How Debt Created A Revolution

People who don’t think debt has an effect on a nation don’t know history. France at one time was the greatest power in Europe. It had a large population that was productive with growing industry and the ability to easily feed itself. It was the superpower of its time.

Its decline came through the spending and taxing of the central government. Louis XIV’s chief advisor at one time was Jean Baptiste Colbert, controller-general of France’s finances, who believed that prosperity came through promoting industrial economic growth. The national prosperity would enable the government to tax more and increase the wealth of the nation; however, he thought that this could be achieved through countless regulations. The net effect was dismal failure.

When Colbert asked a group of manufacturers how the government could help industry, one manufacturer by the name of Legendre replied, “Laissez-nous faire!” (Leave us alone!)

Wealth must be first produced before it can be taxed. Although this was understood, the French government made one bad decision after another. Simply put, one of the major problems was a national debt fueled by extravagant spending. A prime example was the building of the palace at Versailles. Other examples were the cost of maintaining the king’s court and the central bureaucracy that handled the numerous accounts of the national government. By the 1780’s, 50% of the nation’s budget was consumer by the national debt. This just resulted in more taxation at all levels of government.

When Louis XVI wanted to put into effect reforms, his efforts were blocked. Government indebtedness was so high that he wanted to cut court expenses, lower taxes and abolish certain government restrictions to stimulate manufacturing. His efforts were too late and too little to solve the crisis.

Economic hardship and the financial crisis eventually exploded into the French Revolution which forever changed France.

There are a multiple lessons that can be learned from France’s descent into financial ruin.

1. Debt can grow to the point that a government can lose control over it.
2. Spending and taxes drain a nation’s wealth.
3. Higher and higher taxes are a sign that a government’s spending is out of control.
4. Constant spending makes it necessary to tax all social classes.
5. Taxing the wealthy more doesn’t solve a debt problem because the government spends what it collects.
6. The more taxes are collected the more wasteful spending by the government.
7. Spending creates a burdensome bureaucracy that fights to perpetuate itself.
8. Bureaucracies become part of the debt because of the cost of maintaining them.
9. Too many regulations hamper business success and diminish the ability of private enterprise to flourish.
10. Reform cannot be achieved when spending creates dependency on government financing because politicians and bureaucrats will resist reforms.

Advertisements

About camden41

Retired public school administrator Retired history professor: Taught Western Civilization, American Civil War, United States History, Economic History, Ancient & Medieval Foundations, American History Since 1945
This entry was posted in Uncategorized and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s