French Financial Crisis
Charles Alexandre de Calonne told Louis XVI in August 1786 that the state was bankrupt and that only structural reform could save it. The deficit was around 110 million livres against revenue of some 475 million, and roughly half of all spending went on servicing debt. The immediate cause was the American war, financed entirely by borrowing on Necker's advice at rates that reflected French credit rather than British. The deeper cause was the tax system. The nobility and the clergy were substantially exempt from the taille; the church paid a negotiated voluntary gift; whole provinces had different arrangements; internal customs barriers fragmented the market; and collection was farmed out to financiers who kept a share. France was not a poor country. It was a rich country with a state that could not tax it. Calonne's proposal was radical: a universal land tax paid by all landowners without exemption, assessed by elected provincial assemblies, plus free trade in grain, abolition of internal tariffs and the corvée. He knew the parlements would reject it, so he persuaded the king to summon an Assembly of Notables in February 1787 — 144 hand-picked bishops, nobles and magistrates whom he expected to endorse it. They refused, demanded to see the accounts, and destroyed him. Calonne was dismissed in April. His successor Brienne fared no better, and the Parlement of Paris declared that only the Estates-General could consent to new taxation. It was summoned for May 1789, having not met since 1614. The bankruptcy was therefore not the revolution's background but its immediate cause.
- Year: 1786 CE
- Category: Economic
