Modern history

D) THE PRICE OF PATRIOTISM

In November 1781, news of the brilliant Franco-American victory at Yorktown was brought to the bedside of the dying Maurepas, who was too mortally ill to take it in, or to understand the wild rejoicings outside his windows. In fact, by then it was becoming apparent that military involvement had not been without its costs. A financial crisis was looming; court factions were active; and, with Maurepas dying, the ministry was far weaker than it looked. Any remedy to the government’s problems would be all the more difficult to swallow, moreover, in that France’s involvement in the American War of Independence had been thus far, financially speaking, virtually painless for the population at large. From 1781 onwards, pain was on the horizon. Yorktown was a signal that the kissing had to stop, not start.

France’s financial passage through most of the American War had been steered by one man: Jacques Necker. Turgot had seemed a relative outsider to the political establishment, yet Necker was infinitely more so. The only political role the forty-four year old had played was as Genevan ambassador in Paris, an honorific post served up to him in gratitude by his fellow Genevan burghers for all the profits he had brought them by wheeling and dealing on their (as well as his own) behalf, notably as Director of France’s Compagnie des Indes. The Genevan had political ambitions, and these lay in France: he used his wife’s Parisian salon as a propaganda weapon; developed business and leisure links to the political as well as the literary elite; and wrote polemical anti-Turgot economic tracts. In the early 1770s, he had helped out Terray with some important loans, and the fact that he knew how government finance worked was not lost on either Vergennes or Maurepas, who realized that France’s involvement in America required some fancy financial footwork. Necker’s foreign and Protestant status forbade him the title and status perquisites of a Controller-General, and initially he was appointed Director of the Royal Treasury under Controller-General Taboureau des Réaux; in 1777, the latter disappeared and Necker was promoted Director-General of Finance – de facto Finance Minister. Despite his promotion, Necker’s was not to reason why; his function was to produce the bullets which others would fire. This instrumental view of him as a technician rather than a fellow statesman was symbolized in his exclusion not merely from the State Council, which his Protestant faith made problematic, but from the ceremonial grandes entrées (which gave those present the right to sit in the king’s office to discuss state affairs).

Down to his overthrow in 1781, the Genevan seemed quite as much of a financial wizard as his Scottish predecessor John Law had done to an earlier generation. He accepted the terms which Louis XVI had agreed with Turgot in the much less stressful atmosphere of peace – namely, no state bankruptcy and no new taxes – and managed to stick to them during a war which was to prove as expensive for France as the Seven Years War. The extension in 1780 of a second vingtième for five years brought in only roughly twenty million livres, and virtually all the rest was achieved through borrowing. Necker utilized tried and tested methods – state lotteries, borrowing from provincial estates, and so on – but relied especially heavily on lifetime annuities or rentes viagères.A good deal of this borrowing was handled by the Discount Bank (Caisse d’escompte) which Necker’s Genevan financial rival, Isaac Panchaud, had founded in 1776 to provide cheap credit for economic expansion. Necker ejected Panchaud and put on the board bankers and financiers who allowed him to tap international money-markets, notably through the Protestant financial diaspora which had formed in Geneva, Amsterdam, London, Cadiz and elsewhere following the Revocation of the Edict of Nantes.

‘If he can finish the war without departing from this system’, Vergennes commented privately in 1777, before his disenchantment with the Genevan had set in, ‘he will be a very great man in his field’.47 There were important political gains as well as financial benefits to be derived from not relying on the reflex of imposing new taxes. In particular, the strategy helped to tranquillize the parlements, which were still somewhat chastened by the experience of the Maupeou years. From 1774, Maurepas and Miromesnil proved adept at the kind of parlementary management which had gone out of style under Maupeou, developing a friendly parti ministériel through cultivating senior parlementaires, staying well informed, distributing pensions to buy off potential troublemakers, and so on. ‘The magistracy has not made a fuss since I have been in office,’ Miromesnil boasted in 1782.48 Calm on the parlementary front was also helped by the absence of issues out of which the magistrates could make political capital. Even the extension of the secondvingtième in 1780 passed without a hitch. Necker’s financial stewardship also accrued to the credit of the king, and further burnished his patriotic credentials. By turning his back on ‘arbitrary finance’ under Necker’s instruction, Louis truly appeared, according to Edmund Burke, in a masterly back-handed compliment in 1780, ‘a Patriot King’.49

