FINANCE.
Certain financial practices, not immediately connected with taxation,
call for a short notice; for they are among the most famous errors of
the government of old France. One of these was the habit of issuing what
were called anticipations.[Footnote: Anticipations. "On entendait par
là des assignations sur les revenus futurs, remises aux fournisseurs et
autres creanciers du Trésor et negociables entre leurs mains."
Clamageran, iii. 30. Necker, _Compte rendu_, 20. Stourm (ii. 200)
thinks the amount not excessive, while acknowledging that it was so
considered. The Anticipations formed in fact the floating debt of the
government. Gomel, 287.] These were securities with a limited time to
run, payable from a definite portion of the future revenue. They were a
favorite form of investment with certain people, and a great convenience
to the treasury, but they constantly tended to increase to an amount
which was considered dangerous. Thus the revenue of each year was spent
before it was collected; and loans were contracted, not for any urgent
and exceptional necessity of the state, but for ordinary running
expenses. Another practice was the issuing by the king in person of
drafts on the treasury. Such drafts (_acquits de comptant_) were
made payable to bearer, and it was therefore impossible for the
controller of the finances to know for what purpose they had been drawn.
Originally a device for the payment of the private expenses of the king,
these drafts had become favorite objects of the cupidity of the
courtiers; because from their form it was impossible to trace them and
discover the recipient. Under Louis XVI. they absorbed more money than
ever before. It was very easy for that weak prince to give a check to
any one who might ask him. Turgot made him promise to stop doing so, but
he had not the strength to keep his word.[Footnote: Clamageran, in.
380, n. Bailly, i. 221, ii. 214, 259. The foreign office made use of
ordonnances de comptant to the amount of several millions annually, for
subsidies to foreign governments, expenses of ambassadors, secret
service, etc. Stourm, ii. 153.]
From an early time the custom of selling public offices had taken root
in France. Before the middle of the fourteenth century we find Louis X.
selling judicial places to the highest bidder, and less than a hundred
years later the practice had extended so that all manner of petty
offices were sold by the government. This method of raising money was so
easy that, in spite of the remonstrances of estates general and the
promises of kings, it was continually extended. In the sixteenth
century, as a greater inducement to purchasers, the offices were made
transferable on certain conditions, and in 1605 they became subjects of
inheritance. Places under government were thus assimilated to other
property and passed from the holder to his heirs. The law which
established this state of things was called _Édit de la Paulette_,
after one Paulet, a farmer of the revenue.
This sale of offices bore a certain resemblance to a loan and to a tax.
The services to be performed were often unimportant, sometimes worse
than useless. But the salary attached to the office might be considered
the interest of money lent to the crown; or if the office-holder were
paid by fees, he was enabled to make good to himself the advance made to
the government by drawing money from the tax-payers. Very generally the
two forms of profit to the incumbent were combined, together with a
third, the possession, namely, of privileges, or exemption from
taxation, attached to the office.
In managing its revenue from this source, the treasury dealt fairly
neither with the office holders nor with the public. Places were created
only to be sold, and before long were abolished, either without any
promise of compensation to the buyers, or with promises destined never
to be fulfilled. This want of faith kept down the price, which was often
but ten years' purchase of the income of the place. Yet rich and poor
were eager to buy. "Sir," said a minister of finance to King Louis XIV.,
"as often as it pleases your Majesty to make an office, it pleases God
to make a fool to fill it."
Thus it came to pass that most places about the royal person, in the
courts of justice and in the treasury, and many in the municipal
governments, the professions, and the trades, were subject to sale and
purchase. Numberless persons waited at the royal table, sat in the high
courts of Parliament, weighed, measured, gauged, sold horses, oysters,
fish, or sucking pigs, shaved customers or gave hot baths, as public
functionaries and by virtue of letters patent sold to them by the crown.
The clerk kept his register, not because the information it contained
would be useful to the government, but because he or some one else had
lent money, on which the public was now paying interest in the form of
registration fees. Thus the custom of selling offices was cumbrous and
objectionable.[Footnote: Montesquieu defends the custom, however. He
maintains that the offices in a monarchy should be venal; because people
do as a family business what they would not undertake from virtue; every
one is trained to his duty, and orders in the state are more permanent.
