Early in the year 1789 the French nation found itself in deep financial
embarrassment: there was a heavy debt and a serious deficit.
The vast reforms of that period, though a lasting blessing politically,
were a temporary evil financially. There was a general want of
confidence in business circles; capital had shown its proverbial
timidity by retiring out of sight as far as possible; throughout the
land was stagnation.
Statesmanlike measures, careful watching and wise management would,
doubtless, have ere long led to a return of confidence, a reappearance
of money and a resumption of business; but these involved patience
and self-denial, and, thus far in human history, these are the rarest
products of political wisdom. Few nations have ever been able to
exercise these virtues; and France was not then one of these few. [2]
There was a general search for some short road to prosperity: ere long
the idea was set afloat that the great want of the country was more of
the circulating medium; and this was speedily followed by calls for an
issue of paper money. The Minister of Finance at this period was Necker.
In financial ability he was acknowledged as among the great bankers of
Europe, but his was something more than financial ability: he had a
deep feeling of patriotism and a high sense of personal honor. The
difficulties in his way were great, but he steadily endeavored to
keep France faithful to those principles in monetary affairs which the
general experience of modern times had found the only path to national
safety. As difficulties arose the National Assembly drew away from him,
and soon came among the members renewed suggestions of paper money:
orators in public meetings, at the clubs and in the Assembly, proclaimed
it a panacea--a way of "securing resources without paying interest."
Journalists caught it up and displayed its beauties, among these men,
Marat, who, in his newspaper, "The Friend of the People," also joined
the cries against Necker, picturing him--a man of sterling honesty, who
gave up health and fortune for the sake of France--as a wretch seeking
only to enrich himself from the public purse.
Against this tendency toward the issue of irredeemable paper Necker
contended as best he might. He knew well to what it always had led,
even when surrounded by the most skillful guarantees. Among those who
struggled to support ideas similar to his was Bergasse, a deputy from
Lyons, whose pamphlets, then and later, against such issues exerted a
wider influence, perhaps, than any others: parts of them seem fairly
inspired. Any one to-day reading his prophecies of the evils sure to
follow such a currency would certainly ascribe to him a miraculous
foresight, were it not so clear that his prophetic power was due simply
to a knowledge of natural laws revealed by history. But this current in
favor of paper money became so strong that an effort was made to breast
it by a compromise: and during the last months of 1789 and the first
months of 1790 came discussions in the National Assembly looking to
issues of notes based upon the landed property of the Church,--which was
to be confiscated for that purpose. But care was to be taken; the issue
was to be largely in the shape of notes of 1,000, 300 and 200 _livres_,
too large to be used as ordinary currency, but of convenient size to
be used in purchasing the Church lands; besides this, they were to bear
interest and this would tempt holders to hoard them. The Assembly thus
held back from issuing smaller obligations.
Remembrances of the ruin which had come from the great issues of smaller
currency at an earlier day were still vivid. Yet the pressure toward
a popular currency for universal use grew stronger and stronger. The
finance committee of the Assembly reported that "the people demand a new
circulating medium"; that "the circulation of paper money is the best of
operations"; that "it is the most free because it reposes on the will
of the people"; that "it will bind the interest of the citizens to the
public good."
The report appealed to the patriotism of the French people with the
following exhortation: "Let us show to Europe that we understand our
own resources; let us immediately take the broad road to our liberation
instead of dragging ourselves along the tortuous and obscure paths of
fragmentary loans." It concluded by recommending an issue of paper money
carefully guarded, to the full amount of four hundred million _livres_,
and the argument was pursued until the objection to smaller notes faded
from view. Typical in the debate on the whole subject, in its various
phases, were the declarations of M. Matrineau. He was loud and long for
paper money, his only fear being that the Committee had not authorized
enough of it; he declared that business was stagnant, and that the sole
cause was a want of more of the circulating medium; that paper money
ought to be made a legal tender; that the Assembly should rise above
prejudices which the failures of John Law's paper money had caused,
several decades before. Like every supporter of irredeemable paper money
then or since, he seemed to think that the laws of Nature had changed
since previous disastrous issues. He said: "Paper money under
a despotism is dangerous; it favors corruption; but in a nation
constitutionally governed, which itself takes care in the emission of
its notes, which determines their number and use, that danger no longer
exists." He insisted that John Law's notes at first restored prosperity,
but that the wretchedness and ruin they caused resulted from their
overissue, and that such an overissue is possible only under a
despotism. [3]
M. de la Rochefoucauld gave his opinion that "the _assignats_ will draw
specie out of the coffers where it is now hoarded. [4]
On the other hand Cazalès and Maury showed that the result could only
be disastrous. Never, perhaps, did a political prophecy meet with more
exact fulfillment in every line than the terrible picture drawn in one
of Cazalès' speeches in this debate. Still the current ran stronger and
stronger; Petion made a brilliant oration in favor of the report, and
Necker's influence and experience were gradually worn away.
Mingled with the financial argument was a strong political plea. The
National Assembly had determined to confiscate the vast real property
of the French Church,--the pious accumulations of fifteen hundred
years. There were princely estates in the country, bishops' palaces and
conventual buildings in the towns; these formed between one-fourth and
one-third of the entire real property of France, and amounted in value
to at least two thousand million _livres_. By a few sweeping strokes
all this became the property of the nation. Never, apparently, did a
government secure a more solid basis for a great financial future. [5]
There were two special reasons why French statesmen desired speedily to
sell these lands. First, a financial reason,--to obtain money to
relieve the government. Secondly, a political reason,--to get this land
distributed among the thrifty middle-classes, and so commit them to the
Revolution and to the government which gave their title.