The capstone of Necker’s system which allowed this novel phenomenon in French history – a war without new taxes – was public confidence. Public confidence could be boosted, first, by renouncing the tax option. It was accepted that the state would rather increase tax revenue than declare a bankruptcy which risked durably alienating cheap credit: tax-payers were always likely to be sacrificed on the rentiers’ altar. If, then, Necker could refrain from introducing new taxes, he would keep both state rentiers and tax-payers happy. Confidence was boosted, second, by a public relations campaign to highlight Necker’s financial wizardry and (coincidentally) his humanitarianism. As his writings on the grain trade showed, the Genevan was far less confident than Turgot that the hidden hand of the market would bring general prosperity and happiness. Analysts were just realizing that France was experiencing not depopulation but strong demographic growth, and Necker felt that population increase risked producing larger numbers of paupers, and that the state should take a proactive role to avoid popular misery and revolt. He brazenly deployed his own wife as virtual minister of health and public welfare, reforming hospitals, visiting the sick, encouraging the streamlining of charitable institutions and so on. Her efforts were flanked by other humane measures designed to keep Necker’s image in the public eye: the ending of serfdom on royal domains in 1779, for example, and the abolition of judicial torture in 1780.

Necker’s utilization of publicity aimed to benefit the crown as well as himself of course. This was particularly evident in his quest to draw provincial opinion into a closer and more sympathetic relationship with the crown through a dose of political representation in the form of provincial ‘administrations’ (a term he employed so as to avoid comparison with Turgot’s much-excoriated plans for elective assemblies). Necker was confident that these could develop into important agencies for both testing and shaping public opinion. In a confidential memorandum to Louis in 1778 he stressed their advantages for the crown over the self-ascribed representative functions of Intendants and provincial parlements. The latter in particular, Necker argued, should be cut back to purely judicial functions. The king was, however, lukewarm, and Necker’s original plans had to be watered down. Only two such assemblies were introduced, by way of trial, in the provinces of Berry and Haute-Guyenne. They had powers overtax-assessment and oversaw roadworks under the surveillance of the local Intendants. The assemblies retained the hallowed division into three estates – one-quarter of the members were ecclesiastics, one-quarter nobles and a half from the Third Estate – and were constituted through a mixture of royal nomination and cooptation rather than election (which led Turgot sourly to remark of them that they resembled his own projected elective assemblies ‘as a windmill resembles the moon’).50

Finally, Necker aimed to boost public confidence in his financial management by providing more transparency in this area than any previous ruler or minister had dreamt of. He estimated that the mystery which surrounded the state’s financial affairs could act as a deterrent to lenders, and that there were benefits to be gained in opening the books to show that the king’s finances were healthy and that bankruptcy or new taxes were not just around the corner. In February 1781, therefore, he published a Compte Rendu au Roi(‘Account for the King’) which – belying its name – was not a confidential memorandum to his ruler but purported to be a public disclosure of the state of royal finances. The work was, courtier de Croÿ ruefully admitted, ‘a great political stroke’ (though the wickedly sardonic Maurepas hailed it as being ‘as true as it is modest’).51 An overnight best-seller – 100,000 copies were sold – it certainly did the trick of reinforcing the minister’s credit and personal popularity.

