Front Page Titles (by Subject) CHAPTER V: M. Necker's Plans of Finance. - Considerations on the Principal Events of the French Revolution (LF ed.)
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CHAPTER V: M. Necker’s Plans of Finance. - Germaine de Staël, Considerations on the Principal Events of the French Revolution (LF ed.) 
Considerations on the Principal Events of the French Revolution, newly revised translation of the 1818 English edition, edited, with an introduction and notes by Aurelian Craiutu (Indianapolis: Liberty Fund, 2008).
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M. Necker’s Plans of Finance.
The principles adopted by M. Necker in the management of the finances are so simple that their theory is within the reach of every person, although their application be very difficult. It is easy to say to statesmen “be just and firm,” as to writers “be ingenious and profound”: this advice is perfectly clear, but the qualities which enable us to follow it up are very rare.
M. Necker was persuaded that economy, and publicity,1 the best guarantee of fidelity in our engagements, form the only foundations of order and credit in a great empire. As in his opinion public morality ought not to differ from private, so he conceived that the affairs of the state might, in many respects, be conducted on the same principles as those of each private family. To equalize the receipt and expenditure; to arrive at that desired point rather by a reduction of expense than by an increase of taxation; and, when war unfortunately became necessary, to meet its extra expense by loans, the interest of which should be provided for either by a new tax or by a new retrenchment—such were the great and leading principles from which M. Necker never deviated.
No people can carry on a war without other aid than their ordinary revenue; it becomes therefore indispensable to borrow, that is, to throw on future generations a part of the pressure of a contest supposed to be undertaken for their welfare. We might suppose the existence of an accumulated treasure, such as that which Frederick the Great possessed; but, besides that there was nothing of the kind in France, it is only a conqueror or those who aim at becoming conquerors that deprive their country of the advantages attached to the circulation of money and the maintenance of credit.
Arbitrary governments, whether revolutionary or despotic, have recourse, for their military expenses, to forced loans, extraordinary contributions, or the circulation of paper; for no country either can or ought to make war with its ordinary revenue. Credit is then the true modern discovery which binds a government to its people; it obliges the executive power to treat public opinion with consideration: and, in the same way that trade has had the effect of civilizing nations, credit, which is the offspring of trade, has rendered the establishment of constitutional forms of some kind or another necessary to give publicity to financial transactions and guarantee contracts. How was it practicable to found credit on mistresses, favorites, or ministers, who are in a course of daily change at a royal court? What father of a family would place his fortune in such a lottery?2
Nonetheless, M. Necker was the first and only minister in France who succeeded in obtaining credit without the benefit of any new institution. His name inspired so much confidence that capitalists in various parts of Europe came forward, even to a degree of imprudence, with their funds, reckoning on him as on a government, and forgetting that he could lose his place at any moment. It was customary in England, as in France, to quote him before the Revolution as the best financial head in Europe; and it was considered as a miracle, that war should have been carried on during five years without increasing the taxes, or using other means than providing for the interest of the loans by progressive retrenchments. But when the time came that party spirit perverted everything, his plan of finance was charged with charlatanism—a singular charlatanism, truly; to carry the austerity of private life into the cabinet, and to forgo the pleasure of making friends and partisans by a lavish distribution of the public money! The true judges of the talents and honor of a finance minister are the public creditors.
During M. Necker’s administration, the public funds rose and the interest of money fell, to a degree of which there had been no example in France. The English funds, on the other hand, experienced a considerable fall; and the capitalists of all countries subscribed eagerly to the loans opened at Paris, as if the virtues of an individual could supply the place of the stability of law.
