Economic Causes of The French Revolution: Debt

The year was 1789. France was one of the most prosperous, most urbanised, most populated and most powerful nations in Europe. Despite economic difficulties, particularly its national debt and inequitable taxation system, France?s, inherent strength was also evident in its economic prosperity. It was the premier economic power of continental Europe. However, social inequity and the irresponsibility and financial mismanagement of the French government ignited a Revolution which descended swiftly into indiscriminate executions. The financial strain of servicing old debt, the excesses of the current royal court, superfluous taxation and famine throughout rural France caused dissatisfaction with the monarchy, contributed to national unrest, and - coupled with Enlightenment and revolutionary ideas - culminated in the French Revolution of 1789. This period of radical political and social upheaval led to the collapse of the French monarchy ? which had ruled for centuries ? in just three years.

The financial mismanagement of the French government is evident in their persistently extravagant expenditure which culminated in unsustainably high levels of national debt. Consequently, the French government was facing a long-running fiscal crisis of such severity, that on the eve of the Revolution in 1789, the French government was effectively bankrupt. Debt

Although there were similarities between French and British national debt, the differences between them were crucial to proper financial management. France?s national debt was magnified through the funding of their unsuccessful Seven Years War (1756-1763), as well as funding the Americans in their War of Independence against Britain. Britain had also incurred an immense debt from these conflicts equal to that of France. In both France and Britain, approximately half the government?s annual expenditure was committed to servicing this debt. However, although France was the wealthier nation of the two, Britain had exceedingly advanced fiscal institutions in place to manage its debt, hence, France?s debt was serviced at an interest rate almost twice as high as that of Britain?s. The dissatisfaction of France?s defeat in the Seven Years War led Louis XV and his ministers to assemble a long term plan involving the construction of a larger Navy and formulate an anti-British coalition of allies. This plan would eventually lead to a war of revenge allowing France to reclaim its colonies from Britain. However, it merely generated more debt. Louis XV also spent extravagant sums to establish Versailles as a city worthy to be the French capital, constructing Ministries of War, Foreign Affairs and the Navy.

Radical financial reforms in the reign of his successor, Louis XVI, angered the nobles and were blocked by parliament which argued the King lacked legal right to levy new taxes. Although providing decisive aid to American forces in their War of Independence, especially at the Battle of Yorktown in 1781, France?s gains from the Treaty of Paris were limited. Furthermore, the main French fleet had been sunk by the British in 1782, causing Louis XVI to spend more money to finance the construction of a larger Navy, which resulted in the generation of yet more debt. Appointed finance minister in 1776, Jacques Necker supported the American Revolution. The War of Independence cost 1,066 million livres, and was financed by large new international loans at high interest rates instead of increasing taxes as his predecessors had. However, no new taxes were imposed to increase revenue to offset this increase in expenditure. Necker conveniently concealed the crisis from the public by failing to mention the loans. The dismal failure of Necker?s tax policy led to his dismissal. He was replaced in 1783 by Charles Alexandre de Calonne who increased public spending in order to ?buy? France out of debt. When this policy also failed, Louis XVI convened the Assembly of Notables in 1787 to discuss a revolutionary new fiscal reform proposed by Calonne. Although the Nobles were shocked when the extent of public debt was revealed to them, it was, however, insufficient to motivate them to support the proposed reforms, and they rejected Calonne?s plan. The nobles? rejection of the fiscal reform proposal signalled to Louis XVI that he had lost the ability to rule as an absolute monarch, causing him to fall into depression. Debt incurred by Louis XV was compounded by the Monarchy?s extravagant expenditure on luxuries, including the luxurious Palace of Versailles, and of course, Madame Deficit ? Marie Antoinette. Antoinette spent incredible amounts of treasury money. Unable to consummate their

marriage for years, the young Queen compensated for Louis XVI?s lack of affection by excessive spending on clothes, jewels, gambling and city trips. Although traditionally expected to spend on attire so as to outshine other women of the court, the Queen often gravely exceeded her clothing allowance due to her desire for lavish gowns dripping with jewels. Louis XVI gave Antoinette Chteaux Petit Trianon as a gift which she renovated with her trademark extravagance. There were rumours Madame Deficit plastered the walls with diamonds and gold. Sources The Origins of the French Revolution. (2006) Kreis, S., History Guide Retrieved December 6, 2010. Europe in Retrospect: The French Revolution (2000) Betts, R., Britannia. Retrieved 05:50, December 3, 2010. French Revolution (1789 - 99) Britannia Online Encyclopedia. Retrieved December 3, 2010. http://suite101.com/economic-causes-of-the-french-revolution-debt-a320737