Though Necker’s book-keeping techniques would be subject to pitiless criticisms by his successors (and subsequently by historians), the Compte Rendu purported to show an average year of ordinary expenditure which left some 10 million livres surplus in the state’s kitty after around 400 million expenditure. It did not, however, crucially, indicate the full extent of the extraordinary expenditure to which the American War had committed the state. Insofar as we can reconstruct Necker’s thinking on this point, it seems that he made a fundamental distinction between ordinary and extraordinary state expenditure, and worked on the assumption that the state could borrow as much as it liked in wartime provided, first, that it could manage to pay the interest on loans from its ordinary accounts without them going into deficit; second, that wars were neither too protracted nor too frequent; and third, that a vigorous campaign of retrenchment kept normal expenditure under constant review.

A policy of economy was indeed an important dimension of Necker’s programme. He continued Turgot’s work of cutting sinecures within the Royal Household, but went far further down the line of administrative rationalization, launching a full-scale attack on venality in financial adminstration. The aim was not only to reduce the state’s outgoings in the form of fees and perquisites but also – as Terray had indicated – to make efficiency gains by turning posts staffed by amateur officials, who regarded their places as a form of private property which should make a return for their investment, into positions staffed by a smaller and more loyal contingent of salaried officials. An early step was the buying out of some 481 venal receivers and controllers in the royal domains and forests department and their replacement with a minuscule staff of state officials. Similarly, a score of financial officials in the Royal Household was replaced by a single treasurer-paymaster-general. When the six powerful mandarin-like intendants de financewho ran government departments made objections to the swathes that Necker was cutting through the bureaucracy, he abolished them forthwith, following this up with the abolition of the four intendants de commerce. In 1780, he abolished forty-eight receivers-general of taxes between whose hands between one-third and one-half of the state’s taxes passed. Where venal officers survived, moreover, they were subjected to closer scrutiny. Day-to-day monitoring of accounts was enforced so that venal officers holding state revenues did not profit from their position by lending that money to the state – a widely practised form of financial graft. The great court officers were forbidden from selling subordinate offices within their departments – a move which was rigorously applied even to figures of the stature of the prince de Condé, Grand Master of the King’s Household. Nor was the General Farm immune from Necker’s improving scourge: in 1780, the Genevan reduced their workload, putting the collection of royal domain revenue and aides in the hands of salaried officials.

Necker was too much of a pragmatist not to avail himself occasionally of the advantages of venal office for putting cash in the government’s hands – his decision in 1780 to make the posts of auctioneers venal raised some 7.5 million livres for the state treasury. More characteristically Neckerite, however, was his drive to increase revenue from the taille by insisting on more careful monitoring of individual tax returns – an issue on which the Paris Parlement became hot under the collar. This kind of revenue-raising move, like that of establishing a leaner and more efficient tax machine, was designed to ensure that the state’s ordinary accounts were healthy enough to bear the additional burden of interest payments on loans.

Necker’s strategy of administrative rationalization implied a novel degree of central control over the state’s finances. The word budget had only entered the French language as late as 1764, and the practice it denoted had not yet become an accepted government procedure. Fearing the fall-out from another John Law imbroglio – when the state had suffered political catastrophe through over-dependence on a single financial provider – Fleury and his successors had deliberately built decentralization into the state’s accounts. Finance ministers consequently did not have a single revenue fund or the bureaucracy necessary to ascertain exactly even how much money was coming in and going out. The ‘royal treasury’ was composed of two quite separate treasurers. Many royal funds – notably those relating to the big spending departments (War, Navy, Household) as well as expenditure on Ponts et Chaussées, the provinces, the factory inspectorate and so on – did not pass through the hands of the two treasurers at all but were dealt with in separate accounts. Annual auditing was a farce, and since the Chambre de Justice had fallen into disuse after 1716, judicial checks on financial maladministration were non-existent.

