The State of French Finances

IN 1781, JACQUES NECKER (ZHAHK neh-KAIR), the assistant to Louis XVI's controller general of finance (Necker could not be named controller general due to his Swiss birth and Protestant faith), published an account of the French monarchy's finances. Although Necker denied that the monarchy was in debt and hid France's enormous interest payments, his efforts to expose the inadequacies of the monarchy's monetary policies were the first real steps toward financial reform. His efforts, however, could not prevent the financial crisis that engulfed the French monarchy.

Sire,

[I offer Your Majesty] ... a public account of ... the current state ofHis Majesty's finances....

If one examines the great credit that England enjoys and which is currently its greatest strength in the war, one should not attribute that entirely to the nature of its government; because, regardless of the authority of the monarch of France, since his interests are known always to rest on the foundation of faithfulness and justice, he could easily make all forget that he has the power to dismiss those principles; it is up to Your Majesty, with his strength of character and virtue, to make this truth felt through experience.

But another cause of the great credit of England is ... the public renown to which the status of its finances is subject. That status is presented to Parliament each year, and printed afterward; and thus all lenders have regular knowledge of the balance being maintained between revenue and expenditure, they are never troubled by suspicions and imaginary fears....

In France, a great mystery is always made of the status of the finances; or, if they are occasionally discussed, it is in the preambles of edicts and always when we want to borrow; but those words, too often the same to be true, have necessarily lost their authority and experienced men no longer believe them without the guarantee, so to speak, of the moral character of the minister of finance. It is vital to found confidence on a more solid base. I admit that, under certain circumstances, it has been possible to profit from the veil cast over the financial situation to obtain, in the midst of disorder, some mediocre credit that was not warranted; but this momentary advantage, which sustained a misleading illusion and favored the indifference of the administration, was soon followed by unhappy transactions, the memory of which lasts longer and which will take long to correct. . . .

The sovereign of a realm like that of France can always, when he wants to do so, maintain the balance between expenditures and ordinary revenue; the diminution of the former, always seconded by the wishes of the public, is in his hands; and when circumstances require, increasing taxes is within his power; but the most dangerous, and the most unjust of resources, is to seek momentary aid with blind confidence and take loans without insuring the interest, or to raise revenues, or to economize.

Such administration, which is seductive because it postpones the moment of difficulty, only increases ills and digs itself deeper into the hole; while another kind of conduct, simpler and more frank, multiplies the means available to the Sovereign and forever protects it from any sort of injustice.

It is thus this broad view of administration on the part of His Majesty which has permitted us to offer a public account of the state of his finances; and I hope that, for the good of the realm and his power, this happy institution will not be temporary.

Jacques Necker, Preface to the King's Accounts (1781)