If offices were not sold by the government they would be by the
courtiers. Montesquieu, iii. 217 (_Esprit des Lois_, liv. v.
cxix.). See also De Tocqueville, iv. 171 (_Anc. Reg_. ch. xi.). In
many cases offices were desired more for the sake of distinction and
privilege than for profit. The income was often very small. Clamageran,
ii. 196, 378, 569, 615, 665; iii. 23, 24, 102, 155, 200, 319. Necker,
_De l'Administration_, iii. 147. Thierry, i. 163. Pierre de
Lestoile, 390, _n_.]
While the taxes of France were thus devised without system and levied
without skill, the attention of a thoughtful part of the nation had been
turned to financial matters. About the middle of the century arose the
Physiocrats, the founders of modern political economy. Their leader,
Quesnay, believed that positive legislation should consist in the
declaration of the natural laws constituting the order evidently most
advantageous for men in society. When once these were understood, all
would be well, for the absurdity of all unreasonable legislation would
become manifest. He taught two cardinal principles; first, "that the
land was the only source of riches, and that these were multiplied by
agriculture;" and, second, that agriculture and commerce should be
entirely free. The former of these doctrines, after exercising a good
deal of influence by calling attention to the injustice and oppression
with which the agricultural class in France was treated, has ceased to
be believed as a statement of absolute truth. The latter, adopted with
great enthusiasm by many generous minds, has exercised a deep influence
on modern thought.
Manufactures, according to Quesnay, do no more than pay the wages and
expenses of the workmen engaged in them. But agriculture not only pays
wages and expenses, but produces a surplus, which is the revenue of the
land. He divides the nation into three classes: (1) the productive,
which cultivates the soil; (2) the proprietary, which includes the
sovereign, the land-owners, and those who live by tithes, in other words
the nobility and the clergy; and (3) the sterile, which embraces all men
who labor otherwise than in agriculture, and whose expenses are paid by
the productive and proprietary classes. Therefore he argues that taxes
should be based directly on the net product of real estate, and not on
wages nor on chattels. In other words, all taxes should be levied
directly on the income derived from land, and indirect taxation in every
shape should be abolished.
Liberty of agriculture, liberty of commerce! "Let every man be free to
cultivate in his field such crops as his interest, his means, the
nature of the ground may suggest as rendering the greatest possible
return." "Let complete liberty of commerce be maintained; for the
regulation of commerce, both internal and external, which is most
safe, most accurate, most profitable to the nation, consists in full
liberty of competition." These doctrines of Quesnay, joined with the
ideas of property and security, form the basis of the modern school of
individualism. [Footnote: Lavergne, _Les Économistes,_ 105. Quesnay,
_Oeuvres,_ 233, 306, 331 _(Maximes du gouvernement économique d'un
royaume agricole Maxime,_ iii. v. xiii. xxv.). Turgot, iv. 305.
Bois-Guillebert appears to have been the principal precursor of the
Physiocrats. Horn, _L'Économie politique avant les Physiocrates,
passim;[Greek physis] = nature,[Greek kratos] = power.]
The body of doctrines long known as "political economy," (for the words
seem now to be used in a larger sense), bore the mark of their origin in
the eighteenth century. Here, as elsewhere, it was the belief of
Frenchmen of that age that the application of a few simple rules derived
from natural laws would solve the difficulties of a complicated subject.
The principles of political economy were conceived as forming "a true
science, which does not yield to geometry itself in the conviction which
it carries to the soul, and which certainly surpasses all others in its
object, since that is the greatest well-being, the greatest prosperity
of the human race upon the earth."[Footnote: 2. Abbé Beaudeau, quoted
in Lavergne, _Les Économistes,_ 179.] Quesnay and Gournay founded
branches of the economic school. The latter, who printed nothing, is
chiefly known through the encomiums of Turgot. Gournay was a merchant,
and recognized that commerce and manufactures are hardly less
advantageous to a state than agriculture. This is the chief difference
of his teaching from that of Quesnay. Gournay is the author of the
famous maxim: _Laissez faire; laissez passer;_ and his whole
system depended on the idea "that in general every man knows his own
interest better than another man to whom that interest is entirely
indifferent;" and that "hence, when the interest of individuals is
exactly the same as the general interest, the best thing to do is to
leave every man to do as he likes."[Footnote: Turgot, iii. 336
(_Éloge de M. de Gournay_).]
