The document summarizes the financial problems that led to the French Revolution. By the 1780s, France was facing large budget deficits due to high spending from wars and a complex, inefficient tax system. Reforms attempted by ministers Turgot and Necker failed to solve the structural issues. The country was on the verge of bankruptcy by 1786, with deficits estimated at over 25% of national income. Rising prices from deregulating grain markets also contributed to public unrest among the poor.

1. Problems in tax revenue
Attempts at reform –Turgot, Necker

2.  Traditional story of the French Revolution
begins on 20th August 1786 when Calonne,
Louis’ XVI’s Minister for Finance, informed
the King that the government was on the
verge of bankruptcy.

3.  Revenue for 1786 would be 475 million livres
whilst expenditure would be 587 million livres –
making a deficit of 112 million – a quarter of the
national income.
 (deficit - the amount by which something,
especially a sum of money, is too small)
 (Livres – in 1789 1 livre equals about 15 cents
AUD –
 1 billion livres US war)

4.  In 1788 it was estimated that total revenues
would be 503 millions livres but expenditure
would be 629 million livre – the deficit had
increased to 126 million livres.
 Interest on the debts alone would be more
than 50% of national income.

6.  1786 – 112 million livres
 1788 – 126 million livres –

7.  Between 1740 and 1783 France had been at
war for 20 years –
 War Of Austrian Succession
 SevenYearsWay
 War f American Independence (1778-83)
 AmericanWar of Independence had cost the
French over a billion livres – not including the
debts from the last wars.

8.  Louis' financial problems were made worse
by the system of taxation on France. Royal
income came from indirect and direct taxes.
Direct tax Tax gained on the income or
profits of the person who
pays it
Indirect tax paid on goods p services
purchased

9.  Salt
 Legal transactions
 The aide – a regular tax levied on consumer
goods, such as wine, liquor, oil, textiles,
tallow, iron, wood, livestock, playing cards,
hides, soap, paper etc. (like a GST)

10.  The Crown was prevented from receiving much
of its potential tax revenue and until it recovered
control of its finances, no reform could occur.
 The privileged classes, whose income from
property had increased since the 1740s, were an
untapped source of wealth that the Crown
urgently needed to access. Instead the tax
burden was laced on the leats wealthy segment
of the population.

11.  Direct taxes were collected by royal tax officials.
 Almost all indirect taxes had been outsourced to
collection officers, called tax farmers.
 Tax farmers brought the right to collect tax on
behalf of the Crown as a venal office.
 They had to gather an agreed amount for the
Crown each year in revenue from indirect taxes.
 Why would a position as a tax farmer be be an
appealing venal office to purchase?

12.  The tax farmers had to turn over an agreed amount to
the Crown – but they soon became known for their
corruption.
 To enforce collection, the tax farmers could seize
property.Their guards were armed and uniformed.
Part of that uniform was a little shoulder strap that
identified them as acting on behalf of the King.They
enjoyed special privileges and protection of the law.
 It is no surprise that many of them became very
wealthy.

13.  France in the 1780s was a confusing jumble of
laws, taxes, privileges, even weights and
measures, language which differed in each
province and generalities
 .

15.  Lack of internal coherence
due to historical factors – the
French state is newer than
that of say. England, and as
new regions came under the
control of the French
sovereigns, sometimes they
were able to negotiate
special prilivages and
exemptions
 Carried over from olden
times, each province had
different tax agreements
with the Crown.The
resulting difference in tax
rates from province to
province made it necessary
to set up internal customs
barriers.

16.  The Gabelle was levied at 6 different levels.
 Example of Brittany. Brittany paid no tax on
salt. Its neighbours Anjou, Maine, Normandy
paid tax.
 Tax farmers collected the salt tax and other
indirect taxes.

17.  An absurdly complex system of taxation
naturally provoked smuggling on an
enormous scale.This meant that border salt
smuggling, so even less tax was collected
 General goods were taxed indirectly by the
Octroi – a tax on goods taken in towns.The
tax was collected by the tax farmers

18.  Consequently, the fight against smugglers cost an enormous
amount of money and required an enormous amount of
manpower.
 In 1784, construction begun in Paris on a continuous stone wall,
known as Mur des Fermiers Généraux, or Wall of the Farmers-
General, marking the city limits at the time.The wall was finished
in 1787. It was higher than 3 meters / 10 feet and 23 km / 14 miles
long, and its gates were guarded by tax officials.
 This particular wall was built to limit the evasion of the octrois.
But the smugglers found their ways around it, and the wall
became a perfect target for the citizens' wrath.The prices for food
were climbing while the greed of tax collectors were as
widespread as they were well known.

