The Three No's and the Unpayable Bill

This six-livre écu silver coin of Louis XVI was struck in Paris in 1783. With a machine-struck edge that made clipping easy to detect, this coin maintained the standard of sound money. At that time, the kingdom's finances stood before a cliff of debt with which reformers were grappling.

The Ideal Twenty Months

In August 1774, shortly after Louis XVI ascended the throne, Turgot was appointed Controller-General of Finances and pledged three "no's" to the king: no bankruptcy, no new taxes, and no borrowing. His ideal was to restore the finances by liberalizing the economy and cutting waste. He freed the grain trade and issued edicts to abolish the corvée for road building and the monopolies of the guilds.

However, when poor harvests caused bread prices to soar, riots known as the Flour War broke out across the country. The nobility and the parlements, their vested interests threatened, resisted. The ideal was shattered against the wall of privilege, and Turgot was dismissed after just twenty months.

War Financed by Debt

After Turgot, Jacques Necker took control of the royal finances in June 1777. His strategy was the polar opposite of Turgot's: avoid new taxes and finance the war with borrowing. This was at a time when vast sums were needed to support the American Revolutionary War. It was also a pragmatic decision, as it was impossible to tax the privileged classes.

Between 1777 and 1781, Necker borrowed approximately 520 million livres. At the same time, he carried out reforms such as abolishing over five hundred sinecures and reducing the number of tax farmers by a third. But the interest on the borrowed money swelled due to compounding.

The Trick in the Publicly Released Account

In February 1781, Necker published his financial report to the king, the *Compte rendu au roi*. This was the first time in French history that the royal finances were made public. The very act of revealing the finances, traditionally a secret of the king, to everyone was a revolutionary event.

The report stated a surplus, claiming that ordinary revenue exceeded expenditure by over ten million livres. Twenty thousand copies were printed, sold out in weeks, and translated into several languages. However, there was a trick to this surplus. The report only included the ordinary accounts and excluded extraordinary expenditures, such as the costs of the American war.

A State Devoured by Interest Payments

The funds France poured into the American Revolutionary War amounted to approximately 1.3 billion livres, more than double the annual revenue of the Crown. All of this money was financed by borrowing, and France borrowed at nearly twice the interest rate of Great Britain.

By 1780, interest payments on the national debt alone consumed 43 percent of the budget. Calonne, who succeeded Necker in managing the finances, continued to borrow even more. The deficit in 1787 reached 140 million livres.

He finally resorted to taxing the privileged classes with a land tax applicable to all, regardless of status, but the Assembly of Notables, chosen by the king in 1787, rejected it. Only one path remained. In August 1788, it was decided to convene the Estates-General for the first time in 175 years, and Necker was recalled. The Estates-General would be convened not for the sake of human rights, but for an unpayable bill.