The best known member of the economic school in France was Anne Robert
Jacques Turgot, born in Paris on the 10th of May, 1727, of a family
belonging to the higher middle class. His father was _prevost des
marchands_, or chief magistrate of the city. Young Turgot was at
first educated for the ecclesiastical life, and indeed pursued his
studies in that direction until a bishopric seemed close at hand. But he
felt no vocation to enter the priesthood. Turgot was too much the child
of his century to be content to put his great powers into the harness of
the Roman Church; he was, as he told his friends who remonstrated with
him on abandoning his brilliant prospects, too honest a man to wear a
mask all his life.
At the age of twenty-four, Turgot turned finally from the study of
divinity to that of law and administration. He was rapidly promoted to
the place of a _maître des requêtes_, a member of the lowest board
of the royal council, and nine years later he became intendant of the
district of Limoges. It was the poorest in France, but Turgot soon
became so much interested in its welfare that he refused to exchange it
for a richer one. In spite of years of dearth and of the extraordinary
measures of relief which they made necessary, he went energetically to
work at all manner of permanent reforms. He effected improvements in the
apportionment and levy of the taille. He abolished the onerous
_corvée_. He diminished the terror of compulsory service in the
militia, by permitting the engagement of substitutes. He encouraged
agriculture by distributing seeds and offering prizes for the
destruction of wolves, which were still numerous in his district, and he
waged a successful war on a moth that was ravaging the wheat crop. He
assisted in the introduction of the manufacture of pottery, still one of
the leading industries of Limoges. His reports are among the most
valuable material in existence for the study of the condition of old
France.
Soon after the accession of Louis XVI., Turgot was called to the
ministry, first, for a very short time, as secretary of the navy, and
then as Controller of the Finances. Two courses were open to the new
minister. Malesherbes, his close adherent, standing in high official
position, urged him to summon the Estates General, or at least the
Provincial Estates, and rule constitutionally. Such action would have
been a great, a serious innovation, but it was not on this ground that
Turgot opposed it. Like most of the economists of his day, he believed
at once in freedom and in despotism. "The republican constitution of
England," he had said, "sets obstacles in the way of the reform of
certain abuses." Turgot had a plan for the benefit of mankind. None but
a despot could carry it out for him. France and the world were to be set
right; and it would take absolute power to compel them into the best
course.
The new Controller of the Finances could not afford to wait. "You
accuse me of too great haste," he said to a friend, "and you forget
that in my family we die of the gout at fifty." But this haste,
combined with his awkward and haughty manners, proved the cause of his
ruin. The courtiers, whose perquisites were in danger, were disgusted
at his simplicity and economy. Although he was the friend of absolute
government, he was accused of republican austerity. And his measures
were not more popular than his manners. The harvest of 1774 had been
bad, and famine was in the land. Turgot met the situation by declaring
commerce in grain free throughout the kingdom. The harvest was again
bad in 1775, and riots broke out, for the common people had it firmly
in their minds that the price of bread was fixed by the
government. Turgot put down disturbances with a high hand, and
persevered in his measures. He abolished the _corvée_ on roads and
public works throughout France. In truth it would have been better to
modify and regulate it, for in poor countries many men had rather work
on the roads than pay for them, but such considerations as this were
foreign to his mind. He, moreover, abolished the trade-guilds
(_jurandes_), which possessed the monopoly of most kinds of
manufactures and trades, saying that God, in giving man needs and
making labor his necessary resource, had made the right to work the
property of every man, and that this property is the most sacred and
inalienable of all.[Footnote: Turgot, viii. 330. Yet the monopolies
in certain trades, as those of apothecaries, jewelers, printers, and
booksellers, were retained, probably because their strict regulation
and supervision was considered necessary. The guilds were
reestablished, with modifications, on the fall of Turgot.
