FRENCH REVOLUTION 483 body of laws in its jurisdiction.After a law passed muster,it was registered by the Parlements and enforced in court.Parlements also functioned as courts of law and courts of appeal. The Parlements had the right to remonstrate,that is,to send a written exposition of their misgivings about a law,and to request that the law be reconsidered.If the king persisted,the Parlement could issue "iterative remonstrances."The next step was for the king to summon and preside over a special Parlement session called a lit de justice.When the king sat in Parlement,he could compel registration of a law.Further resistance from the Parlement was met by force, exile,or prison. There was no written constitution,yet legal scholars spoke of one and disputed it.An uneasy sense of balance existed between the king's divine right to rule and the secular necessities of legal continuity. France presented a paradox.The absolute power of the monarchy was acknowledged,and institutions were reinforced that effectively constrained centralized authority. Offices Positions in the Parlement were sold by the king and were inherited or resold by the "owner"with tacit royal consent and payment of a transaction tax.Holders of parliamentary offices,as well as other venal offices of justice,were known as the noblesse de robe.They formed a cohesive class united by their common arrangements with the Crown. Beyond the noblesse de robe,there was a larger class of officers,more than 50,000 by the time of the Revolution,who also owned their offices.These positions in the judicial,police,administrative,and fiscal systems were properties owned and bequeathed by the officers. An officer's wages represented the interest on the sum,called the finance of the office,which he or his predecessor had paid to acquire the office.12 The finances of all offices formed a component of the public debt that could not be altered or diminished without major institutional changes.3 Taxes Royal taxes under Louis XIV consisted of the taille,a direct tax of medieval origin from which the nobility was exempt,and a vast array 12 Office owners did not welcome increases in wages because they forced the owners to increase the finance or forfeit the office. 13 An officer's compensation often went beyond the wages themselves to include all forms of pecuniary and nonpecuniary rewards:feudal-like dues,legal or illegal bribes, prestige,tax exemption,and that most coveted prize,nobility itself(see Bien 1987)
FRENCH REVOLUTION 483 body of laws in its jurisdiction. After a law passed muster, it was registered by the Parlements and enforced in court. Parlements also functioned as courts of law and courts of appeal. The Parlements had the right to remonstrate, that is, to send a written exposition of their misgivings about a law, and to request that the law be reconsidered. If the king persisted, the Parlement could issue "iterative remonstrances." The next step was for the king to summon and preside over a special Parlement session called a lit de justice. When the king sat in Parlement, he could compel registration of a law. Further resistance from the Parlement was met by force, exile, or prison. There was no written constitution, yet legal scholars spoke of one and disputed it. An uneasy sense of balance existed between the king's divine right to rule and the secular necessities of legal continuity. France presented a paradox. The absolute power of the monarchy was acknowledged, and institutions were reinforced that effectively constrained centralized authority. Offices Positions in the Parlement were sold by the king and were inherited or resold by the "owner" with tacit royal consent and payment of a transaction tax. Holders of parliamentary offices, as well as other venal offices of justice, were known as the noblesse de robe. They formed a cohesive class united by their common arrangements with the Crown. Beyond the noblesse de robe, there was a larger class of officers, more than 50,000 by the time of the Revolution, who also owned their offices. These positions in the judicial, police, administrative, and fiscal systems were properties owned and bequeathed by the officers. An officer's wages represented the interest on the sum, called the finance of the office, which he or his predecessor had paid to acquire the office.'2 The finances of all offices formed a component of the public debt that could not be altered or diminished without major institutional changes.'3 Taxes Royal taxes under Louis XIV consisted of the taille, a direct tax of medieval origin from which the nobility was exempt, and a vast array 12 Office owners did not welcome increases in wages because they forced the owners to increase the finance or forfeit the office. 13 An officer's compensation often went beyond the wages themselves to include all forms of pecuniary and nonpecuniary rewards: feudal-like dues, legal or illegal bribes, prestige, tax exemption, and that most coveted prize, nobility itself (see Bien 1987)
