Closely connected with the attack upon the Church was the embarrassing question of finance. No man, on the outbreak of the Revolution, enjoyed so high a reputation for finance as Necker, and no man probably misused that reputation more. Everyone knew that the financial embarrassments of the country were the real cause of the summoning of the States-General. Everyone knew that there was, first, an enormous annual deficit amounting to at least 120 or 130 million francs, and rising for the year 1789 to a much higher figure, and, secondly, a very heavy floating debt. The natural course, and the only wise one, would have been for the Minister to have laid bare at once all the embarrassments of the State, and to have used his great popularity and credit for facing the difficulty boldly, and for setting matters on a satisfactory footing for the future. Instead of that, Necker, either for mistaken political reasons, or for more personal and less worthy causes, from the first minimised the financial difficulty, represented the deficit as much less than it was, described the work of restoring order in the finances as 'mere child's play,' and concealed the worst features of the situation from the public to whom he appealed for support. Necker's system of finance had been to proceed by raising loans on favourable terms—a system for which his financial reputation and connections gave him peculiar facilities. During the summer of 1789, he continued to carry on this system, and the State lived, for a time, upon the money which Necker raised by loan or borrowed from the Caisse d'Escompte, and upon the patriotic contributions which enthusiastic ladies and gentlemen poured into the Exchequer. But by the autumn, it had become clear, even to Necker, that this system would not do for ever, that the credit of the State was not improving, that loans could no longer be raised with success, and that the condition of the finances generally was far worse than it had been five months before. Thereupon, at the end of September, Necker came forward with a heroic remedy, and thanks to the support of Mirabeau, he induced the Assembly to consent to an extraordinary tax of one quarter of all incomes in the country, to be paid within the next three years.
But even this drastic expedient failed. The method of assessing the tax, and the time over which the period of payment was spread, contributed to frustrate its results. The embarrassments of the State increased. The debt steadily mounted; for, after the outbreak of the Revolution, people on all sides refused to pay taxes, and the Government was compelled to use for current purposes any money on which it could lay hands. Then too, the extraordinary expenses of the year, occasioned by the circumstances of the Revolution, were exceptionally heavy, and the cost of keeping Paris quiet was heavier still. In two months alone of the winter of 1789-90, the State paid over to the Parisian authorities seventeen million francs for the purchase of corn, and it is estimated that in the year which followed, it advanced to the various municipalities in the departments no less than sixteen hundred millions, in order to cheapen the price of bread. Besides that, it was soon called on by the Parisian authorities—and the calls of Paris were rarely refused—to pay over many millions more, for keeping up relief-works for the unemployed workmen of the capital, for maintaining and equipping its National Guard, for defraying the expenses of destroying the Bastille, and even for lighting and paving its streets. Under these circumstances matters grew steadily worse, and Mirabeau fell back on the idea of appropriating the property of the Church, and of using the credit and resources so obtained in order to issue paper money to pay the pressing creditors of the State. By that means he hoped to gain a breathing-space, until a strong Government could be formed to grapple thoroughly with the whole question. The idea, once formed, was soon put into execution. Early in November, 1789, the Assembly declared that the lands and property of the Church were at the disposal of the State. In December, it directed a part of this property, to the value of four hundred millions of francs, to be sold for the national benefit. In the following March, as the land did not sell quickly, it was determined to make it over to the various municipalities, to sell at a handsome profit to themselves, and in the meantime to issue paper money, also to the extent of four hundred millions, to increase the currency and to act as bank notes. Thus, in April, 1790, there came into existence the Assignats.
