Chapter 19

FINANCE.

Certain financial practices, not immediately connected with taxation, call for a short notice; for they are among the most famous errors of the government of old France. One of these was the habit of issuing what were called anticipations.[Footnote: Anticipations. "On entendait par là des assignations sur les revenus futurs, remises aux fournisseurs et autres creanciers du Trésor et negociables entre leurs mains." Clamageran, iii. 30. Necker, _Compte rendu_, 20. Stourm (ii. 200) thinks the amount not excessive, while acknowledging that it was so considered. The Anticipations formed in fact the floating debt of the government. Gomel, 287.] These were securities with a limited time to run, payable from a definite portion of the future revenue. They were a favorite form of investment with certain people, and a great convenience to the treasury, but they constantly tended to increase to an amount which was considered dangerous. Thus the revenue of each year was spent before it was collected; and loans were contracted, not for any urgent and exceptional necessity of the state, but for ordinary running expenses. Another practice was the issuing by the king in person of drafts on the treasury. Such drafts (_acquits de comptant_) were made payable to bearer, and it was therefore impossible for the controller of the finances to know for what purpose they had been drawn. Originally a device for the payment of the private expenses of the king, these drafts had become favorite objects of the cupidity of the courtiers; because from their form it was impossible to trace them and discover the recipient. Under Louis XVI. they absorbed more money than ever before. It was very easy for that weak prince to give a check to any one who might ask him. Turgot made him promise to stop doing so, but he had not the strength to keep his word.[Footnote: Clamageran, in. 380, n. Bailly, i. 221, ii. 214, 259. The foreign office made use of ordonnances de comptant to the amount of several millions annually, for subsidies to foreign governments, expenses of ambassadors, secret service, etc. Stourm, ii. 153.]

From an early time the custom of selling public offices had taken root in France. Before the middle of the fourteenth century we find Louis X. selling judicial places to the highest bidder, and less than a hundred years later the practice had extended so that all manner of petty offices were sold by the government. This method of raising money was so easy that, in spite of the remonstrances of estates general and the promises of kings, it was continually extended. In the sixteenth century, as a greater inducement to purchasers, the offices were made transferable on certain conditions, and in 1605 they became subjects of inheritance. Places under government were thus assimilated to other property and passed from the holder to his heirs. The law which established this state of things was called _Édit de la Paulette_, after one Paulet, a farmer of the revenue.

This sale of offices bore a certain resemblance to a loan and to a tax. The services to be performed were often unimportant, sometimes worse than useless. But the salary attached to the office might be considered the interest of money lent to the crown; or if the office-holder were paid by fees, he was enabled to make good to himself the advance made to the government by drawing money from the tax-payers. Very generally the two forms of profit to the incumbent were combined, together with a third, the possession, namely, of privileges, or exemption from taxation, attached to the office.

In managing its revenue from this source, the treasury dealt fairly neither with the office holders nor with the public. Places were created only to be sold, and before long were abolished, either without any promise of compensation to the buyers, or with promises destined never to be fulfilled. This want of faith kept down the price, which was often but ten years' purchase of the income of the place. Yet rich and poor were eager to buy. "Sir," said a minister of finance to King Louis XIV., "as often as it pleases your Majesty to make an office, it pleases God to make a fool to fill it."

Thus it came to pass that most places about the royal person, in the courts of justice and in the treasury, and many in the municipal governments, the professions, and the trades, were subject to sale and purchase. Numberless persons waited at the royal table, sat in the high courts of Parliament, weighed, measured, gauged, sold horses, oysters, fish, or sucking pigs, shaved customers or gave hot baths, as public functionaries and by virtue of letters patent sold to them by the crown. The clerk kept his register, not because the information it contained would be useful to the government, but because he or some one else had lent money, on which the public was now paying interest in the form of registration fees. Thus the custom of selling offices was cumbrous and objectionable.[Footnote: Montesquieu defends the custom, however. He maintains that the offices in a monarchy should be venal; because people do as a family business what they would not undertake from virtue; every one is trained to his duty, and orders in the state are more permanent. If offices were not sold by the government they would be by the courtiers. Montesquieu, iii. 217 (_Esprit des Lois_, liv. v. cxix.). See also De Tocqueville, iv. 171 (_Anc. Reg_. ch. xi.). In many cases offices were desired more for the sake of distinction and privilege than for profit. The income was often very small. Clamageran, ii. 196, 378, 569, 615, 665; iii. 23, 24, 102, 155, 200, 319. Necker, _De l'Administration_, iii. 147. Thierry, i. 163. Pierre de Lestoile, 390, _n_.]