Necker’s move in the direction of a modern, more centralized financial bureaucracy was not something which his ministerial colleagues welcomed. Sartine at the Navy Ministry, for example, faced with the task of bringing the French navy up to virtual parity with the Royal Navy following the decay of ship-building under Terray’s stringent financial stewardship, was the ultimate big spender. The annual outlay on the navy had more than quadrupled between 1726 and 1775 – passing from eight million to 33.2 million livres – and between a quarter and a third of the money the state borrowed in the course of the American War went on naval expenditure. Necker was hyper-sensitive, then, when in 1779 and 1780 Sartine started to spend funds for which he had no authorization. The two ministers were so much at loggerheads that (Maurepas being temporarily indisposed) the king had to step in and adjudicate between them. Louis frankly concluded that Necker’s financial skills made him ‘more useful to us’,52 and Sartine was summarily dismissed.

By 1780, however, Necker’s financial strategy, designed for short rather than long wars, was feeling the strain. He had been permitted to put out peace feelers to England, but Foreign Minister Vergennes had persuaded Maurepas and the king that France needed to stay in the field to obtain the fruits of military intervention. Yet the extension of the war and the rising cost of borrowing was threatening Necker’s strategy of keeping the state’s ordinary accounts in credit. Evidence was accruing that the annuity loans (rentes viagères) which accounted for around half of government borrowing had become needlessly expensive. Rates of interest – on average 8 per cent, rising to around 10 in the early 1780s – were simply not sufficiently sensitive to improving patterns of life expectancy. In addition, the practice of allowing lenders to name a person on whose life the annuity was based had permitted financial speculators – ironically, Genevan bankers most of all – to nominate as their ‘life’ particularly healthy, virginal young girls who had survived a bout of smallpox. By the 1780s, literally millions of livres in rentes viagères were riding on the lives of thirty ‘immortal Genevan maids’.

Necker’s increasing sensitivity to the need to limit spending was, however, impaired by the lack of fiscal discipline shown by his ministerial colleagues. He won the battle with Sartine, who was replaced as Navy Minister by Necker’s nominee, the marquis de Castries. The Director-General of Finances also gained in authority within the ministry as a whole when pressure from the queen’s party, which was re-entering the political game at this time, had Montbarey replaced at War by the marquis de Ségur in 1780. Yet these two appointments disrupted the harmony of the ministry which Maurepas had so carefully constructed. Maurepas resented Necker’s growing influence, as did Foreign Minister Vergennes, who had ambitions to succeed the royal Mentor (now nearly eighty). In addition, tension with fellow ministers over Necker’s policies gave comfort to factions within the royal court, as well as to venal office-holders and financial interests, who resented his parsimony, his brutal insistence on accountability and his taste for administrative rationalization.

In this context, it is possible to see Necker’s publication of his Compte Rendu in February 1781 as a slightly desperate move in terms of both his financial and political fortunes. The clarity of the royal accounts would silence the doubters and lay the groundwork for further hefty loans which the continuance of the war necessitated. And so it proved. In addition, the work was intended to buttress Necker’s weakening political position by summoning up behind him public opinion and the reform constituency which he was amassing in the country at large. Yet although the Compte Rendu boosted his position among the public, it weakened his chances of political survival. The idea that the state’s accounts should be anything other then the ‘king’s secret’, veiled from public gaze, appalled government servants of Maurepas’s vintage and of Vergennes’s natural conservatism. Necker had drawn scandalized attention, moreover, to the amount of money spent on pensions for royal favourites and courtiers, making himself some durable enemies.

In April 1781, the king’s brother, the comte de Provence, signalled his advent into the world of faction by a striking act of malice, the leaking of the memo which Necker had written to the king in 1778 supporting the idea of provincial assemblies. The document included passages in which Necker had favourably compared such bodies with the parlements and the Intendants. Uproar broke out in Paris, among the parlements and at the heart of the royal administration. A pamphlet war was joined, in which sundry doubts were cast on the reliability of the glowing figures in the Compte Rendu. At this juncture, the king asked Vergennes to provide him with reasoned arguments about the desirability of the Compte Rendu. Vergennes poured withering scorn on the document as a Genevan – worse, British – manoeuvre and, twisting the knife, condemned the ‘innovatory spirit’ of Necker’s whole ministry.53 Necker tried a last throw of the dice to bolster his position. On 16 May 1781 he petitioned the king for entry into the State Council, and control over spending on the armed forces and the navy. It was asking too much. Had Louis granted the request, he would have effectively placed his Finance Minister over and above fellow ministers, and lost the king the unqualified support of Vergennes and Maurepas. Louis said no. Stunned at the refusal, Necker resigned on the spot.

