Causes of the Collapse of the Royal Finances Flashcards
What are the 3 factors?
- Necker and Calonne’s erros 1778-1787
- Flaws in the structure of the AR preventing changes to taxation
- Financial privileges of the 1st and 2nd estates
When was Necker finance minsiter?
1777-1781
How did Necker attempt to improve royal finance?
- Continued Turgot’s idea of cutting royal expenditure
- Borrowed 520m livres with high interest rather than raising tax
- Hit hard at venality to reduce corruption but lost a massive source of credit
- Reduced tac farmers from 60-40
What was Necker’s Compte Rendu du Roi?
- 1781
- Published royal spending and government’s finance to try and win the people’s confidence; 100,000 copies sold in a week
- The statement was false and said France was in a surplus of 10m when it was in fact in a deficit of 46m
- Necker also didn’t declare the cost of the American War of Independence when the French loaned 1.3b
Why did Necker’s policies fail?
- Inaccuracy of statement may have gained confidence but didn’t solve France’s financial problems
- Needed more loans to pay back other loans creating a cycle of debt
- Made enemies at court e.g. Louis XVI opposed Compte Rendu
When was Calonne minister of fiannce?
1783-1787
When did Calonne put his reform package together?
1786
What was Calonne’s problem?
He feared raising tax on peasants and reluctant to tax nobles so looked for loans from European banks but French credibility was little to none
What did his reform package involve?
- Continued raising loans
- Ended corvée royale and replaced with genreal land tax on everybody
- Removed controls on grain trade
- Removed internal customs barriers to try and boost commerce
- To gain the country’s confidence, out his ideas to ‘Assembly of Notables’ selected by King from 1st and 2nd Es
Why did Calonne’s policies fail?
- He didn’t realise the implications of the changes he was introducing
- I.e. land tax on all profoundly opposed structure of AR and so…
- Ministers opposed these measures
How did flaws in the structure of the AR lead to the collapse of the royal finances?
- Not enough income because…
- Structure itself prevented changing tax
- Structure made wider economic crisis caused by competition and weather more detrimental
What were the flaws in the AR in an economic contect?
- Direct tax collected by venal officers; could keep some but give didn’t know how much they were expecting which meant a lot of corruption
- Indirect taxes (e.g.) collected by tax farmers and syndicates but accounting procedures limited which meant more corruption
- France lacked a network of rivers/canals to carry goods e.g. grain
- Only 15% of population lived in localities with more than 2000 which was bad for trade
- No central treasury nor bank; borrowing scheme using paper money
What are some stats about the wider economic crisis?
- Downturn in 1770s meant by 1777, cost of living was double 50 years ago and were earning the same
- 1780s decline in textile industry versus more mechanised British e.g. by 1789, British had 200 cotton mills and France had 8 (also unemployment)
- Poor harvest 1785-9 depressed peasants incomes
- July 1788 = hailstorm destroyed crops so worst harvest in 40 years
- 25,000 different units of measure in France before 1789 = fraud and inefficient trade
- By spring 1789, Parisian workers spending up to 88% of their wages on bread
- Over the 18th century, prices rose 3x faster than wages
How did the financial privileges of the first two estates contribute to the economic crisis?
Massive potential source of income unexploited as they were largely exempt from taxation especially on land
How did the 1st Estate get taxed? How much land did they own?
- Exempt from paying the taille and instead gave King a lump sum (‘Don Gratuit’); not necessarily easy to plan expenditure as no certainty as to how much they might pay
- They owned about 10% of all French land