While the taxes of France were thus devised without system and levied without skill, the attention of a thoughtful part of the nation had been turned to financial matters. About the middle of the century arose the Physiocrats, the founders of modern political economy. Their leader, Quesnay, believed that positive legislation should consist in the declaration of the natural laws constituting the order evidently most advantageous for men in society. When once these were understood, all would be well, for the absurdity of all unreasonable legislation would become manifest. He taught two cardinal principles; first, "that the land was the only source of riches, and that these were multiplied by agriculture;" and, second, that agriculture and commerce should be entirely free. The former of these doctrines, after exercising a good deal of influence by calling attention to the injustice and oppression with which the agricultural class in France was treated, has ceased to be believed as a statement of absolute truth. The latter, adopted with great enthusiasm by many generous minds, has exercised a deep influence on modern thought.

Manufactures, according to Quesnay, do no more than pay the wages and expenses of the workmen engaged in them. But agriculture not only pays wages and expenses, but produces a surplus, which is the revenue of the land. He divides the nation into three classes: (1) the productive, which cultivates the soil; (2) the proprietary, which includes the sovereign, the land-owners, and those who live by tithes, in other words the nobility and the clergy; and (3) the sterile, which embraces all men who labor otherwise than in agriculture, and whose expenses are paid by the productive and proprietary classes. Therefore he argues that taxes should be based directly on the net product of real estate, and not on wages nor on chattels. In other words, all taxes should be levied directly on the income derived from land, and indirect taxation in every shape should be abolished.

Liberty of agriculture, liberty of commerce! "Let every man be free to cultivate in his field such crops as his interest, his means, the nature of the ground may suggest as rendering the greatest possible return." "Let complete liberty of commerce be maintained; for the regulation of commerce, both internal and external, which is most safe, most accurate, most profitable to the nation, consists in full liberty of competition." These doctrines of Quesnay, joined with the ideas of property and security, form the basis of the modern school of individualism. [Footnote: Lavergne, _Les Économistes,_ 105. Quesnay, _Oeuvres,_ 233, 306, 331 _(Maximes du gouvernement économique d'un royaume agricole Maxime,_ iii. v. xiii. xxv.). Turgot, iv. 305. Bois-Guillebert appears to have been the principal precursor of the Physiocrats. Horn, _L'Économie politique avant les Physiocrates, passim;[Greek physis] = nature,[Greek kratos] = power.]

The body of doctrines long known as "political economy," (for the words seem now to be used in a larger sense), bore the mark of their origin in the eighteenth century. Here, as elsewhere, it was the belief of Frenchmen of that age that the application of a few simple rules derived from natural laws would solve the difficulties of a complicated subject. The principles of political economy were conceived as forming "a true science, which does not yield to geometry itself in the conviction which it carries to the soul, and which certainly surpasses all others in its object, since that is the greatest well-being, the greatest prosperity of the human race upon the earth."[Footnote: 2. Abbé Beaudeau, quoted in Lavergne, _Les Économistes,_ 179.] Quesnay and Gournay founded branches of the economic school. The latter, who printed nothing, is chiefly known through the encomiums of Turgot. Gournay was a merchant, and recognized that commerce and manufactures are hardly less advantageous to a state than agriculture. This is the chief difference of his teaching from that of Quesnay. Gournay is the author of the famous maxim: _Laissez faire; laissez passer;_ and his whole system depended on the idea "that in general every man knows his own interest better than another man to whom that interest is entirely indifferent;" and that "hence, when the interest of individuals is exactly the same as the general interest, the best thing to do is to leave every man to do as he likes."[Footnote: Turgot, iii. 336 (_Éloge de M. de Gournay_).]

