The Sinews of Power: the Finances of the French Monarchy from Henri IV to Louis XIV

War could not 'sustain war'

It was a maxim of the brilliant Swedish king, Gustavus Adolphus, at the time of his intervention in the Thirty Years' War in Germany that 'war should sustain war'. By this he meant that for Sweden, a small kingdom of less than a million inhabitants, and one separated from the European mainland by the Baltic Sea, financial weakness required the occupation of more and more territory to provision a large army, and the movement of troops to lands which had not already been devastated. For France, a large kingdom with a population of perhaps nineteen million, but with vulnerable frontiers to the north and east such an option was rarely possible. Wars were not fought in the manner of Gustavus Adolphus, with rapidly mobile forces; and in the most important conflicts, they were fought on several fronts at the same time.

Thus it was inevitable that for the French war could not be made to sustain war, and that the only alternative was to pay the high military costs from the resources of the French kingdom. In Chart 1 (where the item 'war' represents total military expenditure as a proportion of all expenses), the figures are presented according to the main periods of ministerial office in the seventeenth and early eighteenth century. Ministerial periods rather than reigns are chosen, because Henri IV's reign was too short, and the reign of Louis XIV too long, for a financial comparison of the reigns to be meaningful. The trend was for military conflict to absorb an increasing share of expenditure in the course of the seventeenth century. After 1661, war always consumed over half the expenditure budget; but during Chamillart's ministry in the war of the Spanish Succession it consumed nearly seventy per cent of the budget and in the crisis year of 1710, when it seemed that France might have to capitulate to the victorious Allies, 76 per cent! Yet the true cost of war was higher still. The figures for 'extraordinary' expenditure ('extraord' on the chart), which included the cost of borrowing money to help finance the war and excessive profits conferred on financiers who handled the revenues for the crown, have to be included in order to gain a realistic picture of the overall burden of warfare. Thus the cost of war was just as high under Richelieu and Mazarin if extraordinary and military expenses are added together. The sums left for the various royal households ('house' on the chart) for pensions and other miscellaneous items ('misc') were increasingly eroded by the cost of the French war effort. (A contemporary comparison would be the size of military expenditure in the former USSR and the excessive proportion of public revenue which it consumed.)

Who was responsible for bringing about this state of affairs? The innovative nature of Richelieu's ministry (1624-42) is clearly demonstrated when extraordinary expenditure is removed from the calculations. Never again in the seventeenth century did expenditure on war fall back to the low levels of Richelieu's predecessors, to the relatively modest 49 per cent of ordinary expenditure under Sully, and almost 50 per cent under in the period 1611-23. Military expenditure during Richelieu's ministry amounted to 72 per cent of ordinary expenditure. This was exceeded only under Mazarin and Colbert's successors; under Colbert himself the decade of peace in the 1660s reduced the proportion of military expenses to 68 per cent of ordinary expenditure. Here, then, was a significant change under Louis XIII and Richelieu: in proportionate terms, expenditure on pensions and the various royal households declined in significance, and with the exception of household expenses under Colbert (which rose to 19 per cent of the total, the same figure as under Richelieu's predecessors), this became the new balance of expenditure in the seventeenth century. In the crisis year of 1710, even military expenses had to be cut back in an attempt to reduce the level of overall expenditure.

Tax increase and tax revolt

The consequences of this substantial commitment to warfare could only be a rise in taxation. Any calculation of the rate of increase in taxes in the seventeenth century is made in almost total ignorance of the situation in the sixteenth century. There are very few figures from the sixteenth century for a number of reasons, one of which was the destruction and administrative breakdown during the wars of religion (1562-1598). We are thus much less well informed as to whether crown revenues were able to keep up with the sixteenth-century price revolution: the political weakness of the monarchy suggests that they did not, although the fiscal burden might have been heavy because of the competing claims of the warring factions in the provinces. Thus, to some extent, the rise in taxation in the 1620s and 1630s was a compensation (from the point of view of the crown) for an age of inflation. Even so, revenues rose very rapidly, from 20.5 million livres in 1600 to 86.7 million by the time of Richelieu's death in 1642. Thereafter, the rate of increase slowed down: in the peacetime year of 1661, which was also the year of Mazarin's death, revenues were still at 84.2 million; they had reached 116.1 by the time of Colbert's death in 1683; and they were still at only 118.4 million by 1714, the last year of war and the year before Louis XIV's death (Graph 1). The result was inevitably an increasing burden of public debt, to which we shall return.