It was urged, then, that the issue of four hundred millions of paper,
(not in the shape of interest-bearing bonds, as had at first been
proposed, but in notes small as well as large), would give the treasury
something to pay out immediately, and relieve the national necessities;
that, having been put into circulation, this paper money would stimulate
business; that it would give to all capitalists, large or small, the
means for buying from the nation the ecclesiastical real estate, and
that from the proceeds of this real estate the nation would pay its
debts and also obtain new funds for new necessities: never was theory
more seductive both to financiers and statesmen.
It would be a great mistake to suppose that the statesmen of France, or
the French people, were ignorant of the dangers in issuing irredeemable
paper money. No matter how skillfully the bright side of such a currency
was exhibited, all thoughtful men in France remembered its dark side.
They knew too well, from that ruinous experience, seventy years before,
in John Law's time, the difficulties and dangers of a currency not well
based and controlled. They had then learned how easy it is to issue it;
how difficult it is to check its overissue; how seductively it leads to
the absorption of the means of the workingmen and men of small fortunes;
how heavily it falls on all those living on fixed incomes, salaries or
wages; how securely it creates on the ruins of the prosperity of all
men of meagre means a class of debauched speculators, the most
injurious class that a nation can harbor,--more injurious, indeed, than
professional criminals whom the law recognizes and can throttle; how
it stimulates overproduction at first and leaves every industry flaccid
afterward; how it breaks down thrift and develops political and social
immorality. All this France had been thoroughly taught by experience.
Many then living had felt the result of such an experiment--the issues
of paper money under John Law, a man who to this day is acknowledged
one of the most ingenious financiers the world has ever known; and there
were then sitting in the National Assembly of France many who owed the
poverty of their families to those issues of paper. Hardly a man in the
country who had not heard those who issued it cursed as the authors of
the most frightful catastrophe France had then experienced. [6]
It was no mere attempt at theatrical display, but a natural impulse,
which led a thoughtful statesman, during the debate, to hold up a piece
of that old paper money and to declare that it was stained with the
blood and tears of their fathers.
And it would also be a mistake to suppose that the National Assembly,
which discussed this matter, was composed of mere wild revolutionists;
no inference could be more wide of the fact. Whatever may have been the
character of the men who legislated for France afterward, no thoughtful
student of history can deny, despite all the arguments and sneers
of reactionary statesmen and historians, that few more keen-sighted
legislative bodies have ever met than this first French Constitutional
Assembly. In it were such men as Sieyès, Bailly, Necker, Mirabeau,
Talleyrand, DuPont de Nemours and a multitude of others who, in various
sciences and in the political world, had already shown and were destined
afterward to show themselves among the strongest and shrewdest men that
Europe has yet seen.
But the current toward paper money had become irresistible. It was
constantly urged, and with a great show of force, that if any nation
could safely issue it, France was now that nation; that she was fully
warned by her severe experience under John Law; that she was now a
constitutional government, controlled by an enlightened, patriotic
people,--not, as in the days of the former issues of paper money, an
absolute monarchy controlled by politicians and adventurers; that
she was able to secure every _livre_ of her paper money by a virtual
mortgage on a landed domain vastly greater in value than the entire
issue; that, with men like Bailly, Mirabeau and Necker at her head, she
could not commit the financial mistakes and crimes from which France had
suffered under John Law, the Regent Duke of Orleans and Cardinal Dubois.
Oratory prevailed over science and experience. In April, 1790, came the
final decree to issue four hundred millions of _livres_ in paper money,
based upon confiscated property of the Church for its security. The
deliberations on this first decree and on the bill carrying it into
effect were most interesting; prominent in the debate being Necker, Du
Pont de Nemours, Maury, Cazalès, Petion, Bailly and many others hardly
inferior. The discussions were certainly very able; no person can read
them at length in the "Moniteur," nor even in the summaries of the
parliamentary history, without feeling that various modern historians
have done wretched injustice to those men who were then endeavoring to
stand between France and ruin.
This sum--four hundred millions, so vast in those days, was issued in
_assignats_, which were notes secured by a pledge of productive
real estate and bearing interest to the holder at three per cent. No
irredeemable currency has ever claimed a more scientific and practical
guarantee for its goodness and for its proper action on public finances.
On the one hand, it had what the world recognized as a most practical
security,--a mortgage an productive real estate of vastly greater value
than the issue. On the other hand, as the notes bore interest, there
seemed cogent reason for their being withdrawn from circulation whenever
they became redundant. [7]
As speedily as possible the notes were put into circulation. Unlike
those issued in John Law's time, they were engraved in the best style
of the art. To stimulate loyalty, the portrait of the king was placed
in the center; to arouse public spirit, patriotic legends and emblems
surrounded it; to stimulate public cupidity, the amount of interest
which the note would yield each day to the holder was printed in the
margin; and the whole was duly garnished with stamps and signatures to
show that it was carefully registered and controlled. [8]
To crown its work the National Assembly, to explain the advantages
of this new currency, issued an address to the French people. In this
address it spoke of the nation as "delivered by this grand means from
all uncertainty and from all ruinous results of the credit system." It
foretold that this issue "would bring back into the public treasury,
into commerce and into all branches of industry strength, abundance and
prosperity." [9]
Some of the arguments in this address are worth recalling, and, among
them, the following:--"Paper money is without inherent value unless
it represents some special property. Without representing some special
property it is inadmissible in trade to compete with a metallic
currency, which has a value real and independent of the public action;
therefore it is that the paper money which has only the public authority
as its basis has always caused ruin where it has been established; that
is the reason why the bank notes of 1720, issued by John Law, after
having caused terrible evils, have left only frightful memories.
