ABSTRACT

THE catalyst that fused the social tensions of France in a tremendous explosion was the bankruptcy of the monarchy. Royal finances, inadequate since the reign of Louis XIV, finally succumbed under the burden of the war of American Independence. The Swiss banker, Necker, who had been at the head of the economy from October 1776 to May 1781, won easy laurels by raising loans to defray war expenditure without increasing taxation to provide for their servicing and redemption. His misleading compte-rendu of 1781, claiming that there was a 'normal' annual surplus, exclusive of war expenditure, of the order of ten million livres, embarrassed his successors by implying that no increase of taxation was necessary. The end of the war, in fact, left the monarchy with a burden of debt in the region of 3,400 million livres and an annual deficit of about 80 million. As the debt increased so did the proportion of the public revenue devoted to servicing it, on which no economy was possible without a breach of faith with the State's creditors. The scope for retrenchment in the remaining sectors of the economy was inadequate to balance the budget. The level of taxation could not be materially increased in a period of

declining real wages. Louis XVI, unlike some of his royal predecessors, regarded a partial repudiation of the Debt as dishonourable. In these circumstances the only course left open to him was to increase the taxation of the privileged orders. This provided the latter with an excellent opportunity to win a final victory over what was left of royal absolutism by using the power of the purse to force the king to accept some form of aristocratic constitution.1