19.  A saying by some unknown author became very
popular during these days:
 Le mur murant Paris rend Paris murmurant
 It's not snappy at all after translation, but in other
words, The wall walling Paris renders Paris
murmuring. Or maybe, The wall walling Paris makes
Paris wail.
 And talking about things that snap. On the night of
July 12/13, 1789, the citizens of Paris burned 40 tax
barriers and ransacked tax offices.

20.  When Louis first ascended he thrown he
attempted to attempted the problem of royal
finances through reform.
 Advocated limiting royal expenses – wanting to
enforce a rigid economy in all departments.
 His motto was ‘No new taxes, no new loans, no
bankruptcy. ‘
 Warned against the AmericanWar of
Independence
 Also proposed in his Six Edicts that abolition of
privilege – tat all three estates should be subject
to taxation

21.  A sub group of enlightenment thinkers who
advocated laisse faire economics.
 Basically laissez faire translates to ‘hands off’.
 Turgot revoked price controls in grain and
supported free trade in grain which was to
have disastrous consequences and lead to a
proto-Revolutionary situation.

22.  The causes of the French revolution can be attributed to several
intertwining factors:
 Cultural:The Enlightenment philosophy desacralized the authority
of the monarchy and the Catholic Church, and promoted a new
society based on reason instead of traditions.
 Social:The emergence of an influential bourgeoisie which was
formally part of theThird Estate (commoners) but had evolved
into a caste with its own agenda and aspired to political equality
with the clergy (First Estate) and the aristocracy (Second Estate).
 Financial: France's debt, aggravated by French involvement in the
American Revolution, led Louis XVI to implement new taxations
and to reduce privileges.
 Political: Louis XVI faced virulent opposition from provincial
parlements which were the spearheads of the privileged classes'
resistance to royal reforms.
 Economic:The deregulation of the grain market, advocated
by liberal economists, resulted in an increase in bread prices. In
period of bad harvests, it would lead to food scarcity which
would prompt the masses to revolt.
 (Treaty of Eden)

23.  Influenced by ideas of physiocrats – liberalised the
grain market
 This lead to grain merchants hoarding grain – buying
large amounts in areas with good harvests to sell at a
high price to areas suffering shortages.
 Led to the FlourWar of 1774 and 1775 with massive
unrest ,looting of grain stores and undermining the
belief in Louis’ XVI’s benevolence and heightened
class tensions – the conspiracy theory spread that
there was a ‘famine pact’ – that the price increases
were intentionally done to starve the peasantry and
urban poor.

24.  Three years into his reign Lois appointed the Swiss
Protestant Jacque Necker as his finance minister.
 Reputation as a ‘financial whiz’ though his successful
career as a banker
 Necker introduced reforms such as abolishing the
number of tax farmers (saw it as wasteful) and
reduced spending further in the royal household by
eliminating some positions – e.g. atVersailles there
were 400 ceremonial positions in the royal kitchens
alone (measures successful saved 5 million livre for the
Crown)

25.  However Necker was unable to achieve any
large scale fiscal reform.
 It has been remarked of Necker’s career that
he was over praised in this life time.
 He financed the AmericanWar by raising new
loans, instead of razing new taxes.

26.  Necker borrowed in the region of 530 million livres in
his four and a half years in office. He used
these loans to finance the state, to create the illusion
of a recovering economy and, a cynic might suggest
prop up his reputation as a financial wizard.
 He published an account of the royal finances, the
Compete Rendu, in which he made it appear that
France was in a state of surplus by 10 million livres.
 In fact, via false accounting, France was already in
deficit by 70 million livres.

27.  The Compte Rendu drove Necker’s popularity
to new heights. For the first time in history,
an agent of the French royal government had
taken the people into his trust and raised the
veil of secrecy over the nation’s finances.
The Compte Rendu sold thousands of copies
and Necker was hailed as both a liberal
political reformer and a clever economic
manager.

28.  The Compete Rendu made the royal purse a
matter of public opinion.
 It highlighted the extravagant nature of life at
Versialles and court spending. Louis’
spending habits became widely discussed by
the public.

29.  “The public nature of the Compte Rendu, rather
than its inaccuracy, incensed ministers. Necker
was accused of being something less than a
Frenchman.Vergennes gave to Louis XVI an
opinion of the Compute Rendu which
encapsulated this point of view: ‘…the example
of England, where accounts are made public, is
that of a calculating, selfish, troublesome
nation.To apply such principles to France is a
national insult: we are people of feeling, trusting
and devoted to the person of the King’,

30.  The publication of the accounts also earnt
Necker the dislike of the nobility – many of
whom already resented him for abolishing
court positions and dislike having details of
their pensions published.