Therefore it is that the National Assembly has not wished to expose
you to this danger, but has given this new paper money not only a value
derived from the national authority but a value real and immutable, a
value which permits it to sustain advantageously a competition with the
precious metals themselves." [10]
But the final declaration was, perhaps, the most interesting. It was as
follows:--
"These _assignats_, bearing interest as they do, will soon be considered
better than the coin now hoarded, and will bring it out again into
circulation." The king was also induced to issue a proclamation
recommending that his people receive this new money without objection.
All this caused great joy. Among the various utterances of this feeling
was the letter of M. Sarot, directed to the editor of the Journal of the
National Assembly, and scattered through France. M. Sarot is hardly able
to contain himself as he anticipates the prosperity and glory that this
issue of paper is to bring to his country. One thing only vexes him, and
that is the pamphlet of M. Bergasse against the _assignats_; therefore
it is after a long series of arguments and protestations, in order to
give a final proof of his confidence in the paper money and his entire
skepticism as to the evils predicted by Bergasse and others, M. Sarot
solemnly lays his house, garden and furniture upon the altar of his
country and offers to sell them for paper money alone.
There were, indeed, some gainsayers. These especially appeared among the
clergy, who, naturally, abhorred the confiscation of Church property.
Various ecclesiastics made speeches, some of them full of pithy and
weighty arguments, against the proposed issue of paper, and there is
preserved a sermon from one priest threatening all persons handling the
new money with eternal damnation. But the great majority of the French
people, who had suffered ecclesiastical oppression so long, regarded
these utterances as the wriggling of a fish on the hook, and enjoyed the
sport all the better. [11]
The first result of this issue was apparently all that the most sanguine
could desire: the treasury was at once greatly relieved; a portion of
the public debt was paid; creditors were encouraged; credit revived;
ordinary expenses were met, and, a considerable part of this paper
money having thus been passed from the government into the hands of
the people, trade increased and all difficulties seemed to vanish. The
anxieties of Necker, the prophecies of Maury and Cazalès seemed proven
utterly futile. And, indeed, it is quite possible that, if the national
authorities had stopped with this issue, few of the financial evils
which afterwards arose would have been severely felt; the four hundred
millions of paper money then issued would have simply discharged the
function of a similar amount of specie. But soon there came another
result: times grew less easy; by the end of September, within five
months after the issue of the four hundred millions in _assignats_, the
government had spent them and was again in distress. [12]
The old remedy immediately and naturally recurred to the minds of
men. Throughout the country began a cry for another issue of paper;
thoughtful men then began to recall what their fathers had told them
about the seductive path of paper-money issues in John Law's time, and
to remember the prophecies that they themselves had heard in the debate
on the first issue of _assignats_ less than six months before.
At that time the opponents of paper had prophesied that, once on the
downward path of inflation, the nation could not be restrained and that
more issues would follow. The supporters of the first issue had asserted
that this was a calumny; that the people were now in control and that
they could and would check these issues whenever they desired.
The condition of opinion in the Assembly was, therefore, chaotic: a few
schemers and dreamers were loud and outspoken for paper money; many
of the more shallow and easy-going were inclined to yield; the more
thoughtful endeavored to breast the current.
One man there was who could have withstood the pressure: Mirabeau. He
was the popular idol,--the great orator of the Assembly and much more
than a great orator,--he had carried the nation through some of its
worst dangers by a boldness almost godlike; in the various conflicts he
had shown not only oratorical boldness, but amazing foresight. As to his
real opinion on an irredeemable currency there can be no doubt. It was
the opinion which all true statesmen have held, before his time and
since,--in his own country, in England, in America, in every modern
civilized nation. In his letter to Cerutti, written in January, 1789,
hardly six months before, he had spoken of paper money as "A nursery of
tyranny, corruption and delusion; a veritable debauch of authority in
delirium." In one of his early speeches in the National Assembly he had
called such money, when Anson covertly suggested its issue, "a loan
to an armed robber," and said of it: "that infamous word, paper money,
ought to be banished from our language." In his private letters written
at this very time, which were revealed at a later period, he showed that
he was fully aware of the dangers of inflation. But he yielded to the
pressure: partly because he thought it important to sell the government
lands rapidly to the people, and so develop speedily a large class of
small landholders pledged to stand by the government which gave them
their titles; partly, doubtless, from a love of immediate rather than
of remote applause; and, generally, in a vague hope that the severe,
inexorable laws of finance which had brought heavy punishments upon
governments emitting an irredeemable currency in other lands, at other
times, might in some way at this time, be warded off from France. [13]
The question was brought up by Montesquieu's report on the 27th
of August, 1790. This report favored, with evident reluctance, an
additional issue of paper. It went on to declare that the original issue
of four hundred millions, though opposed at the beginning, had proved
successful; that _assignats_ were economical, though they had dangers;
and, as a climax, came the declaration: "We must save the country." [14]
Upon this report Mirabeau then made one of his most powerful speeches.
He confessed that he had at first feared the issue of _assignats_, but
that he now dared urge it; that experience had shown the issue of
paper money most serviceable; that the report proved the first issue
of _assignats_ a success; that public affairs had come out of distress;
that ruin had been averted and credit established. He then argued that
there was a difference between paper money of the recent issue and
that from which the nation had suffered so much in John Law's time; he
declared that the French nation had now become enlightened and he added,
"Deceptive subtleties can no longer mislead patriots and men of sense in
this matter." He then went on to say: "We must accomplish that which
we have begun," and declared that there must be one more large issue
of paper, guaranteed by the national lands and by the good faith of the
French nation. To show how practical the system was he insisted that
just as soon as paper money should become too abundant it would be
absorbed in rapid purchases of national lands; and he made a very
striking comparison between this self-adjusting, self-converting system
and the rains descending in showers upon the earth, then in swelling
rivers discharged into the sea, then drawn up in vapor and finally
scattered over the earth again in rapidly fertilizing showers. He
predicted that the members would be surprised at the astonishing success
of this paper money and that there would be none too much of it.