The best known member of the economic school in France was Anne Robert Jacques Turgot, born in Paris on the 10th of May, 1727, of a family belonging to the higher middle class. His father was _prevost des marchands_, or chief magistrate of the city. Young Turgot was at first educated for the ecclesiastical life, and indeed pursued his studies in that direction until a bishopric seemed close at hand. But he felt no vocation to enter the priesthood. Turgot was too much the child of his century to be content to put his great powers into the harness of the Roman Church; he was, as he told his friends who remonstrated with him on abandoning his brilliant prospects, too honest a man to wear a mask all his life.

At the age of twenty-four, Turgot turned finally from the study of divinity to that of law and administration. He was rapidly promoted to the place of a _maître des requêtes_, a member of the lowest board of the royal council, and nine years later he became intendant of the district of Limoges. It was the poorest in France, but Turgot soon became so much interested in its welfare that he refused to exchange it for a richer one. In spite of years of dearth and of the extraordinary measures of relief which they made necessary, he went energetically to work at all manner of permanent reforms. He effected improvements in the apportionment and levy of the taille. He abolished the onerous _corvée_. He diminished the terror of compulsory service in the militia, by permitting the engagement of substitutes. He encouraged agriculture by distributing seeds and offering prizes for the destruction of wolves, which were still numerous in his district, and he waged a successful war on a moth that was ravaging the wheat crop. He assisted in the introduction of the manufacture of pottery, still one of the leading industries of Limoges. His reports are among the most valuable material in existence for the study of the condition of old France.

Soon after the accession of Louis XVI., Turgot was called to the ministry, first, for a very short time, as secretary of the navy, and then as Controller of the Finances. Two courses were open to the new minister. Malesherbes, his close adherent, standing in high official position, urged him to summon the Estates General, or at least the Provincial Estates, and rule constitutionally. Such action would have been a great, a serious innovation, but it was not on this ground that Turgot opposed it. Like most of the economists of his day, he believed at once in freedom and in despotism. "The republican constitution of England," he had said, "sets obstacles in the way of the reform of certain abuses." Turgot had a plan for the benefit of mankind. None but a despot could carry it out for him. France and the world were to be set right; and it would take absolute power to compel them into the best course.

The new Controller of the Finances could not afford to wait. "You accuse me of too great haste," he said to a friend, "and you forget that in my family we die of the gout at fifty." But this haste, combined with his awkward and haughty manners, proved the cause of his ruin. The courtiers, whose perquisites were in danger, were disgusted at his simplicity and economy. Although he was the friend of absolute government, he was accused of republican austerity. And his measures were not more popular than his manners. The harvest of 1774 had been bad, and famine was in the land. Turgot met the situation by declaring commerce in grain free throughout the kingdom. The harvest was again bad in 1775, and riots broke out, for the common people had it firmly in their minds that the price of bread was fixed by the government. Turgot put down disturbances with a high hand, and persevered in his measures. He abolished the _corvée_ on roads and public works throughout France. In truth it would have been better to modify and regulate it, for in poor countries many men had rather work on the roads than pay for them, but such considerations as this were foreign to his mind. He, moreover, abolished the trade-guilds (_jurandes_), which possessed the monopoly of most kinds of manufactures and trades, saying that God, in giving man needs and making labor his necessary resource, had made the right to work the property of every man, and that this property is the most sacred and inalienable of all.[Footnote: Turgot, viii. 330. Yet the monopolies in certain trades, as those of apothecaries, jewelers, printers, and booksellers, were retained, probably because their strict regulation and supervision was considered necessary. The guilds were reestablished, with modifications, on the fall of Turgot. _Encyclopédie méthodique, Commerce_, ii. 760, 790.] But Turgot's ideal of freedom was entirely industrial and commercial, and not at all political or social. He forbade all associations or assemblies of masters or workmen, holding that the faculty granted to artisans of the same trade to meet and join in one body is a source of evil. Under Turgot's system, the individual workman would not have escaped the tyranny of the masters' guild only to fall under that of the trades-union; but one of the most essential privileges of a freeman would have been denied him. Individual liberty to work, and political liberty to combine, have not yet been made perfectly to coincide.

