Financial Causes of the French Revolution

State Revenues Dwarfed by Expenses and Debt Servicing

Jul 12, 2009

For the 22.5 million French in 1789, taxation and prices had risen sixty-five percent while wage increases rose by less than half that amount, prompting popular outcry.

When the French monarchy contemplated assisting the American patriots in their struggles against Great Britain, Jacques Turgot supposedly warned Louis XVI that, “the first gunshot will drive the state into bankruptcy.” His advice was not heeded and French participation was costly.* By the time revolution broke out in 1789, overall prices had risen 65% but wages had only risen by 22% The March 1788 state budget showed clearly that the state was paying out more than it was taking in.

The Financial Woes of Europe’s Richest Country

France had the largest population in Europe and potentially massive resources. Yet a semi-feudal social, political, and economic structure kept the state from working toward maximization of prosperity. Turgot’s reforms between 1774 and 1776 did more to stabilize credit (even to the point of attracting Dutch loans) than any preceding programs.

But Turgot was dismissed, France went to war, and the financial decline continued. Of 23 million inhabitants, 100,000 represented the First Estate. The clergy of the First Estate were exempt from taxes; yearly, the Church paid a “free donation” to the king that did not represent a set amount and was paid by borrowing. Additionally, the Church collected tithes, owned one-tenth of the land, and monopolized education.

The nobility paid minor taxes and were exempt from most of the direct taxes. Exacerbating the problem, the monarchy continued to sell governmental offices that carried tax exemptions. Thus, although a one-time immediate source of revenue, these offices never produced future revenue and often included non-taxable pensions.

The heaviest tax burden fell on peasants and members of a growing bourgeoisie class that was not part of the lay nobility (nobility of the robe). Significantly, all of Louis XVI’s advisors were members of the nobility except for Jacques Necker, a Swiss banker. Any tax reform affecting the nobility would be bitterly opposed.

The Failure of Institutions

By the time Louis felt compelled to summon the Estates General in 1789, three quarters of yearly state expenditures went for defense or military needs and servicing the debt incurred by borrowing to pay for earlier wars, including the American Revolution. Further taxes were not realistic. Increases in the stamp tax, salt, wines, soap, and tobacco had already been made. Because France was importing grain, the price of bread rose. The price of bread stood at 20 sous which was equivalent to one Livre. The average wage for a worker in France was 650 Livre. It should also be noted that 50% of all incomes went to pay rent.

The king could expect no help from any quarter. All of the intendants were of the nobility and the various parlements or courts were dominated by nobles. The Church, always fiercely independent, relied upon the 1561 Poissy agreement which provided tax immunity to the institution.

The tax to income was also limited. Most French workers only worked 250 days in the year and were required to provide the state with free labor from six to thirty days a year repairing roads and bridges. This was the much hated corvee.

Final Solutions Rejected by the King

Several years before the revolution broke out, a new royal minister, Calonne, proposed replacing the corvee with money payments. His plan also called for the confiscation of some church assets and de-monopolizing the trade in grain. Unfortunately, he was opposed by the nobility and the clergy and dismissed in 1787. It would not be long before the debt crisis brought about the French Revolution.

* This cost has been estimated at 2,000,000,000 livres. 1440 livres would equal 256 US dollars at the time of Thomas Jefferson (although the pre-revolution livre was no longer used after 1795).

The copyright of the article Financial Causes of the French Revolution in French History is owned by Michael Streich. Permission to republish Financial Causes of the French Revolution in print or online must be granted by the author in writing.

Jul 14, 2009 3:03 PM

Guest :

This article really helped me to better understand France's revolutionary underpinnings. A question involving France's financial status leading into the French Revolution appeared on an exam in my history class. Perfect study material!