His theory grew by what it fed upon,--as the paper-money theory has
generally done. Toward the close, in a burst of eloquence, he suggested
that _assignats_ be created to an amount sufficient to cover the
national debt, and that all the national lands be exposed for sale
immediately, predicting that thus prosperity would return to the nation
and that an classes would find this additional issue of paper money a
blessing. [15]
This speech was frequently interrupted by applause; a unanimous vote
ordered it printed, and copies were spread throughout France. The
impulse given by it permeated all subsequent discussion; Gouy arose
and proposed to liquidate the national debt of twenty-four hundred
millions,--to use his own words--"by one single operation, grand,
simple, magnificent." [16] This "operation" was to be the emission of
twenty-four hundred millions in legal tender notes, and a law that
specie should not be accepted in purchasing national lands. His demagogy
bloomed forth magnificently. He advocated an appeal to the people, who,
to use his flattering expression, "ought alone to give the law in a
matter so interesting." The newspapers of the period, in reporting his
speech, noted it with the very significant remark, "This discourse was
loudly applauded."
To him replied Brillat-Savarin. He called attention to the depreciation
of _assignats_ already felt. He tried to make the Assembly see that
natural laws work as inexorably in France as elsewhere; he predicted
that if this new issue were made there would come a depreciation of
thirty per cent. Singular, that the man who so fearlessly stood against
this tide of unreason has left to the world simply a reputation as
the most brilliant cook that ever existed! He was followed by the Abbe
Goutes, who declared,--what seems grotesque to those who have read
the history of an irredeemable paper currency in any country--that
new issues of paper money "will supply a circulating medium which will
protect public morals from corruption." [17]
Into this debate was brought a report by Necker. He was not, indeed,
the great statesman whom France especially needed at this time, of all
times. He did not recognize the fact that the nation was entering a
great revolution, but he could and did see that, come what might,
there were simple principles of finance which must be adhered to. Most
earnestly, therefore, he endeavored to dissuade the Assembly from
the proposed issue; suggesting that other means could be found for
accomplishing the result, and he predicted terrible evils. But the
current was running too fast. The only result was that Necker was
spurned as a man of the past; he sent in his resignation and left
France forever. [18] The paper-money demagogues shouted for joy at his
departure; their chorus rang through the journalism of the time. No
words could express their contempt for a man who was unable to see the
advantages of filling the treasury with the issues of a printing press.
Marat, Hébert, Camille Desmoulins and the whole mass of demagogues so
soon to follow them to the guillotine were especially jubilant. [19]
Continuing the debate, Rewbell attacked Necker, saying that the
_assignats_ were not at par because there were not yet enough of them;
he insisted that payments for public lands be received in _assignats_
alone; and suggested that the church bells of the kingdom be melted down
into small money. Le Brun attacked the whole scheme in the Assembly, as
he had done in the Committee, declaring that the proposal, instead
of relieving the nation, would wreck it. The papers of the time very
significantly say that at this there arose many murmurs. Chabroud came
to the rescue. He said that the issue of _assignats_ would relieve the
distress of the people and he presented very neatly the new theory of
paper money and its basis in the following words: "The earth is the
source of value; you cannot distribute the earth in a circulating value,
but this paper becomes representative of that value and it is evident
that the creditors of the nation will not be injured by taking it." On
the other hand, appeared in the leading paper, the "Moniteur," a very
thoughtful article against paper money, which sums up all by saying,
"It is, then, evident that all paper which cannot, at the will of the
bearer, be converted into specie cannot discharge the functions of
money." This article goes on to cite Mirabeau's former opinion in his
letter to Cerutti, published in 1789,--the famous opinion of paper money
as "a nursery of tyranny, corruption and delusion; a veritable debauch
of authority in delirium." Lablache, in the Assembly, quoted a saying
that "paper money is the emetic of great states." [20]
Boutidoux, resorting to phrasemaking, called the _assignats_ _"un papier
terre,"_ or "land converted into paper." Boislandry answered vigorously
and foretold evil results. Pamphlets continued to be issued,--among
them, one so pungent that it was brought into the Assembly and read
there,--the truth which it presented with great clearness being simply
that doubling the quantity of money or substitutes for money in a nation
simply increases prices, disturbs values, alarms capital, diminishes
legitimate enterprise, and so decreases the demand both for products
and for labor; that the only persons to be helped by it are the rich
who have large debts to pay. This pamphlet was signed "A Friend of the
People," and was received with great applause by the thoughtful minority
in the Assembly. Du Pont de Nemours, who had stood by Necker in the
debate on the first issue of _assignats_, arose, avowed the pamphlet to
be his, and said sturdily that he had always voted against the emission
of irredeemable paper and always would. [21]
Far more important than any other argument against inflation was the
speech of Talleyrand. He had been among the boldest and most radical
French statesmen. He it was,--a former bishop,--who, more than any
other, had carried the extreme measure of taking into the possession of
the nation the great landed estates of the Church, and he had supported
the first issue of four hundred millions. But he now adopted a judicial
tone--attempted to show to the Assembly the very simple truth that the
effect of a second issue of _assignats_ may be different from that of
the first; that the first was evidently needed; that the second may be
as injurious as the first was useful. He exhibited various weak points
in the inflation fallacies and presented forcibly the trite truth that
no laws and no decrees can keep large issues of irredeemable paper at
par with specie.