Historians remain divided as to how serious the problems of the royal finances were at the time of Necker’s fall. What seems unequivocal, however, is that in the immediate aftermath of Necker’s dismissal they grew far worse. In the two years down to the conclusion of the war in 1783, virtually as much was borrowed as Necker had managed in the five years down to 1781. The rates of interest on the new loans tended to be higher, thus increasing the load to be borne on the ordinary accounts. By 1783, the American War had added 1,000 million livres to the state’s debts, which represented additional annual expenditure on interest payments of some 100–130 million. This was becoming almost impossible to sustain, given that Necker’s immediate successors renounced the policies of retrenchment and administrative rationalization on which the Genevan had relied in order to pay for additional interest charges.

Necker’s successor, the distinguished crown servant, Joly de Fleury, had far less freedom of manoeuvre than his predecessor, and was accordingly appalled to discover a much less rosy picture than Necker’s Compte Rendu had painted: Necker’s 10 million livres ‘surplus’ on the ordinary accounts seemed in fact to be a deficit of 15 million; and extraordinary borrowing had been so extensive, Joly de Fleury reckoned, that even if it were amortized over the following decade, the state would still be running an annual deficit of over 50 million livres. His own family links in the Parlement and every corner of the Robe proved invaluable in preparing the ground for new taxes. The French naval setback at the Battle of the Saints in 1782 served as a pretext for presenting to the Parlement an edict, couched in terms of pressing military urgency, proposing the levying of a third vingtième for three years. The Parlement scarcely jibbed. Joly de Fleury was also by then reassuring financial and administrative milieux that the days of floating loans in the cosmopolitan world of European banking were over. He sought instead to draw on the indigenous credit of venal office-holders, and to this end he embarked on a policy of wholesale restoration of the venal posts which Necker had suppressed (and indeed even some posts which had disappeared under Terray and Turgot). The forty-eight receivers-general for the taille were a spectacular early resurrection, and many others followed. The closer scrutiny of high Household officials was removed, and the monitoring of accounts was also relaxed. The restored officials proved sufficiently grateful to be back in business to be generous in their provision of loans, but even this was not enough for a beleaguered royal treasury.

Within a year of Necker’s dismissal, Joly de Fleury had moved far away from his predecessor’s policies of financial retrenchment, centralizing rationalization of financial administration and the rejection of new taxes. One of Necker’s main headaches – indeed the occasion for his resignation – was the Finance Minister’s lack of control over the spending patterns of other ministries, and this problem did not disappear. Post-Maurepas, factionalism doggedly militated against a unified ministerial policy on finance – as indeed on anything else. Navy Minister Castries in particular felt that he had no duty to declare his accounts to anyone but the king. This was all the more serious in that naval expenditure was colossal, even following the peace with the English. Castries regarded the peace as utterly unsatisfactory and sought to maintain the navy on a war footing, ready for a re-engagement with the British which he felt was just around the corner. The case highlighted the swift erosion of the ministerial unity which Maurepas had coordinated since the fall of Turgot. Maurepas’s influence had been in decline some time before his death. His failure to prevent the appointment of Ségur and Castries in 1780 had placed at the heart of the government two court aristocrats with a powerful contempt for mere ‘Robins’ and with strong links to the factions swirling around Queen Marie-Antoinette. The demise of Maurepas’s system allowed the queen’s party to burst out of the sphere of court patronage where Maurepas had managed to contain it since 1776 and to re-emerge into the political arena.