_Encyclopédie méthodique, Commerce_, ii. 760, 790.] But Turgot's ideal
of freedom was entirely industrial and commercial, and not at all
political or social. He forbade all associations or assemblies of
masters or workmen, holding that the faculty granted to artisans of
the same trade to meet and join in one body is a source of evil. Under
Turgot's system, the individual workman would not have escaped the
tyranny of the masters' guild only to fall under that of the
trades-union; but one of the most essential privileges of a freeman
would have been denied him. Individual liberty to work, and political
liberty to combine, have not yet been made perfectly to coincide.
The innovations thus introduced were great; the interests threatened
were powerful. The Parliament of Paris rallied to the defense of vested
rights. It refused to register the edicts issued to enforce the
minister's innovations.
The king held a bed of justice and forced their registration; but his
weak nature was tiring of the struggle. Turgot was unpopular on all
sides, and Louis never supported a truly unpopular minister. "Only M.
Turgot and I love the people," he cried, in his impotent despair; and
then he gave way. Malesherbes, the principal supporter in the royal
council of the Controller General of the Finances, was the first to go.
Thereupon Turgot wrote the king a long and harsh letter, blaming him for
Malesherbes's resignation. "Do not forget, sir," said he, "that it was
weakness which put the head of Charles I. on the block; it was weakness
which formed the League under Henry III., which made crowned slaves of
Louis XIII. and of the present king of Portugal; it was weakness which
caused all the misfortunes of the late reign." Kings to whom such
language as this can be used are not strong enough to bear it. Turgot
was dismissed twelve days after sending the letter.[Footnote: May 12,
1776. Lavergne, _les Économistes_, 219. Turgot, iii. 335; viii.
273, 330. Bailly, ii. 210.]
The financial situation of France was undoubtedly serious. The cause of
this was far less the amount of the debt, or the excess of expenditure
over revenue, than the total demoralization of the public service. The
annual deficit at the accession of Louis XVI. is variously stated at
from twenty to forty million livres a year.[Footnote: From four to
eight million dollars.] Such a deficiency would have nothing very
appalling for a strong minister of finance, supported by a determined
sovereign, and could have been overcome by economy alone. The expenses
of the court were not less than thirty millions. Turgot proposed to
reduce them by five millions immediately and by nine millions more in
the course of a few years. Twenty-eight millions were spent in pensions,
and it requires but a superficial knowledge of the state of France to
assure us that many of these were bestowed without sufficient reason.
[Footnote: Stourm sets the pensions at thirty-two millions, and thinks
that the improper ones did not exceed six or seven millions, ii. 134.]
Important reductions might have been made in the expenditures of most of
the departments without impairing their efficiency. But to have done
this many interests would have had to be disturbed, many hardships
inflicted. Amiable persons, living without labor at the public cost,
would have been deprived of their revenues. Other agreeable and
influential men and women would have had to live without pleasant things
which they had been brought up to expect. The good-nature of the king
made him shrink from inflicting pain. He would approve of the best plans
of economy, he would promise his minister of finance to adhere to them,
he would depart from them secretly at the solicitation of his wife or of
his courtiers. The poor man wanted "to make his people happy," and he
could not bear to see those of his people who came nearest to him
discontented. The successor of Turgot was a mere courtier, not even
personally honest, whose career was fortunately cut short by death
within a few months of his nomination.
The war of the American Revolution was drawing near, and old Maurepas,
the prime minister, felt the need of a competent man to take charge of
the finances. A name was suggested to him,--that of Necker, a successful
banker. But Necker was a Protestant, a Swiss, a nobody. The title of
Controller was too high for him, so a new post was created, and he was
made Director-General of the Finances, coming into office in October,
1776.
It has been the fate of Necker to excite strong enthusiasm and violent
objurgation; but in fact he was little more than commonplace. An
ambitious man, he wanted to make a reputation, to build up the royal
credit, to found a national debt, like that of England. Did he really
believe that such a debt would pay its own interest, without additional
taxes, or did he rely on economy of expenditure and good administration,
not only to balance the ordinary accounts, but to cover the interest of
the war-loans which he was obliged to contract? How far did his cheerful
manifestoes deceive himself? What might he not really have accomplished
if the royal support had been anything more solid than a shifting
quicksand? These questions cannot be answered satisfactorily. Neither
Necker, nor anybody else, knew exactly what the government owed, or what
it borrowed. The loans contracted by Necker himself are believed to have
amounted to five hundred and thirty million livres. Of this sum it is
thought that about two hundred millions were employed in covering the
annual deficit for five years, and that three hundred and thirty
millions were spent for the extraordinary demands of the war. The money
was raised chiefly by state lotteries and by the sale of life annuities,
although many other means also were employed.