In his speech occur these words: "You can, indeed, arrange it so that
the people shall be forced to take a thousand _livres_ in paper for a
thousand _livres_ in specie; but you can never arrange it so that a man
shall be obliged to give a thousand _livres_ in specie for a thousand
_livres_ in paper,--in that fact is embedded the entire question; and on
account of that fact the whole system fails." [22]
The nation at large now began to take part in the debate; thoughtful
men saw that here was the turning Point between good and evil, that the
nation stood at the parting of the ways. Most of the great commercial
cities bestirred themselves and sent up remonstrances against the new
emission,--twenty-five being opposed and seven in favor of it.
But eloquent theorists arose to glorify paper and among these, Royer,
who on September 14, 1790, put forth a pamphlet entitled "Reflections of
a patriotic Citizen on the issue of _Assignats_," in which he gave many
specious reasons of the why the _assignats_ could not be depressed, and
spoke of the argument against them as "vile clamors of people bribed
to affect public opinion." He said to the National Assembly, "If it
is necessary to create five thousand millions, and more, of the paper,
decree such a creation gladly." He, too, predicted, as many others had
done, a time when gold was to lose all its value, since all exchanges
would be made with this admirable, guaranteed paper, and therefore that
coin would come out from the places where it was hoarded. He foretold
prosperous times to France in case these great issues of paper were
continued and declared these "the only means to insure happiness, glory
and liberty to the French nation." Speeches like this gave courage to
a new swarm of theorists,--it began to be especially noted that men who
had never shown any ability to make or increase fortunes for themselves
abounded in brilliant plans for creating and increasing wealth for the
country at large.
Greatest force of all, on September 27, 1790, came Mirabeau's final
speech. The most sober and conservative of his modern opponents speaks
of its eloquence as "prodigious." In this the great orator dwelt first
on the political necessity involved, declaring that the most pressing
need was to get the government lands into the hands of the people, and
so to commit to the nation and against the old privileged classes the
class of landholders thus created.
Through the whole course of his arguments there is one leading point
enforced with all his eloquence and ingenuity--the excellence of the
proposed currency, its stability and its security. He declares that,
being based on the pledge of public lands and convertible into them, the
notes are better secured than if redeemable in specie; that the precious
metals are only employed in the secondary arts, while the French paper
money represents the first and most real of all property, the source of
all production, the land; that while other nations have been obliged to
emit paper money, none have ever been so fortunate as the French nation,
for the reason that none had ever before been able to give this landed
security; that whoever takes French paper money has practically a
mortgage to secure it,--and on landed property which can easily be sold
to satisfy his claims, while other nations have been able only to give a
vague claim on the entire nation. "And," he ones, "I would rather have a
mortgage on a garden than on a kingdom!"
Other arguments of his are more demagogical. He declares that the only
interests affected will be those of bankers and capitalists, but
that manufacturers will see prosperity restored to them. Some of his
arguments seem almost puerile, as when he says, "If gold has been
hoarded through timidity or malignity, the issue of paper will show that
gold is not necessary, and it will then come forth." But, as a whole,
the speech was brilliant; it was often interrupted by applause; it
settled the question. People did not stop to consider that it was the
dashing speech of an orator and not the matured judgment of a financial
expert; they did not see that calling Mirabeau or Talleyrand to advise
upon a monetary policy, because they had shown boldness in danger and
strength in conflict, was like summoning a prize-fighter to mend a
watch.
In vain did Maury show that, while the first issues of John Law's paper
had brought prosperity, those that followed brought misery; in vain did
he quote from a book published in John Law's time, showing that Law was
at first considered a patriot and friend of humanity; in vain did he
hold up to the Assembly one of Law's bills and appeal to their memories
of the wretchedness brought upon France by them; in vain did Du Pont
present a simple and really wise plan of substituting notes in the
payment of the floating debt which should not form a part of the
ordinary circulating medium; nothing could resist the eloquence of
Mirabeau. Barnave, following, insisted that "Law's paper was based
upon the phantoms of the Mississippi; ours, upon the solid basis of
ecclesiastical lands," and he proved that the _assignats_ could not
depreciate further. Prudhomme's newspaper poured contempt over gold as
security for the currency, extolled real estate as the only true basis
and was fervent in praise of the convertibility and self-adjusting
features of the proposed scheme. In spite of all this plausibility and
eloquence, a large minority stood firm to their earlier principles; but
on the 29th of September, 1790, by a vote of 508 to 423, the deed was
done; a bill was passed authorizing the issue of eight hundred millions
of new _assignats_, but solemnly declaring that in no case should the
entire amount put in circulation exceed twelve hundred millions. To make
assurance doubly sure, it also provided that as fast as the _assignats_
were paid into the treasury for land they should be burned, and thus a
healthful contraction be constantly maintained. Unlike the first issue,
these new notes were to bear no interest. [23]
Great were the plaudits of the nation at this relief. Among the
multitudes of pamphlets expressing this joy which have come down to us
the "Friend of the Revolution" is the most interesting. It begins as
follows: "Citizens, the deed is done. The _assignats_ are the keystone
of the arch. It has just been happily put in position. Now I can
announce to you that the Revolution is finished and there only remain
one or two important questions. All the rest is but a matter of detail
which cannot deprive us any longer of the pleasure of admiring this
important work in its entirety. The provinces and the commercial cities
which were at first alarmed at the proposal to issue so much paper money
now send expressions of their thanks; specie is coming out to be joined
with paper money. Foreigners come to us from all parts of Europe to seek
their happiness under laws which they admire; and soon France, enriched
by her new property and by the national industry which is preparing for
fruitfulness, will demand still another creation of paper money."
