Modern history

V LAST BEST HOPES: THE BANKER

The physiocrats, Turgot included, had always been strong on ends, weak on means. For all their powerful intellectual exertions they failed to see a contradiction in their commanding liberalism to come into being through the instruments of absolutism. They even took some pride in calling an absolutist policy the “legal despotism” required to bring about the promised land of free labor, free trade and free markets. They also made no allowance for the kind of short-term dislocations – such as riots and wars – that constituted everyday reality in an eighteenth-century state. It was understandable – especially given Turgot’s bleak warnings on the calamities that would ensue if ever another war was entertained – that once such a war did indeed beckon across the Atlantic, the monarchy turned to quite a different kind of answer.

It would be well to suppose that the promotion of Jacques Necker, following a brief period of business as usual under Controller-General Clugny, represented a turn from theory to pragmatism. And in the sense in which he was as eager to turn to loan finance coupled with administrative reform as Turgot had been to eschew them, this was indeed the case. But in fact the real authority that Necker brought to his office as Director-General (for as a Protestant he was forbidden the office of controller) was magical. For one kind of mystique – that of the intellectual – was substituted another: that of the Protestant Bank. As an outsider he was doubly charmed. Blameless for the ills that afflicted Catholic France, he was thought to embody the contrary set of virtues crudely associated with Protestant capitalism: probity, frugality and rock-solid credit. But also by virtue of his being an outsider he had precious links with the international loan market, which was increasingly seen as an alternative to the extortion of the gens de finance.

Public opinion saw Necker as a banking wizard: someone who could pull rabbits out of hats and money out of thin air. He was invested with the sort of miraculous powers associated with the electrical Franklin, Dr. Mesmer’s magnetic tubs, or Montgolfier’s balloons. His overwhelming personal ordinariness only excited the flattery of those who wanted to contrast him even further with the sybaritic financiers or the pretentious physiocrats. He appeared, in fact, to be the perfect solid citizen, happily nested in a marriage so overflowing with conjugal joys that it might have been invented by Jean-Jacques Rousseau. His wife Suzanne presided over the most influential salon in Paris and spread a little Protestant seriousness among the monde by doing charity work with the poor and sick. When she burst into tears during one of the philosophes’ more candid discussions of atheism, Grimm only found the spectacle even more deliciously innocent. Diderot, whose “bourgeois dramas” were currently moistening the Paris theater, followed suit and professed to Mme Necker, “It is really too bad that I never got to know you sooner. You would certainly have inspired me with a taste for purity and delicacy which would have passed into my books.”

Mme Necker’s vivacity and zeal found a little echo in her daughter, Germaine – the future Mme de Staël. And the brilliance of the feminine side of the family only threw the sterling virtues of stout, solid Jacques into bolder relief. He would have had to be a saint not to have had his head turned by the flattery that followed the publication of his Elogy of Colbert in 1773. And he was not. He was even somewhat puffed up by his own sense of certainty, as one extraordinary sentence in the Elogy suggests: “If men are made in the image of God, then the minister of finance, next to the king, must be the man who most closely approximates to that image.”

In the apprehensive climate of an impending war, Necker’s indomitable self-belief was reassuring, especially since the best that the preceding Controller-General, Clugny, could come up with was a lottery. While Turgot had come from the ethos of government service and philosophical speculation, Necker came from the business world. He had come to Paris from Geneva at the age of eighteen to join the family bank of Thélusson et Cie and on the death of its senior partner had succeeded to the direction of the firm. It had been handed the poisoned chalice of the French India Company to manage but somehow survived the debacle of French imperialism in the subcontinent, and had helped the government with grain provisioning during the difficult period of the 1760s. It was this experience that led Necker to publish his own treatise on the grain trade during Turgot’s renewal of deregulation, a timing that clearly stung the Minister, and he wrote telling Necker as much. Genuinely surprised by Turgot’s angry tone, Necker reiterated that he stood squarely behind the general principles of a free grain trade. But it was his reservations – namely that in periods of dearth crisis, the government should assume responsibilities for pricing and provisioning – that struck his reading public at a time when the countryside around Paris was fired with riot.