484 JOURNAL OF POLITICAL ECONOMY of indirect taxes on consumption and movements of commodities across France's numerous internal borders (droits,traites,aides,and gabelles).The king collected various feudal dues and revenues from the monopolies that he owned,including coin minting,salt,postal service,tobacco,parts of foreign trade,gunpowder manufacture,and the lottery. The taille was collected differently in various regions.Within the kingdom's historic core,a system of direct allocation of tax liabilities by royal officers had evolved(the areas under this system were called pays d'election).The monies were collected by the receveurs,venal offi- cers who pledged to pay the Treasury the amounts assessed according to a specific timetable.They regularly gave the Treasury rescriptions, or claims on themselves due a year hence,which the Treasury resold at discount.The receveurs earned interest on the funds collected and also received a commission on the taxes collected (see Bosher [1970] for details).Notes issued by the receveurs and billets issued by the Fermes Generales were called anticipation notes.These notes formed the floating debt system and also allowed private parties to transfer funds to and from Paris in the absence of a developed banking system. More "recently"absorbed territories such as Brittany,Burgundy, Provence,Artois(fifteenth century),Bearn,Foix,Bigorre(sixteenth century),Franche-Comte,and Flanders(seventeenth century)negoti- ated their global tax dues with the king through the provincial Es- tates,which met regularly and were charged with collecting tax mon- ies.Other direct taxes (the capitation in 1695)followed the same mode of assessment as the taille.Repeatedly throughout the eighteenth cen- tury,attempts were made to impose income taxes without respect to status or privilege.These attempts failed in terms of both the modest amounts collected in 1789(12 percent of revenues)and the persisting irregularities in assessment. Indirect taxes and monopolies were leased to syndicates of individ- uals who contracted with the king.Tax farmers collected taxes within the limits of the law in exchange for a specified amount of money for each year of the lease.The lease stated a minimum payment to the farmers and a rule for sharing the excess over that minimum between the king and the farmers.After 1726,the Fermes Generales collected all consumption taxes and internal duties,and managed the salt monopoly.14 A last form of tax collection called the regie was collected by govern- ment employees who received a salary and a commission.Louis XIV 14 As a variant of tax farming,the financiers paid a capital sum corresponding to the present value of a tax
484 JOURNAL OF POLITICAL ECONOMY of indirect taxes on consumption and movements of commodities across France's numerous internal borders (droits, traites, aides, and gabelles). The king collected various feudal dues and revenues from the monopolies that he owned, including coin minting, salt, postal service, tobacco, parts of foreign trade, gunpowder manufacture, and the lottery. The taille was collected differently in various regions. Within the kingdom's historic core, a system of direct allocation of tax liabilities by royal officers had evolved (the areas under this system were called pays d'election). The monies were collected by the receveurs, venal officers who pledged to pay the Treasury the amounts assessed according to a specific timetable. They regularly gave the Treasury rescriptions, or claims on themselves due a year hence, which the Treasury resold at discount. The receveurs earned interest on the funds collected and also received a commission on the taxes collected (see Bosher [1970] for details). Notes issued by the receveurs and billets issued by the Fermes Ge'nerales were called anticipation notes. These notes formed the floating debt system and also allowed private parties to transfer funds to and from Paris in the absence of a developed banking system. More "recently" absorbed territories such as Brittany, Burgundy, Provence, Artois (fifteenth century), Bearn, Foix, Bigorre (sixteenth