Although there was a good deal of continuing stability at the level of government personnel down to the late 1780s, this hid a growing fragmentation within the ministry. Foreign Minister Vergennes, who was the closest that Maurepas had to a successor, proved quite unable to pour oil on troubled waters in the Maurepas manner, and indeed seemed more disposed to act the role of faction-leader than to serve as supra-ministerial coordinator. The king respected Vergennes (for most of his ministers he by now displayed something like contempt), but he was keen not to be seen as having a principal minister, and so Vergennes was given little by way of ministerial priority. He did not sit in on individual ministers’ business sessions with the king, which meant that he lacked coordinating oversight over the ministry such as Maurepas had, and he never enjoyed influence over ministerial appointments. Much of the influence he did amass, moreover, he expended on feathering his and his family’s nest. Hated by courtiers as a parvenu, Vergennes had come from a lowly social background, and sought to use his position to place members of his family in prominent positions throughout the political establishment.

Characteristically, Vergennes’s efforts to bring the chaotic and unruly accounting procedures of the big spending ministries under control exacerbated rather than mollified the divisions within the ministry. In February 1783, a ‘finance committee’ was established, composed of himself – now with the title of chef du conseil royal des finances – plus Keeper of the Seals Miromesnil, Finance Minister Joly de Fleury and the king himself. All ministries would bring regular accounts to the new council for approval. Ségur and Castries, seeing themselves as engaged in a battle to the death with their Robe colleagues, were endlessly obstructive. A couple of months later, when Joly de Fleury failed to get the king’s support in an inter-departmental battle with Castries about unauthorized navy spending, he resigned in frustration.

Joly de Fleury’s successor, the young but experienced financial official Lefèvre d’Ormesson, enjoyed a reputation for honesty which the king – always keen on political virtue – commended: ‘you have morals’, he intoned, ‘and are not an intriguer.’54 But integrity proved insufficient either to deal with the financial morass or retain the favour of the fickle monarch. In addition, Vergennes seemed to make his colleague’s job more rather than less difficult: d’Ormesson was appalled to discover that the Foreign Minister was drawing on his ministry’s accounts, without giving any notification to the Controller-General’s office, in order to purchase the palace of Rambouillet from the duc de Penthièvre on the king’s behalf. The two ministers made their peace on this issue, and Vergennes backed d’Ormesson’s plans to undertake reform of the collection of indirect taxation, which involved moving from a system of tax farming to a more direct form of administration (the régie). This led to a head-on confrontation with the General Farm, which orchestrated a run on the Caisse d’escompte, on which the government depended for short-term credit. Vergennes cravenly backed down, offering up the well-intentioned d’Ormesson as sacrificial lamb to the world of high finance back into whose clutches the state had fallen since the overthrow of Necker.

The task of d’Ormesson’s successor as Controller-General, Charles-Alexandre de Calonne, had been made immeasurably more difficult as a result of the costs of the American War (for which Necker was partly responsible) and because of the political dispute which now hovered around the royal finances as a result of the Compte Rendu (for which the Genevan bore full responsibility). Necker’s had been a brave attempt to construct a model of the royal finances out of the figures he derived from what was still, despite his best efforts, a very dispersed and chaotic accounting system. As his political rivals were swift to point out, however, Necker was not a disinterested analyst, but a player with much to lose from accounts which looked anything but glowing. After his fall, there was no way that claims and counter-claims about the state of the royal finances could be adjudicated in an impartial manner. It remained uncertain, therefore, whether the Compte Rendu represented a window of transparency or a crude, self-serving political fable. Ambiguity over the issue was magnified by the fact that, following his dismissal, Necker chose to stay in politics, while the king, following Vergennes’s advice to distance himself from any Neckerite ‘innovatory spirit’, clammed up totally, acting as though financial affairs were his business alone. Necker’s successors as Finance Minister would thus always have their task enormously complicated by the Genevan wizard and the whole of the literate public looking critically over their shoulders. However much the king disliked the fact, the state’s management of its finances had become a talking-point on the public sphere.

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