France was now fully committed to a policy of inflation; and, if there
had been any question of this before, all doubts were removed now by
various acts very significant as showing the exceeding difficulty of
stopping a nation once in the full tide of a depreciating currency. The
National Assembly had from the first shown an amazing liberality to all
sorts of enterprises, wise or foolish, which were urged "for the good of
the people." As a result of these and other largesses the old cry of the
"lack of a circulating medium" broke forth again; and especially loud
were the clamors for more small bills. The cheaper currency had largely
driven out the dearer; paper had caused small silver and copper money
mainly to disappear; all sorts of notes of hand, circulating under the
name of "confidence bills," flooded France--sixty-three kinds in Paris
alone. This unguaranteed currency caused endless confusion and fraud.
Different districts of France began to issue their own _assignats_ in
small denominations, and this action stirred the National Assembly to
evade the solemn pledge that the circulation should not go above twelve
hundred millions and that all _assignats_ returned to the treasury for
lands should immediately be burned. [24] Within a short time there had
been received into the treasury for lands one hundred and sixty million
_livres_ in paper. By the terms of the previous acts this amount of
paper ought to have been retired. Instead of this, under the plea of
necessity, the greater part of it was reissued in the form of small
notes.
There was, indeed, much excuse for new issues of small notes, for, under
the theory that an issue of smaller notes would drive silver out of
circulation, the smallest authorized _assignat_ was for fifty _livres_.
To supply silver and copper and hold it in circulation everything was
tried. Citizens had been spurred on by law to send their silverware and
jewels to the mint. Even the king sent his silver and gold plate, and
the churches and convents were required by law to send to the government
melting pot all silver and gold vessels not absolutely necessary for
public worship. For copper money the church bells were melted down. But
silver and even copper continued to become more and more scarce. In the
midst of all this, various juggleries were tried, and in November, 1790,
the Assembly decreed a single standard of coinage, the chosen metal
being silver, and the ratio between the two precious metals was
changed from 15 1/2 to 1, to 14 1/2 to 1--but all in vain. It was found
necessary to issue the dreaded small paper, and a beginning was made by
issuing one hundred millions in notes of five _francs_, and, ere long,
obedient to the universal clamor, there were issued parchment notes for
various small amounts down to a single _sou_. [25]
Yet each of these issues, great or small, was but as a drop of cold
water to a parched throat. Although there was already a rise in prices
which showed that the amount needed for circulation had been exceeded,
the cry for "more circulating medium" was continued. The pressure for
new issues became stronger and stronger. The Parisian populace and the
Jacobin Club were especially loud in their demands for them; and, a few
months later, on June 19, 1791, with few speeches, in a silence very
ominous, a new issue was made of six hundred millions more;--less than
nine months after the former great issue, with its solemn pledges
to keep down the amount in circulation. With the exception of a few
thoughtful men, the whole nation again sang paeans. [26]
In this comparative ease of new issues is seen the action of a law
in finance as certain as the working of a similar law in natural
philosophy. If a material body fall from a height its velocity is
accelerated, by a well-known law, in a constantly increasing ratio: so
in issues of irredeemable currency, in obedience to the theories of a
legislative body or of the people at large, there is a natural law of
rapidly increasing emission and depreciation. The first inflation bills
were passed with great difficulty, after very sturdy resistance and by
a majority of a few score out of nearly a thousand votes; but we observe
now that new inflation measures were passed more and more easily and
we shall have occasion to see the working of this same law in a more
striking degree as this history develops itself.
During the various stages of this debate there cropped up a doctrine
old and ominous. It was the same which appeared toward the end of the
nineteenth century in the United States during what became known as the
"greenback craze" and the free "silver craze." In France it had
been refuted, a generation before the Revolution, by Turgot, just as
brilliantly as it was met a hundred years later in the United States
by James A. Garfield and his compeers. This was the doctrine that all
currency, whether gold, paper, leather or any other material, derives
its efficiency from the official stamp it bears, and that, this being
the case, a government may relieve itself of its debts and make itself
rich and prosperous simply by means of a printing press:--fundamentally
the theory which underlay the later American doctrine of "fiat money."
There came mutterings and finally speeches in the Jacobin Club, in the
Assembly and in newspaper articles and pamphlets throughout the country,
taking this doctrine for granted. These could hardly affect thinking
men who bore in mind the calamities brought upon the whole people,
and especially upon the poorer classes, by this same theory as put in
practice by John Law, or as refuted by Turgot, but it served to swell
the popular chorus in favor of the issue of more _assignats_ and plenty
of them. [27]
The great majority of Frenchmen now became desperate optimists,
declaring that inflation is prosperity. Throughout France there came
temporary good feeling. The nation was becoming inebriated with paper
money. The good feeling was that of a drunkard just after his draught;
and it is to be noted as a simple historical fact, corresponding to a
physiological fact, that, as draughts of paper money came faster the
successive periods of good feeling grew shorter.
Various bad signs began to appear. Immediately after each new issue came
a marked depreciation; curious it is to note the general reluctance to
assign the right reason. The decline in the purchasing power of paper
money was in obedience to the simplest laws in economics, but France had
now gone beyond her thoughtful statesmen and taken refuge in unwavering
optimism, giving any explanation of the new difficulties rather than the
right one. A leading member of the Assembly insisted, in an elaborate
speech, that the cause of depreciation was simply the want of knowledge
and of confidence among the rural population and he suggested means of
enlightening them. La Rochefoucauld proposed to issue an address to
the people showing the goodness of the currency and the absurdity of
preferring coin. The address was unanimously voted. As well might they
have attempted to show that a beverage made by mixing a quart of wine
and two quarts of water would possess all the exhilarating quality of
the original, undiluted liquid.
