The Financial Crisi Of The French Revolution

"How Serious Was The Pre-Revolutionary Financial Crisis Between 1786-88,

And How Significant Was The Clash Between The Notables And Calonne In Failing

To Solve It?"

On the twentieth of august 1786 Charles Alexandre de Calonne, comptroller-general of the royal finances, informed King Louis XVI that the state was on the verge of a financial meltdown. Whilst not having exact details to the financial figures to show the full extent of the problem, it is never the less recognized that France was in serious financial difficulty. What then did Calonne propose to sort this financial mess out? How was he to convince the King and the Notables that France was in financial danger and to give backing to his solutions? This essay will attempt to answer such questions by examining the financial crisis France was in and by looking at Calonne's proposals in which to solve it. We shall also examine his failure to convince the Notables and the steps to his acrimonious dismissal.

First then lets look at the financial situation: according to Calonnes calculations the total revenue for France in 1786 would amount to 475 million livres. The problem was though, that expenditure would come to a total of approximately 587 million livres. That meant a deficit of 112 million Ð'- roughly a fifth of the entire annual revenue. This rise in deficit was due to a huge increase in state borrowing since 1777. As a result of the huge amounts of money the state was borrowing there was also the huge rise in the annual interest and repayments that the treasury had to dispurse. Indeed since 1777, Calonne claimed that ariubd 1,250 million livres had been borrowed. A lot of this borrowing was due to financing the various wars that French kings of the eighteenth century were prone to fighting. The last one, French involvement in the American Civil War between 1778-83, had a crippling effect on the economy and was substantial in rendering it down to the situation that Calonne had announced to Louis XVI. What then did the comptroller-general propose to do? To be fair to Calonne he was not lucky enough to have a myriad of options for him to work with. For instance it would be natural to think that in a time of economic crisis, an increase in tax would be an obvious step- yet not so for Calonne. France was already regarded as one of the most highly taxed states in Europe, and the average Frenchman was already feeling the burden of the Kings' borrowing. French taxpayers were already victim of the infamous vingtieme which had risen three times over the course of thirty years. Yet it ended in 1786, which proved costly for the government and was yet another factor which Calonne had to consider in his re-juggling of the states finances. Another possibility for Calonne, that again was mostly out of the question, was to reduce public expenditure and shift the economies. For a start this was effectively a long term solution to France's financial problem Ð'- yet the short term debts were due to be paid back from 1787 onwards. The military, if reduced, would save a lot of money, yet it would come at a time of unrest and tension in Europe. Plus with such a strong international position and reputation, cutting costs on the French army was a strict no. Even if Calonne were to trim the expenditure of pensions, public works and other economies it wouldn't raise even half the amount of money which he needed. There was also the possibility of declaring bankruptcy, but this idea was quickly shelved as it would mean more difficulties for the state to borrow again; and borrowing on such grand scales was the reason for France's economic turmoil in the first place. As Calonne himself put it:

"All the funds were empty, all public stocks were low, all circulation was

interrupted; alarm was general and confidence destroyed."1

As we can see Calonne clearly believed that the economic situation in France was in dire straights when he came to power in 1783. He remedied the situation by continuing to borrow huge amounts of money. The idea here was for short term plans to help stimulate confidence and the economy by investing in public work schemes and new military projects. Calonne raised approximately over 420 million livres from 1783-87. Yet he could hardly go on borrowing for short term investments when clearly what was needed were long term plans to help France recover. What was then the comptroller-general to do in sorting out this dire financial situation? Especially when so many options were closed to him. Calonne himself even stated to Louis:

"I shall easily show that it is impossible to tax further, ruinous to be always

borrowing and not enough to confine ourselves to economical reformsÐ'... the only

effective remedy to take, the only true means of managing finally to put the

finances truly in order, must consist in revivifying the entire State by recasting

all that is vicious in the constitution."2

Put simply, Calonne had come to realize that the financial problems of France were so extraordinary, that they were beyond financial problems. What Calonne proposed to do was to rework the entire state: all institutions had to be revamped in order to save France from her financial crisis. He believed that the state needed comprehensive organization Ð'- as a result he felt it necessary to reform the economy, the government and possibly society in France. Calonne states in his document to Loius:

"The disparity, the disaccord, the incoherence of the different parts of the monarchy

is the principle of the constitutional vices which enervate its strength and hamper

all its organization;Ð'... one cannot destroy one of them without attacking them all."3

Calonne's plan for financial revival consisted of two main long term parts. Firstly, came his plan to increase the revenue. Calonne proposed to restructure the administrative in order to organize better the royal finances. He argued what was needed was a reworking of the tax system. As a result, Calonne proposed to abolish the vingtiemes and replace them with what he called a land tax. This land tax was permanent (unlike the vingtiemes) and there were to be no exceptions in paying this tax as the clergy and privileged had enjoyed with the vingtiemes.