The innovations thus introduced were great; the interests threatened were powerful. The Parliament of Paris rallied to the defense of vested rights. It refused to register the edicts issued to enforce the minister's innovations.

The king held a bed of justice and forced their registration; but his weak nature was tiring of the struggle. Turgot was unpopular on all sides, and Louis never supported a truly unpopular minister. "Only M. Turgot and I love the people," he cried, in his impotent despair; and then he gave way. Malesherbes, the principal supporter in the royal council of the Controller General of the Finances, was the first to go. Thereupon Turgot wrote the king a long and harsh letter, blaming him for Malesherbes's resignation. "Do not forget, sir," said he, "that it was weakness which put the head of Charles I. on the block; it was weakness which formed the League under Henry III., which made crowned slaves of Louis XIII. and of the present king of Portugal; it was weakness which caused all the misfortunes of the late reign." Kings to whom such language as this can be used are not strong enough to bear it. Turgot was dismissed twelve days after sending the letter.[Footnote: May 12, 1776. Lavergne, _les Économistes_, 219. Turgot, iii. 335; viii. 273, 330. Bailly, ii. 210.]

The financial situation of France was undoubtedly serious. The cause of this was far less the amount of the debt, or the excess of expenditure over revenue, than the total demoralization of the public service. The annual deficit at the accession of Louis XVI. is variously stated at from twenty to forty million livres a year.[Footnote: From four to eight million dollars.] Such a deficiency would have nothing very appalling for a strong minister of finance, supported by a determined sovereign, and could have been overcome by economy alone. The expenses of the court were not less than thirty millions. Turgot proposed to reduce them by five millions immediately and by nine millions more in the course of a few years. Twenty-eight millions were spent in pensions, and it requires but a superficial knowledge of the state of France to assure us that many of these were bestowed without sufficient reason. [Footnote: Stourm sets the pensions at thirty-two millions, and thinks that the improper ones did not exceed six or seven millions, ii. 134.] Important reductions might have been made in the expenditures of most of the departments without impairing their efficiency. But to have done this many interests would have had to be disturbed, many hardships inflicted. Amiable persons, living without labor at the public cost, would have been deprived of their revenues. Other agreeable and influential men and women would have had to live without pleasant things which they had been brought up to expect. The good-nature of the king made him shrink from inflicting pain. He would approve of the best plans of economy, he would promise his minister of finance to adhere to them, he would depart from them secretly at the solicitation of his wife or of his courtiers. The poor man wanted "to make his people happy," and he could not bear to see those of his people who came nearest to him discontented. The successor of Turgot was a mere courtier, not even personally honest, whose career was fortunately cut short by death within a few months of his nomination.

The war of the American Revolution was drawing near, and old Maurepas, the prime minister, felt the need of a competent man to take charge of the finances. A name was suggested to him,--that of Necker, a successful banker. But Necker was a Protestant, a Swiss, a nobody. The title of Controller was too high for him, so a new post was created, and he was made Director-General of the Finances, coming into office in October, 1776.

It has been the fate of Necker to excite strong enthusiasm and violent objurgation; but in fact he was little more than commonplace. An ambitious man, he wanted to make a reputation, to build up the royal credit, to found a national debt, like that of England. Did he really believe that such a debt would pay its own interest, without additional taxes, or did he rely on economy of expenditure and good administration, not only to balance the ordinary accounts, but to cover the interest of the war-loans which he was obliged to contract? How far did his cheerful manifestoes deceive himself? What might he not really have accomplished if the royal support had been anything more solid than a shifting quicksand? These questions cannot be answered satisfactorily. Neither Necker, nor anybody else, knew exactly what the government owed, or what it borrowed. The loans contracted by Necker himself are believed to have amounted to five hundred and thirty million livres. Of this sum it is thought that about two hundred millions were employed in covering the annual deficit for five years, and that three hundred and thirty millions were spent for the extraordinary demands of the war. The money was raised chiefly by state lotteries and by the sale of life annuities, although many other means also were employed.