It is worth while to follow for a little the history of the Assignats, for they afterwards became one of the most characteristic and disastrous features of Revolutionary finance. The intention of their authors had been to use the Assignats as a temporary convenience, to tide over the many pressing difficulties of the moment, until the State could find time to face and to settle the question of its finances. In that idea, had it been rigidly adhered to, there was nothing economically wrong. But from the first, the plan proved disappointing. The sale of the Church lands brought in comparatively little. The municipalities naturally considered their own interests first, and did not always sell the lands in the manner most profitable to the State. They permitted the buyer to take possession on payment of a very small instalment of the price; and in many cases speculators, taking advantage of this system, bought Church land largely, then cut down the timber and pulled down the houses on it, and having made what profit they could, decamped before the second instalment became due. In the existing state of the administration, it was not difficult to play tricks with the law. Moreover, purchasers of these lands were permitted to pay for them in Assignats, the idea being that all the paper money issued would thus return into the Exchequer, and pass out of circulation as the Church lands were sold off. The fact, however, that the Assignats were accepted by the municipalities at their nominal value made it the object of speculators to depreciate them, and thus from the first a powerful motive was at work to depreciate the new currency. The consequence was, that within a few months of the first issue of Assignats, the embarrassments of the State were as pressing as ever. The Assignats already issued had been spent, and the Assembly, as far as ever from financial order, could only suggest the issuing of more. Then again Mirabeau, aware of the dangers of his course, but still struggling to avert bankruptcy, and hoping for a change of Ministry which might ultimately set matters right, threw his influence into the same scale. In September, 1790, he induced the Assembly to sanction a final issue of eight hundred millions more, towards the liquidation of the National Debt; to enact that more than twelve hundred millions should never be put into circulation, and to provide that all Assignats paid into the Treasury thenceforward should be burned.
But once the Assembly had entered on the downward course, it found it impossible to stop. The strong Government and the financial readjustment, which Mirabeau had hoped for, never came. The eight hundred millions went, as the four hundred millions had gone before them, and still there seemed to be no prospect of the debt ever being redeemed, or of a balance ever being established between the income and the expenditure of the State. Again and again the Government found that it must either face bankruptcy, or else get over its difficulties for the moment by fresh issues of paper money, and again and again, when the alternative had to be faced, it naturally chose the latter course. By June, 1791, the issue of the previous September had been exhausted, and casting its own prudent limitations to the winds, the Assembly issued six hundred millions more. From that time forward the depreciation of the paper money steadily and rapidly advanced. The Treasury, departing from the original proposal, had already begun to issue Assignats of quite small value. Paper money soon became the regular currency in which wages were paid; and even the poorest classes thus learned to feel the effects of its variations, and to make such profit out of those variations as they could. With the depreciation of the Assignats and the disappearance of specie, the rage for speculation, naturally stimulated by the rapidity of political change, took hold of the public mind, and the spirit of gambling increased in all classes the unrest and fever of the time.
The Assembly, it is true, did at length endeavour to face the whole financial position, and to establish at any rate its current finances on a firm and permanent footing. But the manner in which it made the attempt was sufficient to ensure its failure. The expenses of the Revolution had necessarily been very large. The Assembly had, no doubt, cut down the expenses of the Court, of the army, and of the Church; but it had at the same time undertaken new and very heavy burdens. The cost of the new system of local government and of the new system of administering justice involved a large increase in the annual expenditure. The cost of compensating the officers suppressed in the Law, the Church, and the public services, of pensioning off the dispossessed ecclesiastics, and of buying out the innumerable vested interests at which the reforms of the Assembly had struck, alone amounted to an enormous sum. There were all the debts of the Ancien Régime to be taken over, and besides that all the deficits in the current accounts, which steadily accumulated, month after month, down to the end of 1790. The property of the Church, which was at first regarded as an inexhaustible treasure, and estimated at much beyond its real value, disappointed the expectations of its new possessors, as they saw it frittered away in issues of Assignats. The abolition of tithes, though a great benefit to the proprietors of land, had in no way enriched the Exchequer. The abolition of feudal dues, though a heavy loss to their old possessors and an infinite gain to the nation at large, had brought nothing into the coffers of the State. The cessation of the hated Gabelle and of many other indirect taxes, which the people had refused any longer to pay, and which the Assembly, making a virtue of necessity, had accordingly abolished, had cut away one large source of revenue. It remained to find the means of making good the deficiency and of providing for the charges which the Revolution had imposed.
