09 January 2014

There had been three classic ways in which Controllers-General had dealt with the growing burden of French government finance:  disguised bankruptcies, loans from domestic and foreign syndicates and new taxes.  Louis XV's last controller, the Abbé Terray, had used all three.  Louis XVI's first controller, Turgot, repudiated all three.  Instead, he proposed the lessons of liberal economic theory, in particular that of Physiocracy, whose very name proclaimed it to be the "Law of Nature" and thus irrefutable.  The "sect" of the physiocrats argued that was corporatism, regulation and protection -- the heavy hand of the state -- that was stifling productivity and enterprise in France... [after this was removed] the urban and rural sectors would coexist in charmed reciprocity and France would swarm with contented, rational rustics all plowing, producing, saving and spending to the deep rhythm of the market...When Turgot came into office as Controller-General in 1774, having served briefly as minister for the navy, it was not just as an economic but as a political liberal.  Only if he could depend on support from the noble Parlements could he deliver policies that avoided the most arbitrary excesses of the previous reign in respect of bankruptcies, loans and taxes.  So, with the King's warm endorsement, he rescued the Parlements from the limbo into which Chancellor Maupeou had sent them.  His mistaken assumption was that they would back his reforms out of a combination of gratitude and rationality...It followed from Turgot's sympathy with physiocratic ideas that the liberalization of the French economy would, of itself, generate the kind of prosperity that would solve the financial problems of the government.  This would happen in two ways.  Public confidence, that most alchemical of economic quantities, would revive, disposing of the need for additional new loans since the old ones, duly honored, would suffice.  Trade and manufactures would flourish to such an extent that they too, from increased turnover, would yield enough revenues to repair the damage.  All this was, of course, the direct ancestor of supply-side public finance, and had just about as much chance of success as its version two hundred years later in a different but similarly fiscally overstretched empire.

Simon Schama, Citizens: A Chronicle of the French Revolution, Chapter 2: "Blue Horizons, Red Ink"

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