The royal lottery had been a favorite device earlier in the century. As practiced by Necker and some of his predecessors it combined the features of gambling and of investment. Every ticket, in addition to its chance of drawing a prize, was in itself a pecuniary obligation of the government, either carrying perpetual interest at four per cent., or to be repaid at its full price in seven or nine years without interest. The prizes were sums of money or annuities. Thus the ticket-holder did not lose his whole stake, and ran the chance of winning a fortune. But the operation was not brilliant for the government.

Nor was the sale of annuities more judiciously managed. Here, as in the lotteries, Necker copied old models, without making any improvements of importance. No account was taken of the age of the annuitants, but incomes were sold at a fixed rate of ten per cent, of the capital deposited for one life, nine per cent, for two lives, eight and a half for three, eight for four. The bankers and financiers of the day were shrewd enough to profit by this arrangement.

They bought up the obligations, and named healthy children as the annuitants. The chance of life of these selected persons was more than fifty years, and as the children were usually chosen at about the age of seven, the treasury would be called on to pay its annuities for an average term of between forty and forty-five years. As the current rate of interest on good security was about six per cent, the operation was not a very promising one for the state.

In spite of all these blunders Necker was liked by the nation. He recognized the need of economy and honestly tried to reduce expenses. He succeeded in cutting off a little of the extravagance of the court and in simplifying the collection of the revenue. He tried to establish provincial assemblies and to equalize the incidence of the salt-tax. And above all, in order to sustain the royal credit, he took the country into his confidence to some extent, and prophesied pleasant things. But he did not stop there. The national accounts had long been considered a government secret; Necker resolved to publish them to the world. His famous "Compte rendu au roi" appeared in February, 1781. The portrait of the author, excellently engraved on copper, stares complacently from the frontispiece, above an allegorical picture, where we can make out Justice and Abundance, while Avarice appears to bring her treasures, and a lady in high, powdered hair, and no visible clothing, gazes astonished from the background. The contents of the report are not such as we are in the habit of expecting in financial documents, but are rhetorical and self-complacent. The ordinary revenues of the country are said to exceed the expenditures by ten million livres. As a matter of fact, no such surplus existed, but Necker was an optimist by temperament, and was moreover anxious to bolster credit. The nation was delighted, but Maurepas and the court were shocked. The cupidity of the courtiers was painted in the account in glowing language. Such a publication was dangerous in itself, and the economical measures already taken, with those announced as to follow, threatened many interests. Even the old prime minister trembled for his personal power. Necker had obtained the removal from office of one of the adherents of Maurepas, while the latter was kept in Paris by the gout. So the usual machinery of detraction was put in motion. Letters, pamphlets, and epigrams flew about. While the larger part of the public was singing Necker's praises, the smaller and more influential inner circle was conspiring against him. He might yet have prevailed but for an act of imprudence. Although the most conspicuous and popular man in the kingdom, he had hitherto been excluded from the Council of State. He now asked to be admitted to it. Louis XVI., whose Catholicism was his strongest conviction, replied that Necker, as a Protestant, was inadmissible by law. Thereupon the latter offered to resign his place as Director of the Finances, and the king, by the advice of Maurepas, accepted his resignation.[Footnote: Gomel, _passim._]

From this time all real chance of the extrication of Louis XVI. from his financial difficulties, without a radical change of government, disappeared forever. The controllers that succeeded Necker only plunged deeper and deeper into debt and deficit. It is needless to follow them in their flounderings. A long experience of the vacillation of the government both as to persons and as to systems had discouraged the hopes of conscientious patriotism, and strengthened the opposition to reform of all those who were interested in abuses. From the well-meaning king, if left to his own ways, nothing more could be hoped. Pecuniary embarrassment, with Louis, as with many less important people, was quite as much a symptom of weakness as a result of unmerited misfortune.