century), Franche-Comte, and Flanders (seventeenth century) negotiated their global tax dues with the king through the provincial Estates, which met regularly and were charged with collecting tax monies. Other direct taxes (the capitation in 1695) followed the same mode of assessment as the taille. Repeatedly throughout the eighteenth century, attempts were made to impose income taxes without respect to status or privilege. These attempts failed in terms of both the modest amounts collected in 1789 (12 percent of revenues) and the persisting irregularities in assessment. Indirect taxes and monopolies were leased to syndicates of individuals who contracted with the king. Tax farmers collected taxes within the limits of the law in exchange for a specified amount of money for each year of the lease. The lease stated a minimum payment to the farmers and a rule for sharing the excess over that minimum between the king and the farmers. After 1726, the Fermes Ge'ne'rales collected all consumption taxes and internal duties, and managed the salt monopoly.14 A last form of tax collection called the regie was collected by government employees who received a salary and a commission. Louis XIV 14 As a variant of tax farming, the financiers paid a capital sum corresponding to the present value of a tax
FRENCH REVOLUTION 485 attempted but failed to use the regie.It was reintroduced first in the 1750s as a tax on leather and later to manage the king's feudal rights and the royal demesne.By 1789,25 percent of fiscal revenues were collected through regies and 35 percent through farms.The re- maining direct taxes were collected through the receveurs and provin- cial officers. Taxation was not uniform across classes,occupations,or provinces. Specific groups often had the opportunity to pay an abonnement or waiver of a new tax or duty.The clergy paid taxes by recurrently conceding a don gratuit(free gift).15By 1789,the annual average of the clergy's tax bill was 10 millions,or less than 2 percent of the state's fiscal revenues,even though the church owned 10-15 percent of the property in France.Cities,provinces,professional corps,the royal princes,and religious associations also benefited from the waiver system.16 The state's liabilities and commitments included favors,gifts,and pensions bestowed by the king.Favors often took a symbolic form. Historians marvel at how Louis XIV had the nobility competing for the honor of holding his shirt while he dressed.Other favors were more costly.Spending on pensions grew at an even faster rate than on defense during the reign of Louis XVI.The revolutionaries were astonished by the thousands of names on the pension lists,as well as by the multiple secret favors consigned in the Red Book and indig- nantly published by the Assembly.Other favors took the form of exchanges of lands,purchases of fiefdoms,and so on. Apology for the Old Regime The revolutionaries considered this structure to be antiquated and inefficient.But it served a purpose.The French nation had been formed over the centuries by granting concessions as well as by con- quest,inheritance,and acquisition.Local customs and traditions, privileges,and hierarchies could not easily be overturned or ignored. Incorporating the local power structures into the French realm made it easier to win acceptance of the new rule. s Individuals or communities could negotiate remises,decharges,moderations,or indem- nites,exemptions or special rebates. 16 A map of the prices at which salt was sold by the Fermes Generales,which managed the monopoly,showed a mosaic of exemptions.Some were due to the fact that a region produced salt itself (Brittany and the Atlantic Coast).Others had historical explanations.Prices varied from 1.5 livres for 100 pounds of salt to 62 in Burgundy (but within Burgundy,20 villages enjoyed prices lower by a half or more).The price increased 30-fold when one crossed from Brittany to Maine.This created opportunities for smuggling