M. Necker has been blamed for the system of loans, as if that system were necessarily ruinous. But what means has England employed to arrive at that degree of wealth which has enabled her to sustain with such vigor twenty-five years of a most expensive war?3 Loans, of which the interest is not secured, would, no doubt, be ruinous if they were practicable; but, fortunately, they are not practicable, for creditors are very cautious in their transactions, and will make no voluntary loans without a satisfactory pledge. M. Necker, to secure the interest and the sinking fund necessary as a guarantee, balanced each loan with a corresponding reform, and the result was a lowering of expense more than sufficient for the payment of the interest. But this plain method of reducing expenditure to increase disposable revenue does not appear to be ingenious enough to the writers, who aim at being profound when they treat of politics.
It has been alleged that the life annuities granted by M. Necker for the loan of money had a tendency to induce fathers of families to encroach on that property which they ought to leave to their children. Yet it will be found that a life interest, on the plan combined by M. Necker, is as fair and prudent an object of speculation as interest on a perpetuity. The most cautious fathers of families were in the habit of advancing money on the thirty livres at Geneva, in the hope of an eventual increase of capital. There are tontines4 in Ireland, and they have long existed in France. Different modes of speculation must be adopted to attract capitalists of different views. But no one can doubt that a father of a family, if he wants to bring his expenses in order, may accomplish a great increase of capital by placing out a portion of his funds at a very high interest rate and by saving yearly a portion of this interest. I should be almost ashamed to dwell on arrangements so familiar to bankers in Europe. But in France, when the ignorant oracles of the saloons have caught, on a serious subject, a phrase of which the turn is plain to everybody, they are in the habit of repeating it on all occasions, and this rampart of folly it is very difficult to overturn.
Must I also answer those who blame M. Necker for not having changed the mode of taxation and suppressed the gabelles5 by imposing a uniform salt tax on those parts of the kingdom which enjoyed exemption from it? But local privileges were so fondly cherished that nothing short of a revolution could destroy them. The minister who should have ventured to attack them would have provoked a resistance pernicious to the royal authority without succeeding in his object. Privileged persons of one class or other were all powerful in France forty years ago, and the national interest alone was devoid of strength. Government and the people, who form, however, two main parts of the state, were unable to cope with a particular province or a particular body; and motley rights, the inheritance of the past, prevented even the King from taking measures for the general good.
M. Necker, in his treatise On the Administration of the Finances of France,6 has pointed out all the evils of unequal taxation in France; but it was a further proof of his judgment to attempt no change in this respect during his first ministry. The incessant demands of the war7 made it wholly unadvisable to incur the risk of domestic contention. A state of peace was indispensable to the introduction of any material change in finance, that the people might at least have the satisfaction of not finding their burdens increased at the time the mode of levying them was about to be altered.
While one class of persons have blamed M. Necker for leaving the system of taxation untouched, another have charged him with too much boldness in sending to the press his Compte Rendu, or official report to the King on the state of the finances.8 But he was, as has been already mentioned, in much the same circumstances as the Chancellor de l’Hôpital, and could not take a single step of consequence without being censured for prudence by the innovators, or for rashness by the partisans of the old abuses. The study of his two administrations is therefore, perhaps, the most useful that can occupy a statesman. He will trace in it the road marked out by reason between contending factions, and will discover efforts incessantly renewed to accomplish a pacific compromise between the innovators and their opponents.9
The publication of the Compte Rendu was intended to answer, in some measure, the purpose so amply attained in England by parlementary debates, that of apprising the nation at large of the true state of the finances. This, however, said some, was derogatory to the royal authority by informing the nation of the state of its affairs. A continuance of such mystery might have been possible if the Crown had had no demands to make on the public purse; but the general discontent had by this time reached a height, which rendered the further collection of taxes a most difficult matter, unless the nation had the satisfaction of knowing the use that had been made, or was intended to be made, of them. The courtiers exclaimed against a system of publicity in finance, which alone can constitute a basis of credit; while they solicited with equal vehemence, both for themselves and their connections, all the money which even such a credit could be made to supply. This inconsistency may, however, be explained by their just dread of exposing to the public eye the expenditure in which they were concerned; for the publication of the state of the finances had the very material advantage of giving the minister the support of public opinion for the various budget cuts that had to be made. To a resolute character like M. Necker the resources offered in France by a plan of economy were very considerable. The King, although personally the reverse of expensive, was of so complying a disposition as to refuse nothing to those who surrounded him; and the grants of every kind under his reign, strict as was his own conduct, exceeded the expenses even of Louis XV. To accomplish a reduction of such grants appeared to M. Necker both the first duty of a minister and the best resource of the state: by acting firmly on this plan he made himself a number of enemies at court, and among persons in the finance department; but he fulfilled his duty, for the people were at that time reduced by taxes to great distress, and he was the first to make that distress the object of examination and relief. To sacrifice himself for those whom he knew not, and to resist the applications of those whom he knew, was a painful course; but it was prescribed by conscience to him who always took conscience for his guide.