Attention was aroused by another menacing fact;--specie disappeared
more and more. The explanations of this fact also displayed wonderful
ingenuity in finding false reasons and in evading the true one. A
very common explanation was indicated in Prudhomme's newspaper, "Les
Révolutions de Paris," of January 17, 1791, which declared that coin
"will keep rising until the people shall have hanged a broker." Another
popular theory was that the Bourbon family were, in some mysterious way,
drawing off all solid money to the chief centers of their intrigues in
Germany. Comic and, at the same time, pathetic, were evidences of the
wide-spread idea that if only a goodly number of people engaged in trade
were hanged, the par value of the _assignats_ would be restored.
Still another favorite idea was that British emissaries were in the
midst of the people, instilling notions hostile to paper. Great efforts
were made to find these emissaries and more than one innocent person
experienced the popular wrath under the supposition that he was engaged
in raising gold and depressing paper. Even Talleyrand, shrewd as he was,
insisted that the cause was simply that the imports were too great and
the exports too little. [28] As well might he explain that fact that,
when oil is mingled with water, water sinks to the bottom, by saying
that this is because the oil rises to the top. This disappearance of
specie was the result of a natural law as simple and as sure in its
action as gravitation; the superior currency had been withdrawn because
an inferior currency could be used. [29] Some efforts were made to remedy
this. In the municipality of Quilleboeuf a considerable amount in specie
having been found in the possession of a citizen, the money was seized
and sent to the Assembly. The people of that town treated this hoarded
gold as the result of unpatriotic wickedness or madness, instead of
seeing that it was but the sure result of a law working in every land
and time, when certain causes are present. Marat followed out this
theory by asserting that death was the proper penalty for persons who
thus hid their money.
Still another troublesome fact began now to appear. Though paper money
had increased in amount, prosperity had steadily diminished. In spite of
all the paper issues, commercial activity grew more and more spasmodic.
Enterprise was chilled and business became more and more stagnant.
Mirabeau, in his speech which decided the second great issue of paper,
had insisted that, though bankers might suffer, this issue would be of
great service to manufacturers and restore prosperity to them and their
workmen. The latter were for a time deluded, but were at last rudely
awakened from this delusion. The plenty of currency had at first
stimulated production and created a great activity in manufactures, but
soon the markets were glutted and the demand was diminished. In spite of
the wretched financial policy of years gone by, and especially in spite
of the Revocation of the Edict of Nantes, by which religious bigotry
had driven out of the kingdom thousands of its most skillful Protestant
workmen, the manufactures of France had before the Revolution come into
full bloom. In the finer woolen goods, in silk and satin fabrics of all
sorts, in choice pottery and porcelain, in manufactures of iron, steel,
and copper, they had again taken their old leading place upon the
Continent. All the previous changes had, at the worst, done no more
than to inflict a momentary check on this highly developed system of
manufactures. But what the bigotry of Louis XIV and the shiftlessness
of Louis XV could not do in nearly a century, was accomplished by this
tampering with the currency in a few months. One manufactory after
another stopped. At one town, Lodève, five thousand workmen were
discharged from the cloth manufactories. Every cause except the right
one was assigned for this. Heavy duties were put upon foreign goods;
everything that tariffs and custom-houses could do was done. Still the
great manufactories of Normandy were closed, those of the rest of the
kingdom speedily followed, and vast numbers of workmen in all parts of
the country were thrown out of employment. [30] Nor was this the case
with the home demand alone. The foreign demand, which at first had been
stimulated, soon fell off. In no way can this be better stated than by
one of the most thoughtful historians of modern times, who says, "It is
true that at first the _assignats_ gave the same impulse to business
in the city as in the country, but the apparent improvement had no firm
foundation, even in the towns. Whenever a great quantity of paper money
is suddenly issued we invariably see a rapid increase of trade. The
great quantity of the circulating medium sets in motion all the energies
of commerce and manufactures; capital for investment is more easily
found than usual and trade perpetually receives fresh nutriment. If this
paper represents real credit, founded upon order and legal security,
from which it can derive a firm and lasting value, such a movement may
be the starting point of a great and widely-extended prosperity, as, for
instance, a splendid improvement in English agriculture was undoubtedly
owing to the emancipation of the country bankers. If on the contrary,
the new paper is of precarious value, as was clearly seen to be the case
with the French _assignats_ as early as February, 1791, it can confer no
lasting benefits. For the moment, perhaps, business receives an impulse,
all the more violent because every one endeavors to invest his doubtful
paper in buildings, machines and goods, which, under all circumstances,
retain some intrinsic value. Such a movement was witnessed in France
in 1791, and from every quarter there came satisfactory reports of the
activity of manufactures."
"But, for the moment, the French manufacturers derived great advantage
from this state of things. As their products could be so cheaply paid
for, orders poured in from foreign countries to such a degree that it
was often difficult for the manufacturers to satisfy their customers.