FRENCH REVOLUTION 485 attempted but failed to use the regie. It was reintroduced first in the 1750s as a tax on leather and later to manage the king's feudal rights and the royal demesne. By 1789, 25 percent of fiscal revenues were collected through regies and 35 percent through farms. The remaining direct taxes were collected through the receveurs and provincial officers. Taxation was not uniform across classes, occupations, or provinces. Specific groups often had the opportunity to pay an abonnement or waiver of a new tax or duty. The clergy paid taxes by recurrently conceding a don gratuit (free gift)."5 By 1789, the annual average of the clergy's tax bill was 10 millions, or less than 2 percent of the state's fiscal revenues, even though the church owned 10-15 percent of the property in France. Cities, provinces, professional corps, the royal princes, and religious associations also benefited from the waiver system.'6 The state's liabilities and commitments included favors, gifts, and pensions bestowed by the king. Favors often took a symbolic form. Historians marvel at how Louis XIV had the nobility competing for the honor of holding his shirt while he dressed. Other favors were more costly. Spending on pensions grew at an even faster rate than on defense during the reign of Louis XVI. The revolutionaries were astonished by the thousands of names on the pension lists, as well as by the multiple secret favors consigned in the Red Book and indignantly published by the Assembly. Other favors took the form of exchanges of lands, purchases of fiefdoms, and so on. Apology for the Old Regime The revolutionaries considered this structure to be antiquated and inefficient. But it served a purpose. The French nation had been formed over the centuries by granting concessions as well as by conquest, inheritance, and acquisition. Local customs and traditions, privileges, and hierarchies could not easily be overturned or ignored. Incorporating the local power structures into the French realm made it easier to win acceptance of the new rule. 15 Individuals or communities could negotiate remises, decharges, modgrations, or indemnites, exemptions or special rebates. 16 A map of the prices at which salt was sold by the Fermes Gingrales, which managed the monopoly, showed a mosaic of exemptions. Some were due to the fact that a region produced salt itself (Brittany and the Atlantic Coast). Others had historical explanations. Prices varied from 1.5 livres for 100 pounds of salt to 62 in Burgundy (but within Burgundy, 20 villages enjoyed prices lower by a half or more). The price increased 30-fold when one crossed from Brittany to Maine. This created opportunities for smuggling
486 JOURNAL OF POLITICAL ECONOMY 450 400 350 300 250 200 150 100 50 1700 1720 1740 1760 1780 *France FIG.4.-Military spending in Britain and France,1688-1789.Sources:for Britain: Mitchell(1988);for France:Mallet(1789),Forbonnais(1758),and the references listed in n.8. Fiscal Pressures to Reform As wars expanded across continents and oceans,costs rose,and they were no longer funded in the traditional medieval way of raising sufficient taxes during wartime to cover expenditures.Figure 4 com- pares the history of military expenditures in France and in England. The wars of Louis XIV (between 1688 and 1714)occasioned the first large-scale recourse to borrowing in the form of publicly sold annuities.This began 75 years of increasing reliance on marketable public debt,bringing the debt/gross national product ratio to 63 per- cent in 1789.By 1789,debt issued on the market represented close to 80 percent of the state's liabilities.Table I shows that the three categories of perpetual debt,life annuities,and securities(fixed-term loans and floating debt)each represented 26 percent of the state's liabilities,whereas the finance of all offices represented 735 millions or 17 percent of the total debt or 21 percent if we add bond monies. Credit was useful to France's foreign policy but difficult for a sover- eign monarch to obtain.An obstacle to getting credit was the sover- eign's monopoly of force and his power over contract enforcement. This problem was analyzed by Bulow and Rogoff(1989)and Chari and Kehoe (1993a).Chari and Kehoe's analysis is driven by the calcu- lation that as long as a government does not lose access to a means
486 JOURNAL OF POLITICAL ECONOMY 450 - 400 350- 0 250- .0 1501 100 / 50 1700 1720 1740 1760 1780 *: France FIG. 4.-Military spending in Britain and France, 1688-1789. Sources: for Britain: Mitchell (1988); for France: Mallet (1789), Forbonnais (1758), and the references listed in n. 8. Fiscal Pressures to Reform As wars expanded across continents and oceans, costs rose, and they were no longer funded in the traditional medieval way of raising sufficient taxes during wartime to cover expenditures. Figure 4 compares the history of military expenditures in France and in England. The wars of Louis XIV (between 1688 and 1714) occasioned the first large-scale recourse to borrowing in the form of publicly sold annuities. This began 75 years of increasing reliance on marketable public debt, bringing the debt/gross national