(e) Financial crisis

The most important of the short-term causes of the French Revolution was the financial crisis. By far the most important aspect of this was the huge deficit that the government was building up.

On 20 August 1786 Colonne, the controller-General (the equivalent of finance Minister) told Louis XVI that the government was on the verge of bankruptcy. Revenue for 1786 would be 475 million Livres, while expenditure would be 587 million livres, making a deficit of 12 million – almost a quarter of the total income.

A much more detailed and alarming picture of the situation is provided in the Treasury account of 1788, which has been called the first and last budget of the monarchy. Total income for 1788 was 503 million livres whereas expenditure stood at 629 million livres.  This produced a deficit of 126 million livres, 20 percent of the total expenditure. There are two reasons why the expenditure continued to rise above income.

1. War: Between 1740 and 1783, France was at war over Austrian succession (1740-1748); then the seven years war (1756-63) and finally, the American War of independence, (1778- 1783). The cost of helping the American colonists to defeat the British government was approximately 1066 million livres. This was mainly achieved through, Necker’s efforts in raising loans, rather than imposing any new taxes, while this did not directly lead to revolution. The lack of an elected parliament to guarantee loans, as in Britain, did not give leaders confidence.

2.  Tax: the crown was not receiving much of the money collected in taxes and until it recovered control of its finances, no basic reforms could be carried out. This is because taxes were collected by a chaotic and inefficient system known as tax farming. The Farmers- General was a company that collected the indirect tax for the government. They paid the state an agreed sum and kept for themselves anything collected above this figure. The French government consequently never received enough money from taxes to cover its expenditure, and so frequently had to borrow. Interest rate payments on the debt became too large because of an increasingly large part of government expenditure in the eighteenth century. Added to this, was the fact that corruption and wastage were vast ways of draining away revenue.

The privileged classes, whose income from property had increased, were an untapped source of revenue that the Crown urgently needed to access. There would, however, be powerful resistance to any change in the taxation structure from those with vested interests in retaining the status quo.

The failure of the attempted reform policies: Why did the reform process fail and with what consequences?

Following Necker’s dismissed in 1781, his successor Joly de Fleury discovered the true nature of France’s, finances. The treasury was 160 million livres short for 1781 and 295 million livres short for 1782. To make good the shortfall, Fleury and his successor Colonne, undid much of Necker’s work by resuming the practice of selling offices (many of which Necker had abolished). They both also borrowed much more heavily than Necker.

In 1786, with loans drying up, Colonne was forced to attempt to reform the tax system altogether. His plan consisted of an ambitious three part programme:

i) The introduction of a land tax, on all owned land. This would affect all landed proprietors the church, noble and common alike. This was regardless of whether the lands were used for luxury purposes or for crops. There were to be no exemptions. This was in light of the fact that the current system of taxation which primarily targeted the Third Estate, could not be increased any further. New sources of revenue had to be found in order to alleviate the burden on the Third Estate as well as increase the amount of the revenue which was collected. Such a reform was directly affecting the privileged position of the clergy and the nobility and was therefore likely to hit a brick wall.

ii) The second part of the programme was aimed at stimulating the economy to ensure that future tax revenues would increase. Colonne proposed abandoning controls on the grain trade and abolishing internal customs barriers, which prevented the free movement of grain from one part of France to another.

iii) The final part of the programme was to try to restore national confidence so that new loans for the short term period could be raised. By doing this, Colonne hoped that the parliaments would be less likely to oppose the registration of his measures

The failure of the reform process.

The obvious body that was supposed to oppose the reforms, that was representative of the nation, was the Estate- General. But this was rejected as being too unpredictable. Colonne and Lous XVI, opted instead, for a handpicked Assembly of notables. It was anticipated that this would be a pliant or soft body which would willingly agree to rubber stamp the reform package.

The 144 members of the Assembly of notables met in February 1787 at a time when the financial woes of the nation were increasingly becoming apparent. It included leading members of the parliament, princes, leading nobles and important bishops. On examining the proposals, it became clear that they would not support Colonne and Louis XVI’s reform package. As representatives of the privileged orders, they had the most to lose from them.

