I am greatly indebted to the generosity of Mr. Andrew D. White, the
distinguished American scholar, author and diplomatist, for permission
to print and to circulate privately a small edition of his exceedingly
valuable account of the great currency-making experiment of the French
Revolutionary Government. The work has been revised and considerably
enlarged by Mr. White for the purpose of the present issue.
The story of "Fiat Money Inflation in France" is one of great interest
to legislators, to economic students, and to all business and thinking
men. It records the most gigantic attempt ever made in the history of
the world by a government to create an inconvertible paper currency, and
to maintain its circulation at various levels of value. It also records
what is perhaps the greatest of all governmental efforts--with the
possible exception of Diocletian's--to enact and enforce a legal limit
of commodity prices. Every fetter that could hinder the will or thwart
the wisdom of democracy had been shattered, and in consequence every
device and expedient that untrammelled power and unrepressed optimism
could conceive were brought to bear. But the attempts failed. They left
behind them a legacy of moral and material desolation and woe, from
which one of the most intellectual and spirited races of Europe has
suffered for a century and a quarter, and will continue to suffer until
the end of time. There are limitations to the powers of governments and
of peoples that inhere in the constitution of things, and that neither
despotisms nor democracies can overcome.
Legislatures are as powerless to abrogate moral and economic laws as
they are to abrogate physical laws. They cannot convert wrong into right
nor divorce effect from cause, either by parliamentary majorities, or
by unity of supporting public opinion. The penalties of such
legislative folly will always be exacted by inexorable time. While these
propositions may be regarded as mere commonplaces, and while they are
acknowledged in a general way, they are in effect denied by many of
the legislative experiments and the tendencies of public opinion of the
present day. The story, therefore, of the colossal folly of France in
the closing part Of the eighteenth century and its terrible fruits, is
full of instruction for all men who think upon the problems of our own
time.
From among an almost infinite variety, there are four great and
fundamental facts that clearly emerge, namely,--
(1) Notwithstanding the fact that the paper currency issued was the
direct obligation of the State, that much of it was interest bearing,
and that all of it was secured upon the finest real estate in France,
and that penalties in the way of fines, imprisonments and death were
enacted from time to time to maintain its circulation at fixed values,
there was a steady depreciation in value until it reached zero point and
culminated in repudiation. The aggregate of the issues amounted to no
less than the enormous and unthinkable sum of $9,500,000,000, and in
the middle of 1797 when public repudiation took place, there was no
less than $4,200,000,000 in face value of _assignats_ and _mandats_
outstanding; the loss, as always, falling mostly upon the poor and the
ignorant.
(2) In the attempt to maintain fixed values for the paper currency the
Government became involved in an equally futile attempt to maintain a
tariff of legal prices for commodities. Here again penalties of fines,
of imprisonments and of death were powerless to accomplish the end in
view.
(3) An wholesale demoralisation of society took place under which
thrift, integrity, humanity, and every principle of morality were thrown
into the welter of seething chaos and cruelty.
(4) The real estate upon which the paper currency was secured
represented confiscations by the State of the lands of the Church and
of the Emigrant Noblemen. These lands were appraised, according to Mr.
White's narrative and other authorities, at $1,000,000,000. Here was
a straight addition to the State's resources of $1,000,000,000. It is
ominously significant that within one hundred years under the "Peace of
Frankfort" signed on the 10th May, 1871, the French nation agreed to pay
a war indemnity to victorious Germany of exactly the same sum, namely,
$1,000,000,000 in addition to the surrender of the province of Alsace
and a considerable part of Lorraine. The great addition to the national
wealth, therefore, effected by the immoral confiscation of the lands in
question disappeared with compound territorial interest added under the
visitation of relentless retribution.
Public opinion in our own country is so far sound on the question
of currency, but signs are not lacking in some lay quarters of
an inclination to sanction dangerous experiments. The doctrine of
governmental regulation of prices, has, however, made its appearance in
embryo. Class dissatisfaction is also on the increase. The confiscation
of property rights under legal forms and processes is apt to be condoned
when directed against unpopular interests and when limited to amounts
that do not revolt the conscience. The wild and terrible expression
given to these insidious principles in the havoc of the Revolution
should be remembered by all. Nor should the fact be overlooked that, as
Mr. White points out on Page 6, the National Assembly of France which
originated and supported these measures contained in its membership the
ablest Frenchmen of the day.
JOHN MACKAY. Toronto General Trusts Building, Toronto, 31st March, 1914.