It is easy to see that prosperity of this kind must very soon find
its limit.... When a further fall in the _assignats_ took place this
prosperity would necessarily collapse, and be succeeded by a crisis
all the more destructive the more deeply men had engaged in speculation
under the influence of the first favorable prospects." [31]
Thus came a collapse in manufacturing and commerce, just as it had come
previously in France: just as it came at various periods in Austria,
Russia, America, and in all countries where men have tried to build up
prosperity on irredeemable paper. [32]
All this breaking down of the manufactures and commerce of the nation
made fearful inroads on the greater fortunes; but upon the lesser, and
upon the little properties of the masses of the nation who relied upon
their labor, it pressed with intense severity. The capitalist could put
his surplus paper money into the government lands and await results; but
the men who needed their money from day to day suffered the worst of
the misery. Still another difficulty appeared. There had come a complete
uncertainty as to the future. Long before the close of 1791 no one knew
whether a piece of paper money representing a hundred _livres_ would,
a month later, have a purchasing power of ninety or eighty or sixty
_livres_. The result was that capitalists feared to embark their means
in business. Enterprise received a mortal blow. Demand for labor was
still further diminished; and here came a new cause of calamity: for
this uncertainty withered all far-reaching undertakings. The business
of France dwindled into a mere living from hand to mouth. This state of
things, too, while it bore heavily upon the moneyed classes, was
still more ruinous to those in moderate and, most of all, to those in
straitened circumstances. With the masses of the people, the purchase of
every article of supply became a speculation--a speculation in which
the professional speculator had an immense advantage over the ordinary
buyer. Says the most brilliant of apologists for French revolutionary
statesmanship, "Commerce was dead; betting took its place." [33]
Nor was there any compensating advantage to the mercantile classes. The
merchant was forced to add to his ordinary profit a sum sufficient to
cover probable or possible fluctuations in value, and while prices of
products thus went higher, the wages of labor, owing to the number of
workmen who were thrown out of employment, went lower.
But these evils, though great, were small compared to those far more
deep-seated signs of disease which now showed themselves throughout the
country. One of these was the _obliteration of thrift_ from the minds
of the French people. The French are naturally thrifty; but, with such
masses of money and with such uncertainty as to its future value, the
ordinary motives for saving and care diminished, And a loose luxury
spread throughout the country. A still worse outgrowth was the increase
of speculation and gambling. With the plethora of paper currency in
1791 appeared the first evidences of that cancerous disease which
always follows large issues of irredeemable currency,--a disease more
permanently injurious to a nation than war, pestilence or famine. For
at the great metropolitan centers grew a luxurious, speculative,
stock-gambling body, which, like a malignant tumor, absorbed into itself
the strength of the nation and sent out its cancerous fibres to the
remotest hamlets. At these city centers abundant wealth seemed to be
piled up: in the country at, large there grew a dislike of steady labor
and a contempt for moderate gains and simple living. In a pamphlet
published in May, 1791, we see how, in regard to this also, public
opinion was blinded. The author calls attention to the increase of
gambling in values of all sorts in these words: "What shall I say of the
stock-jobbing, as frightful as it is scandalous, which goes on in Paris
under the very eyes of our legislators,--a most terrible evil, yet,
under the present circumstances,--necessary?" The author also speaks
of these stock-gamblers as using the most insidious means to influence
public opinion in favor of their measures; and then proposes, seriously,
a change in various matters of detail, thinking that this would prove a
sufficient remedy for an evil which had its roots far down in the whole
system of irredeemable currency. As well might a physician prescribe a
pimple wash for a diseased liver. [34]
Now began to be seen more plainly some of the many ways in which an
inflation policy robs the working class. As these knots of plotting
schemers at the city centers were becoming bloated with sudden wealth,
the producing classes of the country, though having in their possession
more and more currency, grew lean. In the schemes and speculations put
forth by stock-jobbers and stimulated by the printing of more currency,
multitudes of small fortunes were absorbed and lost while a few swollen
fortunes were rapidly aggregated in the larger cities. This crippled a
large class in the country districts, which had employed a great number
of workmen.
In the leading French cities now arose a luxury and license which was
a greater evil even than the plundering which ministered to it. In
the country the gambling spirit spread more and more. Says the same
thoughtful historian whom I have already quoted: "What a prospect for
a country when its rural population was changed into a great band of
gamblers!" [35]
Nor was this reckless and corrupt spirit confined to business men; it
began to break out in official circles, and public men who, a few
years before, had been thought above all possibility of taint, became
luxurious, reckless, cynical and finally corrupt. Mirabeau, himself,
who, not many months previous, had risked imprisonment and even death
to establish constitutional government, was now--at this very
time--secretly receiving heavy bribes. When, at the downfall of the
monarchy a few years later, the famous iron chest of the Tuileries was
opened, there were found evidences that, in this carnival of inflation
and corruption, he had been a regularly paid servant of the Royal
court. [36] The artful plundering of the people at large was bad enough,
but worse still was this growing corruption in official and legislative
circles. Out of the speculating and gambling of the inflation period
grew luxury, and, out of this, corruption. It grew as naturally as a
fungus on a muck heap. It was first felt in business operations,
but soon began to be seen in the legislative body and in journalism.
Mirabeau was, by no means, the only example. Such members of the
legislative body as Jullien of Toulouse, Delaunay of Angers, Fabre
d'Eglantine and their disciples, were among the most noxious of those
conspiring by legislative action to raise and depress securities for
stock-jobbing purposes. Bribery of legislators followed as a matter of
course, Delaunay, Jullien and Chabot accepted a bribe of five hundred
thousand _livres_ for aiding legislation calculated to promote the
purposes of certain stock-jobbers. It is some comfort to know that
nearly all concerned were guillotined for it. [37]
It is true that the number of these corrupt legislators was small, far
less than alarmists led the nation to suppose, but there were enough to
cause wide-spread distrust, cynicism and want of faith in any patriotism
or any virtue.