The rate of increase in revenues can best be calculated by presenting the figures as index numbers (Graph 2), where the annual figures are recalculated in relation to a common base index of 100 for the years 1600-30. (This is, for example, the method of presentation of figures in the modern Retail Price Index.) The base index of 1600-30 has been chosen as the period before France entered the Thirty Years' War in 1635 and before the revenues of the crown (as against the local fiscal burden) showed their greatest increase. The figures have also been recalculated to show the effect of any rise in prices (wheat prices have been selected) in reducing the real rate of revenue increase. Since Graph 2 shows the figures as 'moving averages' the trend may be discerned more easily. The main revenue increase was during Richelieu's ministry; and even when the figures have been 'deflated', that is to say, when an allowance is made for the value of the revenue in terms of grain prices, a near trebling of revenues had occurred (index 286 had been reached by 1643).

A brief introduction to the fiscal system inherited by Henri IV, Louis XIII and Louis XIV is necessary to set the context for the taxes chosen by ministers to finance the war. Since the system was both complex and the product of a long period of evolution it defies simple analysis. The French kingdom had developed three main types of revenue: direct taxes, indirect taxes and 'extraordinary taxes' (affaires extraordinaires). Under the category of direct taxes we may place the taille and taillon (although there were variants of these taxes within the provinces which retained provincial estates, the pays d'états). By the end of Richelieu's ministry the revenue from these taxes was anticipated in the form of loans from financiers, on whose agents were conferred the rights of collection. This is sometimes, incorrectly, referred to as the farming of direct taxes. True revenue farming was exclusively reserved to the area of indirect taxes. The revenue farm was a fixed lease conferring exclusive rights of collection on the revenue farmer and his agents for a number of years. This system, which was largely created during Sully's ministry (1598-1611), virtually excluded royal officials from the administration of indirect taxes such as those on the consumption of salt (the various farms of the gabelles); drink (the aides); and on the circulation of goods in various parts of the kingdom allocated to particular farms (the cinq grosses fermes and regional variants such as the farm of the convoy et comptablie of Bordeaux). The third main type of revenue, the affaires extraordinaires, comprised virtually everything else that did not fall under the other two categories. Strictly speaking, the 'extraordinary taxes' were those raised by the method of traités, or one-off tax contracts with financiers: the financier undertook to raise a fixed sum of money in return for a standard rate of interest. Such contracts might concern the establishment of new offices, or new annuities (rentes), or any of a range of fiscal expedients devised by the ingenuity of successive finance ministers.

The rapidity of the increase in taxation under Richelieu and Mazarin was made worse by a disproportionate reliance on two forms of taxation (Chart 2). These were direct taxes paid predominantly by the peasantry (chiefly the taille from the area without representative institutions known as the pays d'élections) and various taxes and creations of offices paid by office-holders (that is to say, officials who owned their positions as private property; these revenues were known as the parties casuelles). Under Mazarin, direct taxes from the pays d'élections ('pdelec' on the chart) contributed 52.5 per cent of ordinary revenues, while under Richelieu the parties casuelles ('partcas' on the chart) contributed 46 per cent of ordinary revenues. Other revenues, for example from the areas with representative institutions (the pays d'états: 'pdetat' on the chart) or the revenue farms of indirect taxes ('fermgen' and 'fermpart' on the chart, for fermes générales and fermes particulières) were much less important. The result was a wave of peasant rebellions under Richelieu and Mazarin, which to a considerable extent was a consequence of the regional inequities in the burden of direct taxes; and the first Fronde in 1648-9, which was precipitated, at least in Paris, by the discontent of office-holders with the way in which they had been treated by the crown and its ministers in their desperate shortage of funds. Both the peasant rebellions and the discontent during the Fronde focused on the increase in taxes and the extremely inefficient method for collecting them, particularly the recourse to agents of the financiers who were thought (for example) to add a quarter in collection costs to the total levy of direct taxes, chiefly the taille.

