France 1789: A Bankrupt Regime
In the world today, a nation's financial collapse can threaten its political and social stability. It was the same in France in 1789, explains Peter Burley.
The threat by countries as far apart as Poland or Brazil to default on the repayment of their loans is a commonplace newspaper headline today. The first recognisably modern crisis of state bankruptcy – where a nation's financial collapse led directly to political and social upheaval – was experienced by France as the prelude to the French Revolution.
There were some important differences to be noted between France's situation in the late 1780s and that of modern debtor regimes. Commodities did not dominate national economies in the way oil or cocoa, for example, may today. France was generally reckoned to be the world's most developed nation, and not beholden to any one creditor or organised consortium, thus foreign intervention was not a factor to be taken into account. As well as the more obvious rules of modern public finance above all keeping capital and revenue accounts strictly separate – France still suffered from a. legacy of medieval accounting practice including the division of taxes into 'ordinary' and 'extraordinary' categories, with important constitutional implications, and a fiscal administration which had become progressively compartmentalised, duplicated, and partly privatised, making it uncontrollable, unaccountable, and impossible to reform coherently.