The notables were, however, not opposed to all the changes and they agreed that taxation should be extended to all the classes. They claimed that the approval from the nation was needed for Colonne’s reforms had urged the summoning of the Estates – General, which had last met in 1614. Realizing the strength of opposition to Colonne, Louis XVI dismissed him in April 1787. This action directly worsened the economic and political situation in the country because the avenue to raise the much needed revenue was now blocked. This was one clear example where the King’s weakness worsened the crisis in France and helped crystallize the revolutionary situation.

The Political Crisis, 1787-1788

Colonne was replaced by one of the Notables, Lomenie de Brienne. The Assembly of Notables proved to be no more co-operative with Brienne than it had been with Colonne.

Brienne retained Colonnes land tax and introduced a number of new reforms following on from Necker’s earlier plans. There was to be an end to corrupt financial officials; a new central treasury established and laws codified in a printed form accessible to those who needed to consult them. The education system was also reformed and religious toleration was introduced. The army was made more efficient and less expensive to maintain.

When Brienne presented his reforms first to the parliament of Paris, they refused, arguing that the Estates – General was the only one which represented the whole nation, and needed to be consulted about the new taxes. Louis reaction was to exile parliament to Troyes on 15 August 1788.

Louis’ action was considered to be high handed and the result was an aristocratic revolt, usually called the revolt of the nobility. It proved to be the most violent opposition the government had yet faced. There were riots in some of the provincial capitals where the parliaments  met, such as in Rennes in Brittany and Grenoble. In all parts of the country, nobles in unauthorized assemblies met to discuss action in support of parliament.

An assembly of the clergy also joined in on the side of the parliaments, breaking its long tradition of loyalty to the crown. It condemned the reforms and approved the payment of an amount which was less than a quarter of the size requested by the crown.

What was the significance of the revolt of the nobility?

Firstly it showed clearly that Louis XVI was a weak character who failed to exercise the absolute power which had been bestowed upon him by divine right.  He was therefore incapable of implementing tough decisions which would both, address the financial and political crisis in the country as well as save his own position.

It also shows quite clearly that, by their negative attitude towards reform, the nobility were equally responsible for the political crisis which gripped France in 1789. The crisis in France had reached staggering proportions where the nobility were supposed to exercise magnanimity for their own survival. This did not happen, and the nobility as a class headed towards political and social extinction in the face of the French Revolution.

Due to the revolt of the nobility and the failure by the crown to secure more revenue which was desperately needed, the French government went completely bankrupt at the beginning of August 1788. On 16 August 1788, Brienne suspended all payments from the royal treasury, which in effect confirmed that the Crown was broke.

In September 1788, Louis was forced to back down and allow the Paris parliament to return. Following the resignation of Brienne, the king recalled Necker in the belief that he was the only one who could restore the government’s credit and raise new loans. Necker abandoned his predecessor’s reform plans and while indicating that he would try to raise new loans, he stated that he would do nothing until the Estates- General had met. The crisis revealed the limitations of royal power. Although Louis was in effect an absolute ruler, in reality he was unable to impose his government’s reforms on the state. The forces of opposition detected clear signs of weakness in the Crown. The failure to secure reform contributed to a paralysis of the government.

When viewed broadly, the economic crisis directly led to the outbreak of the revolution in France. Bankruptcy compelled the king to agree to call for the Estate-General meetings, whose outcome directly led to the collapse of the Crown. Bankruptcy worsened the harvest failures and the food shortage, because the Crown could not raise money to feed its people. Hence the polarization and land politicization (a process when people who were previously unconnected with politics take, an active interest in political issues which affect the daily lives of the majority of the third (Estate) began as a result of the economic crisis.

The above analysis is backed by J.H. Shennan whose research argues that the long term problems and resentments were brought to a head by events immediately preceding 1789.

According to Shannon, the two most important areas in which deep- seated problems reached a critical point in the 1770s and 1780s, were finance and government. Financial problems brought about by the involvement in the American War of Independence were compounded by a series of bad harvests which resulted in steep increases in the price of bread. Behind both of those factors, lay the permanent problem posed by the conservative social and political order which prevented the rich land of France developing as it should and the government constantly starved of income. Hence both long- term and short-term causes contributed significantly to the outbreak of the French Revolution. The revolution itself was a culminating point of a long period of social, political and economic grievances in France. Whilst factors which became more clearly visible in 1789, such as financial problems and the kings weaknesses, are often cited as more important, the root causes of the Revolution should never be underestimated.