelihood was rising too.

Fiscal immunity as a feature of privilege was, then, being steadily broken down, to the point that well before the Revolution leading aristocratic writers could cheerfully propose its abolition altogether. But by the same token, had the privileged been brought fully within the taxable classes much earlier, it is very unlikely that the additional revenue would have made much difference to the problems of the deficit. The most that can be said is that the principle of exemption at the top of society filtered down as the necessity of evasion at the bottom. So that many in France – as the petitions of complaint before the Revolution were to testify so eloquently – perceived their relationship to the state as a kind of fiscal zero-sum game. For the impoverished peasant, this meant moving one’s few sticks of property – a bed, a few pans and a half-starved goat – to a village other than one’s own parish to avoid assessment. For the parish was the unit of the taille. This kind of desperation tactic was hardly conducive to building up “the cultivator’s rural capital” as the economic theorists of the time fantasized. At the level of the urban bourgeois it meant accumulating enough money to buy one of the many thousands of petty municipal offices that would confer tax exemption. So that in every major town and especially in Paris, there were wardens of the oyster sellers’ guild and gaugers of cheese and curds and inspectors of tripe who gloried in their small dignities and enjoyed their exemptions.

Linked to privilege, but not synonymous with it, venality was perhaps a greater plague, and certainly a greater impediment to stanching the hemorrhage of the crown. For the sale and purchase of office was more deeply and broadly rooted in France than in any other major power in Europe. It had begun as a medieval practice but in 1604 Henri IV had institutionalized the sale of office as a way of raising revenue for the crown. In effect the purchaser lent the government a capital sum (the purchase price), for which he received as a return certain monies and perquisites (the gages) from the office. He also received status (including tax exemption) and it was if anything the nonpecuniary aspects of venal office that made Frenchmen so determined to resist its abolition.

Under Louis XVI several ministers made spirited efforts to reduce the crown’s dependence on this kind of revenue, but after the fall of Necker, it seemed still an irresistible expedient at a time of fiscal crisis. The effective rate paid by the monarchy on old offices or the creation of new ones was, after all, between 1 percent and 3 percent – much less than on other kinds of loans. According to David D. Bien, from the American to the French Revolution something like 45 million livres were raised from the sale of offices – not a large sum spread over these years, but at least indicative of the obstacles to radical reform. So that at the same time that the long-term purpose of the government was to try to extend control over its finances and functions, short-term wants were making that harder, rather than easier to achieve.

The problem was also a matter of attitude. Just because privileges were so widely available and no longer at all synonymous with birth or class, those who stood to lose status as well as cash constituted an ever-broadening coalition. And even among reforming writers who could wax indignant at every other kind of abuse and anachronism, there was little enthusiasm for some sort of nonvenal, bureaucratic state. Voltaire and d’Alembert, for example, were as eager as anyone else to obtain a position such as that ofsecrétaire du roi as the first step to grander things. Louis XVI’s reforming ministers were only too aware of the problem, but were nervous about any wholesale attack. Only Necker, who was notoriously impervious to most peccadillos, was prepared to take on the recalcitrant officeholders. And even then it was among the court – always a popular target – that he found the most flagrantly useless offices to prune. But as long as offices were treated as simply another kind of private property no one could imagine their expropriation without adequate compensation. It has been calculated that there were on the order of fifty-one thousand such venal offices in France on the eve of the Revolution, representing a capital of between 600 and 700 million livres. To redeem them all at once would have cost the state approximately the equivalent of one year’s revenue. This would have been tantamount to shutting down France for a year, until, as it were, the burden could be shifted to the public sector.

The notion of government office as a form of private property strikes modern sensibilities as, by definition, irreconcilable with the public interest. Indeed, the most chronically “ancient” feature of the ancien régime seems to be that it was unable to distinguish adequately between the public and the private realms in matters as vital as its own finances. But even here, some perspective is needed to judge the failings of the French monarchy by its own standards rather than those of modern administrative theory. All European warrior states in this period – and for a long time to come – drew their revenue from three sources: direct taxes usually (as in France) collected by state officials; loans from groups, institutions and individuals all of whom certainly aligned their private interest with the interest of the state; and finally indirect taxes which in some places were administered by bureaucrats and in some places leased out to private individuals who would advance the state a sum of money in return for the right to collect taxes themselves. The difference between what they had lent and what they collected supplied both their profit and operational costs. The Napoleonic state, which is sometimes taken as a bureaucratic state par excellence, in fact used all three just as the old regime had, and even then only kept its finances in order by the crudest forms of military extortion, coercively extracting gigantic sums of money from countries “liberated” by the French army.

So just how serious were the results of the eighteenth-century monarchy’s combination of business and bureaucracy in managing its own finances? For a long time it has been said that the messiness of these arrangements, for example, delayed the appearance of a systematic budget until Necker tried to provide his own published one in 1781. But as Michel Morineau, in a superlative study of these issues, has shown, while there was no public record, there certainly were arrangements that enabled Controllers-General both to apportion expenses among departments of state and to see with fairly reliable accuracy how much money was actually disbursed to those departments. And historians have been equally certain that had the monarchy had the courage to assume directly the business of administering and collecting indirect taxes, it would have saved the admittedly enormous profits going to the commercial “middlemen” who did the taxing on its behalf. On the other hand, however, it would have been saddled with those extra costs of administration, which might well have offset the gains, not to mention the odium which inescapably went with the collection of taxes on basic commodities. It has been estimated that the “overheads” of French revenue collection amounted to 13 percent of the total, compared with 10 percent in the case of Britain, where a centralized bureaucracy did indeed run the customs and excises. If this is really all that was at stake, no wonder Controllers-General were reluctant to upset their habitual regime for some sort of theoretical sovereignty over public business.

It was the policies of the old regime rather than its operational structure that brought it close to bankruptcy and political disaster. Compared with the consequences that flowed from the great decisions of foreign policy, privilege, venality and indirect administration of revenue were of much less significance. At the root of its problems was the cost of armaments when coupled with political resistance to new taxes and a growing willingness of governments to accept high interest-bearing obligations from both domestic and, increasingly, foreign creditors. No doubt it was reckless of French governments in the 1780s to lay up so much trouble for themselves. But it takes a very superior form of hind-sight on the part of an American in the 1980s to write them off as hopelessly obtuse.

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