The royal lottery had been a favorite device earlier in the century. As
practiced by Necker and some of his predecessors it combined the
features of gambling and of investment. Every ticket, in addition to its
chance of drawing a prize, was in itself a pecuniary obligation of the
government, either carrying perpetual interest at four per cent., or to
be repaid at its full price in seven or nine years without interest. The
prizes were sums of money or annuities. Thus the ticket-holder did not
lose his whole stake, and ran the chance of winning a fortune. But the
operation was not brilliant for the government.
Nor was the sale of annuities more judiciously managed. Here, as in the
lotteries, Necker copied old models, without making any improvements of
importance. No account was taken of the age of the annuitants, but
incomes were sold at a fixed rate of ten per cent, of the capital
deposited for one life, nine per cent, for two lives, eight and a half
for three, eight for four. The bankers and financiers of the day were
shrewd enough to profit by this arrangement.
They bought up the obligations, and named healthy children as the
annuitants. The chance of life of these selected persons was more than
fifty years, and as the children were usually chosen at about the age of
seven, the treasury would be called on to pay its annuities for an
average term of between forty and forty-five years. As the current rate
of interest on good security was about six per cent, the operation was
not a very promising one for the state.
In spite of all these blunders Necker was liked by the nation. He
recognized the need of economy and honestly tried to reduce expenses. He
succeeded in cutting off a little of the extravagance of the court and
in simplifying the collection of the revenue. He tried to establish
provincial assemblies and to equalize the incidence of the salt-tax. And
above all, in order to sustain the royal credit, he took the country
into his confidence to some extent, and prophesied pleasant things. But
he did not stop there. The national accounts had long been considered a
government secret; Necker resolved to publish them to the world. His
famous "Compte rendu au roi" appeared in February, 1781. The portrait of
the author, excellently engraved on copper, stares complacently from the
frontispiece, above an allegorical picture, where we can make out
Justice and Abundance, while Avarice appears to bring her treasures, and
a lady in high, powdered hair, and no visible clothing, gazes astonished
from the background. The contents of the report are not such as we are
in the habit of expecting in financial documents, but are rhetorical and
self-complacent. The ordinary revenues of the country are said to exceed
the expenditures by ten million livres. As a matter of fact, no such
surplus existed, but Necker was an optimist by temperament, and was
moreover anxious to bolster credit. The nation was delighted, but
Maurepas and the court were shocked. The cupidity of the courtiers was
painted in the account in glowing language. Such a publication was
dangerous in itself, and the economical measures already taken, with
those announced as to follow, threatened many interests. Even the old
prime minister trembled for his personal power. Necker had obtained the
removal from office of one of the adherents of Maurepas, while the
latter was kept in Paris by the gout. So the usual machinery of
detraction was put in motion. Letters, pamphlets, and epigrams flew
about. While the larger part of the public was singing Necker's praises,
the smaller and more influential inner circle was conspiring against
him. He might yet have prevailed but for an act of imprudence. Although
the most conspicuous and popular man in the kingdom, he had hitherto
been excluded from the Council of State. He now asked to be admitted to
it. Louis XVI., whose Catholicism was his strongest conviction, replied
that Necker, as a Protestant, was inadmissible by law. Thereupon the
latter offered to resign his place as Director of the Finances, and the
king, by the advice of Maurepas, accepted his resignation.[Footnote:
Gomel, _passim._]
From this time all real chance of the extrication of Louis XVI. from his
financial difficulties, without a radical change of government,
disappeared forever. The controllers that succeeded Necker only plunged
deeper and deeper into debt and deficit. It is needless to follow them
in their flounderings. A long experience of the vacillation of the
government both as to persons and as to systems had discouraged the
hopes of conscientious patriotism, and strengthened the opposition to
reform of all those who were interested in abuses. From the well-meaning
king, if left to his own ways, nothing more could be hoped. Pecuniary
embarrassment, with Louis, as with many less important people, was quite
as much a symptom of weakness as a result of unmerited misfortune.