After 1661, there were far fewer such manifestations of popular resistance and the disenchantment of the office- holders was not so marked. The decline in the rate of increase in taxation was undoubtedly one reason for this. The fact that the crown had a permanent army available in peacetime to crush discontent was another. But a third reason was the choice of revenues on which the crown placed greater reliance during the ministry of Colbert and his successors: fifty per cent of revenues were produced from the indirect taxes, chiefly on consumption, and the collection of these taxes was reorganized in the last years of Colbert's ministry into a new system of revenue collection, the ferme générale, which was to last for the rest of the ancien régime. (We may be tempted to compare resistance to direct taxes to hostility to the poll tax today, while increases in VAT are, on the whole, more acceptable.) In the eighteenth century, the indirect taxes on consumption were to prove just as unpopular as the direct taxes which were theoretically levied on peasant wealth. But in the short term, discontent was alleviated and there were few peasant revolts after 1675 and almost no rebellions of office-holders under Colbert's adjusted revenue system. What the system could not do was guarantee the crown enough income in wartime: consumption fell during wartime, and thus the indirect taxes never yielded as much as direct ones such as the taille. Moreover, in the later wars of Louis XIV, new taxes had to be found in the hope of providing a net increase in revenue to bridge the gap between existing revenues and military expenditure: the two most important were the poll tax or capitation of 1695 and the tenth of revenues or dixième of 1710, which was probably the most advanced tax imposed by the French monarchy before the Revolution. It is significant that the dixième was first established in a year of crisis, when it seemed that France could no longer pay for an army to fight the Allies.

The burden of debt and the failure of reform

The cost of war under Louis XIV was greater than the French revenue system could sustain, and by the end of his reign the country faced a crisis of three kinds: there was a massive burden of debt, resulting from the anticipation of future revenues and the issue of paper debts which had not been honoured; the coinage had been successively devalued; and the revenue system had been so ruthlessly exploited that the economy itself was in depression and needed new stimulus. Contemporary commentators in the eighteenth century were unanimous that France had an unsatisfactory and inequitable revenue system that should be overhauled. 'The people of France... it is generally acknowledged', wrote Adam Smith in the Wealth of Nations (1776), 'are much more oppressed by taxes than the people of Great Britain'. The dispute was over what to do. The great fortifications expert, Marshal Vauban, who became interested in fiscal reform as a result of his travels round France inspecting the defences of the realm, proposed a 'royal tithe' (dixme royale) comparable to the tithe of the clergy. The abbé de Saint-Pierre proposed a version of the taille with a scale of charges and thus a much fairer assessment of wealth (the so-called taille tarifée). Most other experts rejected the ideas of Vauban and St-Pierre as unrealistic and the reform attempts were small-scale and half-hearted. Later in the eighteenth century, Quesnay and the Physiocrats would propose a single tax on the net income of farmers, thus based exclusively on agricultural wealth - but this idea was never seriously implemented.

It was left to the Scots adventurer John Law, who in a short but meteoric career in France under the regency of Philippe d'Orléans attempted to tackle all three problems bequeathed by Louis XIV at the same time. (For a few months in 1720, Law was finance minister, but his System was in operation earlier, from 1718.) The upshot was a humiliating bankruptcy in July 1720. As a result, Law's financial genius has not always been correctly perceived. By moving rapidly to a system based on paper money, cheap credit, revenue unification, the elimination of the financiers, and economic regeneration, Law sought to bring about many of those economic changes which in modern western society we take for granted. The failure of his System was a disastrous setback for the finances of the French monarchy in the eighteenth century, for political reform, and for the development of a more advanced economy which by generating wealth more rapidly would have alleviated the heavy fiscal burden carried by the population as a whole. It is a matter of speculation whether, had Law's System worked, the benefits of success would have been squandered in another futile round of warfare, or whether French society and government could have been so radically transformed as to alter decisively the course of history. Could the French monarchy itself, by a long-term commitment to a programme of fundamental reform, have prevented the outbreak of the French Revolution?

History

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