Most important for a ministry now dominated by the foreign affairs minister, Vergennes, Necker promised to fund the American policy without incurring all the dire consequences predicted by Turgot. The question that has raged around Necker’s reputation ever since is whether he lived up to these promises. Until fairly recently the consensus has been overwhelmingly negative. Necker’s publication of his famous Compte Rendu – the first budget made available for wide publication – has been treated as a piece of disingenuous and self-serving propaganda. And it has been characterized as exactly the kind of spurious good cheer that led the French monarchy down the primrose path to perdition.

Necker’s fall from grace was the inevitable product of unrealistic expectations that circulated about his abilities. Lately, however, a much more balanced, sympathetic and in the end wholly convincing view of his management has emerged from more careful research, notably from the Necker papers in the Château de Coppet in Switzerland. From these sources emerges Necker the prudent but determined reformer, rather than Necker the fraudulent prestidigitator. Although no less than Turgot he saw the fundamental prosperity of the crown as being contingent on a freely developed economy, he was not prepared to sacrifice to long-term economic planning the immediate priority of restoring royal credit. What counted for Necker were immediate, measurable savings in rationalized administration and the maximizing of revenue.

Knowing it was out of the question to abolish all venal offices at one blow, he concentrated on those areas where waste was most conspicuous and where venal offices most obviously deprived the crown of income. So he abolished the 48 offices of Receivers-General, each with its own exchequer for receiving direct taxes, replacing them with twelve officials directly accountable to his own ministry. Likewise the 6 intendants of finance who uselessly duplicated the Ministry’s own bureaucracy; the 304 receivers of income from the “Waters and Forests”; and not least, 27 Treasurers-General and Controllers-General of the military departments were similarly dispatched. Thus was created the first phalanx of Necker’s powerful enemies.

To this hecatomb of defunct offices Necker then added a number from the royal household, where he saw special opportunities for economy. No fewer than 406 offices in the bloated regime of the bouche du roi, the King’s kitchen, disappeared. No one at Versailles went hungry as a result, or for that matter was even kept waiting for dinner, for all 406 of the offices were ceremonial appointments that allowed courtiers to dress up on special occasions and display their particular place in the by now rather self-conscious pecking order that passed for court ritual. Away went the 13 chefs and 5 assistants of the Grand Pantry; away went the 20 royal cup bearers (not to be confused with the 4 carriers of the royal wine), the 16 “hasteners” of the royal roast, platoons of tasters, battalions of candle snuffers, brigades of salt passers and (most regrettably) the 10 aides spéciaux for the fruits de Provence. In all some 506 venal offices were abolished with a saving of about 2.5 million livres a year. Necker’s critics complained that this was hardly worth all the effort, especially since the Director was committed to reimbursing all the officeholders to the tune of a capital sum of 8 million livres over five years. But this meant that after four years the reform would pay for itself and thereafter would be a net saving. Perhaps more importantly it represented the return to strict government control of a huge empire of patronage that had simply become the personal plaything of courtiers. Louis XVI seemed delighted. “I wish to put order and economy in every part of my household,” he told one of those courtiers, the Duc de Coigny, “and those who have anything to say against it I will crush like this glass.” At this point, the King threw a goblet to the floor for dramatic emphasis, prompting the satisfactory response from the Duc that “It is perhaps better to be nibbled than smashed.”

Necker was even prepared to take on the Farmers-General, comparing them unflatteringly with a kind of weed that flourished in a swamp. It seems likely that, ideally, he would have wanted to abolish the contract system altogether and have repatriated to the state the responsibility of collecting indirect taxes. But understandably (and especially in wartime) he flinched at the administrative costs that would suddenly have been entailed, not to mention the immediate disappearance of advances on revenue. But he was determined to take for the state a greater share of the profits accruing to the Farm, and after the expiration of the “Lease David” in 1780, he transferred a number of taxes, in particular duties on wine and spirits, to the more direct method of the régie. In that form, the tax was still collected by a third party, but instead of collaring all of the proceeds, whatever they amounted to, the collectors were only entitled to a percentage of the revenue over and above a prior stipulated sum. Even in the Farm that remained for the salt tax, Necker made it clear that, should revenues surpass the money advanced for the lease by a certain sum, the crown would then be entitled to a portion of that profit. This was a brilliant stroke, for it got to the heart of the matter of French finance: not that the farming system was itself depriving the crown of income, but that the Farmers, rather than the state, were collecting the benefits of a rapidly rising gross national product. For it was by then obvious that indirect, not direct, taxes were the true growth area of revenue.