It is in the steps taken to balance the accounts of the nation that one sees perhaps most clearly the fatal optimism of the Assembly, and its rooted and culpable unwillingness to face disagreeable facts. There was no doubt that the Revolution had been extremely costly. Its advantages, the reforms which it had instituted, and the facilities for attaining prosperity which it had opened up to Frenchmen, were obvious and clear. It was equally obvious that those advantages and reforms must entail considerable expenditure, and must be paid for by those who enjoyed them. Instead, however, of taking that line, as in duty it was bound to do, the Assembly seems to have determined that, whatever its needs and difficulties might be, it would so frame its budget, that no one should be able to say that the Revolution had increased the taxation of the people. Accordingly it proceeded to draw up a list of its expenses, which was from beginning to end fallacious. The financiers of the Assembly fixed the votes for each department at a figure which could not possibly cover the expenses, and set down the total expenditure at many millions below its real cost. They then proceeded to reckon up the revenue, over-estimating each item here, as they had under-estimated each item on the other side. They set down as a part of the revenue two or three large items of a purely temporary and exceptional kind. They made no allowance whatever for extraordinary expenses, which they had already estimated at seventy-six millions of francs. They sacrificed to democratic feeling many of those indirect taxes which democracies always resent,—the taxes on salt, tobacco, wine and spirits, and other commodities of less importance. They remodelled the whole system of internal tariffs and swept away its objectionable features. They took some steps in the direction of free trade, and abolished the guilds and the restrictions upon labour. But they by no means entirely abandoned the protective system, and they maintained all indirect taxes which escaped notice, and against which no popular outcry was raised. It is significant of the overwhelming influence which Paris exercised on the deliberations of the Assembly, that the octrois of the city of Paris remained undiminished and untouched, in spite of the general attack made upon the system of indirect taxation. The reason was that the municipality of Paris could not afford to dispense with these duties, and the Assembly dared not abolish what the municipality of Paris wished to maintain. It was not until the working classes of Paris compelled the municipality to suggest the abolition of the impost, that the octrois of Paris were swept away.
Having thus lost a great deal of the revenue raised by indirect taxation, the Assembly proceeded to make up the deficit by imposing two direct taxes, a Poll-tax which was inconsiderable and light, and a tax upon land which was overwhelmingly heavy. The burden of the new land-tax was in itself disproportionate and probably unjust; it was aggravated by a perverse system of rating; and the ignorance of the new civil authorities, who were entrusted with the assessment and collection of the taxes, tended further to defeat the expectations of the Exchequer. As the political fever increased, the system of taxation became an engine by which the party in power in any locality could annoy and oppress its political opponents; and there is no doubt that it led in many cases to partiality and wrong. For this result the circumstances of the times rather than the financiers of the Assembly were to blame. But the Assembly cannot avoid censure for the weakness and unwisdom which it displayed, for its refusal to recognise clearly the liabilities which it had incurred, for its determination to make a show of economy, however delusive that economy might prove, and for the moral cowardice which made it shut its eyes to facts involving unpopularity for those who faced them. Its attempts to redeem or diminish the national debt by loans, by confiscation, and by issuing paper money, failed completely. Its attempt to balance its receipts and expenses for the future ensured failure as complete, from the manner in which it was undertaken. Even if the new taxes had been regularly paid—and they never were—the Assembly's policy could only have resulted in still further increasing the debt, in forcing the Government into fresh issues of Assignats or into other equally desperate expedients, and in destroying the national credit. No doubt allowances, many and ample, should be made for the difficulties of the National Assembly, for its inevitable inexperience, and for its generally excellent intentions. But still it is as practical reformers that the members of that Assembly must be judged; and the record of their labours, though in many respects deserving of sympathy and praise, still goes far to vindicate the maxim, that high-pitched theories and philanthropic aims are after all only as dust in the balance, compared with the many sober qualities of wisdom required for the effective administration of a State.
FOOTNOTES:
[6] Different authorities give different figures. But these seem to be the most correct.