product ratio to 63 percent in 1789. By 1789, debt issued on the market represented close to 80 percent of the state's liabilities. Table 1 shows that the three categories of perpetual debt, life annuities, and securities (fixed-term loans and floating debt) each represented 26 percent of the state's liabilities, whereas the finance of all offices represented 735 millions or 17 percent of the total debt or 21 percent if we add bond monies. Credit was useful to France's foreign policy but difficult for a sovereign monarch to obtain. An obstacle to getting credit was the sovereign's monopoly of force and his power over contract enforcement. This problem was analyzed by Bulow and Rogoff (1989) and Chari and Kehoe (1993a). Chari and Kehoe's analysis is driven by the calculation that as long as a government does not lose access to a means
FRENCH REVOLUTION 487 TABLE 1 STATE OF DEBT IN 1789 Capital Outstanding Debt Service 1.Rents: Perpetuals 1,136.0 56.8 Life annuities 1,154.0 105.0 2.Fixed-term loans 830.3 111.5* 3.Anticipations 322.3 15.8 4.Bond monies 201.8 10.2 5.Financed offices 119.2 5.0 Total (May 1789) 3,763.6 304.3 Ratio to GNP 63.3% Ratio to revenues 64.4% 6.Offices 616.7 9.7 7.Feudal rights 130.0 。。。 8.Debts of clergy 95.0 4.75 9.Debts of abolished institutions 228.4 11.4 Total (November 1789) 4,816.9 325.4 Ratio to GNP 81.1% Ratio to revenues 68.9% SoURCE.-Compte general (1789),pp.44-48,50-54,82,and 98-99:Archives parlemen- ai5,10:96,72:i99,41:l45-52,and30:329. *34.7 of this is interest payments. of saving,the punishment of not being able to borrow in the future is not sufficient to deter a default:if it can lend,a government can tax smooth almost as well as it can by borrowing.From the standpoint of the analysis of Chari and Kehoe(1993a),the mystery is that the king could borrow as much as he did.Nevertheless,the debt sus- tainability problem preoccupied the king's ministers.In 1784,Jacques Necker wrote the following: The absolute power of a monarch and full public trust are two notions which need intermediaries to be perfectly concil- iated.This authority is in France subject to certain restraints when it comes to an increase in the sovereign's revenues, since the laws which levy new taxes must be registered in the Parlements,and these courts can then enlighten the mon- arch's justice by their remarks;but a simple arret du Conseil or a ministerial order authorized by the sovereign are enough to suspend reimbursements or impose a reduction in interest....Therefore one can rekindle or sustain public trust only by giving reassurances on the sovereign's inten- tions,and by proving that no motive can incite him to fail his obligations.[1784,3:155]
FRENCH REVOLUTION 487 TABLE 1 STATE OF DEBT IN 1789 Capital Outstanding Debt Service 1. Rents: Perpetuals 1,136.0 56.8 Life annuities 1,154.0 105.0 2. Fixed-term loans 830.3 111.5* 3. Anticipations 322.3 15.8 4. Bond monies 201.8 10.2 5. Financed offices 119.2 5.0 Total (May 1789) 3,763.6 304.3 Ratio to GNP 63.3% Ratio to revenues 64.4% 6. Offices 616.7 9.7 7. Feudal rights 130.0 ... 8. Debts of clergy 95.0 4.75 9. Debts of abolished institutions 228.4 11.4 Total (November 1789) 4,816.9 325.4 Ratio to GNP 81.1% Ratio to revenues 68.9% SOURCE.-Compte gbdral (1789), pp. 44-48, 50-54, 82, and 98-99; Archives parlementaires, 10:96, 72:199, 41:145-52, and 30:329. * 34.7 of this is interest payments. of saving, the punishment of not being able to borrow in the future is not sufficient to deter a default: if it can lend, a government can tax smooth almost as well as it can by borrowing. From the standpoint of the analysis of Chari and Kehoe (1993a), the mystery is that the king could borrow as much as he did. Nevertheless, the debt sustainability problem preoccupied the king's ministers. In 1784, Jacques Necker wrote the following: The absolute power of a monarch and full public trust are two notions which need intermediaries to be perfectly conciliated. This authority is in France subject to certain restraints when it comes to an increase in the sovereign's revenues, since the laws which levy new taxes must be registered in the Parlements, and these courts can then enlighten the monarch's justice by their remarks; but a simple arr&t du Conseil or a ministerial order authorized by the sovereign are enough to suspend reimbursements or impose a reduction in interest.... Therefore one can rekindle or sustain public trust only by giving reassurances on the sovereign's intentions, and by proving that no motive can incite him to fail his obligations. [1784, 3:155]