The principle of fiscal profit sharing at low administrative cost was extended to other obviously lucrative areas. The messageries royales post and transport system that Turgot had farmed out under contract was converted instead into a régie, and it was in the 1780s that it began to prosper spectacularly. A régie was also applied to the management of the royal domains and forests, where timber was taken for the enormous expansion of urban building that was proceeding in Louis XVI’s reign, making that asset immensely profitable.

All of these savings were designed by Necker for one end: to balance the ordinary revenues and expenditures of the crown. And it was that balance which was reflected in his Compte Rendu. Its publication in 1781 was itself an event. The royal printers and the greatest editor publisher in Paris, Panckoucke, decided to print what by contemporary standards was a huge, virtually unprecedented run of twenty thousand copies (from several presses), and the weighty document was sold out within a few weeks. It was also rapidly translated into Dutch, German, Danish, Italian and English, the Duke of Richmond alone buying six thousand copies. It produced, said the Protestant pastor Rabaut Saint-Etienne, “the effect of sudden light in the midst of darkness.” Marmont, who was to become one of Napoleon’s marshals, even claimed that he had been taught to read from the Compte. Yet although it was a runaway best seller, its popularity never survived Necker’s fall. After 1781 there were no new editions and it became a kind of scapegoat for subsequent Controllers-General, in particular Calonne, who characterized it as an absurd fraud, a pretense that all was well when in fact all was very much ill.

The center of their accusation was that Necker had deliberately constructed a flimsy and artificial balance that bore no reality to the new burden of debt service. But Necker never made any pretense of covering up the cost of war debts. The intention of theCompte Rendu was quite different. It was meant to show that as long as, in peacetime, the fixed obligations of the crown could be met from current income, loans taken out for “extraordinary” purposes such as war might be financed on more advantageous terms than had generally been the case in the second half of the century. To his sound Swiss mind, everything depended on public confidence and credit. With that elusive quantity present, there was no reason not to seek funding for foreign and military purposes that were deemed essential by both the government and public opinion. And given the climate of ecstatic support for the American war, there could hardly be any argument with that.

The fiscal exhaustion that Calonne related to Louis XVI in 1786 as an emergency, and which in effect precipitated the French Revolution, was directly attributable not to Necker’s wartime funding of 530 million livres but to the peacetime loans of his successors, and to their wholesale abandonment of his economies. His retrenchment had created a host of enemies among deprived officeholders. And within the government were ministers, including Vergennes, who became increasingly alienated by both the manner and substance of his policies. In May 1781 Necker met the challenge aggressively by asking the King to bring him into the royal council notwithstanding his Protestantism and title of Director-General. Both Maurepas and Vergennes replied that they would resign if this was done. On May 19 Necker resigned.

Joly de Fleury, who followed him into office, immediately restored most of Necker’s abolished receivers and treasurers; and Calonne actually embarked on a deliberate and flagrant spending spree on behalf of the monarchy, buying Rambouillet and Saint-Cloud and promoting ambitious military works like the naval yards at Toulon and the great harbor project at Cherbourg. Calonne was also an administrative prodigal, abandoning the careful accounting requirements that had caused so much pain in the army and navy (especially on their procurement side) and in the royal household. As R. D. Harris rightly points out, only when the last vingtième tax imposed as a wartime measure was due to expire in 1786 did Calonne suddenly discover that the relation between ordinary income and expenditure was not a surplus as indicated in Necker’s document but a deficit of 112 million livres. This was indeed an emergency but it had been made not by Necker but by those who followed him, and none more culpably than Calonne.