At the time of M. Necker’s first ministry the most numerous part of the population was loaded with tithes and feudal burdens, from which the revolution has delivered it; the gabelles and other local taxes, the general inequalities arising from the exemption of the nobility and clergy, all concurred to render the situation of the people much more uneasy than it is at present. Each year, the intendants decided to sell the last pieces of furniture of the poor, who found themselves incapable of paying the taxes that were demanded from them; in short, in no country in Europe were the people exposed to so harsh a treatment. To the sacred claim of this numerous body was joined that of the Crown, which ought, if possible, to be spared the odium arising from the opposition of parlements to the registry of new taxes. All this shows how signal a service M. Necker rendered to the King, by keeping up the public credit and by meeting the expense of war with progressive retrenchments; for the imposition of new burdens would have irritated the people, and given popularity to the parlement by affording it the opportunity of opposing them.
A minister who can prevent a revolutionary convulsion by doing good has a plain road to follow, whatever may be his political opinions. M. Necker cherished the hope of postponing, at least for some years, the crisis that was approaching, by introducing order into the finances; and had his plans been adopted, it is not impossible that this crisis might have terminated in a just, gradual, and salutary reform.
[1. ] Toward the end of the eighteenth century, public opinion gradually acquired the status of a universal tribunal before which citizens, magistrates, and governments were held accountable. During the Bourbon Restoration, French liberals regarded publicity as playing a key role in limiting and moderating political power and considered it a pillar of representative government along with elections and freedom of the press. Like Constant and Guizot, Madame de Staël viewed publicity and public debates as essential to creating a public sphere partly similar to the economic market based on free competition of interests and ideas.
[2. ] Worth noting is the connection between commerce, credit, and the rule of law, a recurrent topic in Necker’s political writings.
[3. ] Reference to the American War of Independence.
[4. ] Madame de Staël refers here to various onerous forms of financial speculations that were used in the epoch to increase capital. The tontines were invented by an Italian banker named Tonti and were introduced in France in 1653.
[5. ] Salt taxes.
[6. ] Necker’s De l’administration des finances de la France was first published in 1784.
[7. ] A reference to the American War of Independence.
[8. ] Reference to Necker’s Compte rendu, published in 1781, eight years before the French Revolution. Necker became famous as Louis XVI’s finance minister when he made public the state budget for the first time in the history of the French monarchy, which had always kept the state of finances a secret. Necker thought this practice both illegitimate and ineffective and pointed out that public opinion had become “an invisible power which, without any treasury, guard, or army, legislates over the city, the court, and even the king’s palaces” (Necker as quoted in Baker, Inventing the French Revolution, 193). The public success was tremendous: more than three thousand copies of this document were sold the first day of its publication. On the financial crisis during the last two decades of the Old Regime, see Doyle, Origins of the French Revolution, 45–53, 91–107.
[9. ] In this passage Madame de Staël highlights Necker’s moderation by portraying him as a representative of an older tradition of political moderation in France, which also included Montesquieu and, a few decades later, the so-called juste milieu (middle-of-the-road) liberals such as Guizot, Royer-Collard, and Cousin.