Into Open Daylight: Lessons on taxation and the state from 18th century France

…The first steps to be taken by a Minister of the Finances, in the career which he has to run, would be influenced by the obligation he would lie under of bringing into open daylight the whole of his administration. Darkness and obscurity are favourable to indolence; public disclosure of our conduct, on the other hand, can only become an honour and a recompence to us, in proportion as we have felt the importance of our duties, and have determinately fulfilled them. Such a statement of accounts might likewise put every person who is concerned in your Majesty’s counsels, in a situation to study and to attend to the state of the Finances; a species of knowledge important in itself, and having either connection with, or relation to, all deliberations of moment. -Jacques Necker, Minister of Finance, France, Compte Rendu, 1781

The end of the ancién regime* in France was brought about by numerous factors. At least one of the most important was the monarchy’s handling of public finances and broad public demands for reform. The challenges of the era were wound up with debates over the role of the state in the economy, with laissez-faire economists on one side and mercantilists and statists on the other.

These debates were not academic: France was engaged in ruinous wars around the globe in its contest for dominance with Britain, while also facing difficult economic conditions at home. Some of the latter were induced by reforms that threatened traditional interests, and others by bad weather and policies that undermined food security. Revolutionary fervor was fed by high taxation and inflation, especially soaring bread prices, along with the perceived indifference of elites to the needs of the people, distilled in the famous if apocryphal words of Marie Antoinette: “Let them eat cake!”

In these conditions, it may seem remarkable that Louis XVI’s finance minister, Jacques Necker, managed to achieve a kind of “rock star” fame during his years of service. Few modern ministers of finance can claim this kind of stature. He served several times in the government, including in the fateful last term of 1788. The king felt compelled to bring him back into government that year after dismissing him, due to Necker’s enormous popularity.

An early visionary on budget transparency

As the quote that opens this post makes clear, Necker also understood his role as a public communicator in “rock star” terms. Publicity, he argued, is a corrective, a mechanism for building support for difficult choices. In a particularly modern vein, he argued that opening up the government’s financial accounts would build public confidence in the regime. The Swiss banker also apparently believed that more transparency would improve the government’s credit position with investors.

Necker not only published the first royal financial accounts (the Compte Rendu), perhaps the world’s original take on a “citizens budget,” but also sought to institutionalize the practice. His support for transparency originated in his view of England, which he believed enjoyed “great credit” because of the publicity given to the government’s public finances, and the annual presentation of the government financial accounts to parliament. Indeed, it is difficult to find any modern argument for fiscal transparency that was not in some measure anticipated by Necker’s Compte Rendu.

It may also seem incredible today, but France’s published financial accounts of 1781 was a bestseller and was translated into multiple languages. Author Robert Harris estimates it was more widely read than Rousseau’s Social Contract, though of course it did not do as well over the longue durée.

Widespread concern for fair taxation

This is one indication of the centrality of taxation and expenditure at the time. Necker understood that 18th century French citizens were increasingly concerned about the fair administration of taxes and willing to mobilize around the issue. The overwhelming importance of fair taxation across all social classes is clear if we review the most well-known formal protests (remonstrances) of the period leading up to the revolution, as well as the cahiers de doléances of 1789 (the “grievance books” compiled by various groups across the country in the year the revolution began.)

In Blois, a city in central France, even the nobility noted in their cahier:

A tax is a partition of property. This partition ought not to be otherwise than voluntary; in any other case the rights of property are violated: Hence it is the indefeasible and inalienable right of the nation to consent to its taxes. According to this principle, which has been solemnly recognized by the king, no tax, real or personal, direct or indirect, nor any contribution whatsoever, under whatsoever name or form, may be established except with the consent and free and voluntary approval of the nation.

These were increasingly common beliefs that eventually found expression in the “Declaration of the Rights of Man and the Citizen,” the seminal cri de coeur of the revolution, which had this to say about taxes, transparency, and fiscal accountability:

  • A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.
  • All the citizens have a right to decide, either personally or by their representatives, as to the necessity of the public contribution; to grant this freely; to know to what uses it is put; and to fix the proportion, the mode of assessment and of collection and the duration of the taxes.
  • Society has the right to require of every public agent an account of his administration.

These demands for tax reform (as well as participation and accountability) were motivated by the unfairness of the existing system, manifest in the fact that many members of the nobility and others who could pay for the privilege were exempted from tax. At the same time, punitive taxes on salt and other taxes fell heavily on ordinary people.

We know how it all ended; the failure to reform public finances to assure greater transparency, public participation, and equity led to the eventual overthrow of the Bourbon monarchy in what we now call the French Revolution. This may be interpreted as a cautionary tale about the demise of states that do not address a growing clamor for fairness and public participation in public finances.

However, the more nuanced lesson is the construction of a new idea of citizenship that ultimately made revolution possible. This is the inspiration for the title of Simon Schama’s epic chronicle of the French Revolution, “Citizens,” from which I have drawn much of the framing here. The book is a complex tale of culture, politics, economics, and the spread of ideas among a highly literate population. (Schama claims literacy in 18th century France exceeded that in 20th century America.) A critical facet of the debates during this period was the erosion of the notion of the French as defined by membership in rigid social classes, exemplified by France’s “estates,” (nobility, clergy and the rest) and the rise of an ideal of popular sovereignty—a more direct relationship between citizens and the state.

States, citizens and taxation

Note how taxes, which we too often dismiss as technical and dull, were central to the dynamism of the era, the undoing of the monarchy, the rise of new ideas regarding citizenship, broad public mobilization, and—in Schama’s memorable phrasing—the “improvisation of a nation.” To tax is to define the ambit of the state—its roles, its responsibilities, and the reach and limits of its authority vis-à-vis the citizenry.

Just as taxation is therefore not dry and technical, but alive with the fundamental issues of the day, so too is this particular history, which has been reinvented in numerous tax protests over the years in France—most recently by the gilets jaunes (“yellow vests”). The spirit of tax resistance that animated the yellow vests in 2018 was in part about the unfairness of the modern tax system.

As scholar Alexis Spire has shown, the French tax system continues to permit the wealthy to dodge taxes, while enforcing the law more strictly for the middle and working classes. The 2018 resistance in France echoed the cries of the 18th century as the yellow vests denounced “King Macron” and brought revolutionary dress back into style.  Macron responded with a “grand débat” reminiscent of the great regional debates in the eighteenth century, and even the cahiers de doléances were revived.

As Faulkner quipped, “The past lives on. It’s not even past.” If we have lost sight of the urgency of taxation as core to our agenda for governance and development, there is no time like the present to rediscover it.

* The ancien régime was the political and social system of the kingdom of France from the late Middle Ages until the French Revolution in 1789.


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