Later Necker was to sigh over lost opportunities:

Ah! What might have been accomplished in other circumstances. The heart aches to think about it. I labored to keep the ship afloat during the tempest… the days of peace belonged to others.

But as with Turgot it had, in part, been his own determination to secure increasingly exclusive control over finance that cost him friends at court. In particular and perhaps not unreasonably, he had insisted on full membership in the royal council, rather than assuming the outsider role that his anachronistic post of Director-General implied. This was not just a matter of amour-propre. He had been losing ground within the government to the expansionist military policies of de Castries and Ségur and had rashly attempted a mediation to end the American war before it ended the monarchy. This lost him Vergennes’ support. His attack on office and the Farmers-General had made him many powerful enemies, but it was over a specific issue that Necker insisted he be admitted to the council.

He had always argued that broad political support was indispensable to the success of any serious reform program. And to a greater extent than Turgot and other predecessors, Necker as an outsider was prepared to go beyond the circumscribed political realm of court and Parlements to get it. He had established elected provincial assemblies in the Berri and Haute-Guienne to which tasks formerly entrusted to the intendants had been transferred. These were some way from being the top-to-bottom overhaul of institutions advocated by Turgot (who proposed a chain of elected bodies from village assemblies all the way to a national representation), and while the members of Necker’s assemblies met in the traditional three orders of the Estates, the representatives of the Third Estate – the commoners – were, for the first time, present in “double numbers” to equal the number of deputies of the clergy and the nobility. It was when he met not just resistance but total disregard from the Intendant of the Bourbonnais in his proposal to establish a third assembly at Moulins that Necker made his demand of the King. In fact, such was his position that he had to ask one of his enemies, Miromesnil, to forward the proposal to the King in council, something the Minister declined to do.

While Necker had often affronted the stalwarts of the old-regime traditions, no offense was more rank than the central principle of his Compte Rendu: public scrutiny. One of his critics claimed that the essence of royal government had been its secrecy and that “It will be a long time before Your Majesty heals this wound inflicted on the dignity of the throne.” But establishing some sort of accountability in French government was, for Necker, the heart of the matter. Handled by men of integrity and competence like his own loyal assistant Bertrand Dufresne, such publicity was not a handicap but actually the working condition of financial success. It was the essence of credit. As much as anything, the Compte Rendu was an exercise in public education. Its deliberately simple language, and its effort to make a financial account readable by the common man, testifies to its attempt to form an engaged citizenry.

So the issue was much more than a matter of fiscal management style. It arose from a deep and passionate theme in late eighteenth-century French culture, one that flowed over from personal to public morality and which was to make the two inseparable in the discourse and conduct of the Revolution. That was the opposition of transparency and opacity, of candor against dissimulation, of public-spiritedness against self-interest, of directness against disguise. The Revolution would make the manners of the ancien régime, with their emphasis on polite insincerities, a form of treason. But already, in the shape of court intrigue, they were enough to dissuade the King from standing by his most successful reformer.

For Necker, the preservation of secrecy was, in effect, the rescue of despotism. This was not only immoral, it was imprudent. The real difference between British and French credit, he thought, was the ability of the former to use representative institutions like Parliament (however imperfect) to symbolize the relationship of trust and consent between governors and governed. “The strong bond between citizens and the state, the influence of the nation on government,” he wrote, “the guarantees of civil liberty to the individual, the patriotic support which the people always give to the government in crisis all contribute to make English citizens unique in the world.”

But if it was foolish to try to provide a simulacrum of English constitutional history in France, at least there should be some concerted attempt to go in that direction. The worst result of his dismissal, he believed, was that it struck down this union between fiscal retrenchment and political liberalization before it had time to begin. Should there ever be another opportunity when Necker and reform would once again seem a solution, indeed the only solution, it would likely be in circumstances of traumatic upheaval. Others evidently feared the worst. Grimm reported that when the news of Necker’s dismissal spread

One would have thought there was a public calamity… people looked at each other in silent dismay and sadly pressed each other’s hand as they passed.

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