Taking French participation in the Seven Years War as a case study, this book examines the effects of war on the economy and on government finance, finding that the economic toll has usually been exaggerated and the financial toll seriously underestimated.
Originally published in 1987.
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The Seven Years War and the Old Regime in France
The Economic and Financial Toll
By Princeton University Press
PRINCETON UNIVERSITY PRESSCopyright © 1986 Princeton University Press
All rights reserved.
ECONOMIC GROWTH AT RISK
"un terns de délices"
War is a gamble. But for those in the old regime who decided whether or not to take this gamble — kings and oligarchs — the risk was attractive. Visible gains in territory, prestige, power, and economic advantage seemed to outweigh probable losses: war, along with marriage alliances, was the classical path toward state building. The ruler who went to war with the distressing frequency typical in the eighteenth century, however, knew much about probable costs. War meant the depletion of military and naval resources and supplies, vast and wasteful spending on campaigns, the accumulation of debts, and political tensions arising from higher taxation. Even so, these costs rested lightly on the minds of most rulers. France entered the Seven Years War unenthusiastically, but fought it nonetheless, and for goals no greater than these: to preserve French influence in Germany (but not with a realistic prospect of adding territory); to define the eastern boundary of possessions in North America; to retain Minorca, seized in 1756 before the declaration of war; and to protect French prestige. Some wars offered grander prospects. But the point is that the importance of these payoffs differed in the old regime from what may seem most plausible today. Small territorial gains and dynastic dignity bulked large, and were therefore worth what now seem to have been inordinate expenditures in resources.
War also involved certain other risks not always appreciated by those who engaged in it so freely. Beyond the visible risks to prestige and solvency (how tirelessly eighteenth-century statesmen and political commentators repeated the idea that finances are the sinews, les nerfs, of the state!) there were less obvious risks focusing on the economy. A theory of the political means of influencing economic issues was emerging in the middle decades of the eighteenth century. Rulers seem not to have stood in the forefront among readers of the literature on this theory, but discussions of policy options at Versailles reveal that economic issues were not ignored. The king and his ministers worried about colonial wealth. They worried also about the money stock and how war would affect the scarcity of money, a concern covering both the actual stock of specie in a nation and the cost of credit. But they worried less or not at all about how war would influence the allocation of economic resources and how it would affect forces favoring or impeding growth. These were the invisible risks.
The visible issues that fell under the scrutiny of rulers or political commentators provoked a search for information. If the data subsequently gathered are not always satisfactorily precise or altogether reliable, they provide at least so many sightings of a problem. The eighteenth-century estimates of France's money stock tend to range widely, but they also establish the parameters of an answer to the questions "how much?" and "what trend?" It is more difficult to find quantitative signposts for discussing the issues toward which people of the eighteenth century were inattentive or ambiguous. Nonetheless, to examine the costs of a war, we must look first at the scale of the resources at risk. The character of the investigation will be determined, and limited, by the kinds of evidence that are available.
BASIC DATA ON THE OLD REGIME ECONOMY
"Notre but essentiel était de dresser la statistique." Thus Pierre Dardel explained the objective behind his study of shipping in the Norman ports of Rouen and Havre. It is a sentiment and goal characteristic of much recent French economic historiography: the works of Ruggiero Romano, Tihomir Markovitch, Jean Marczewski, François Crouzet, René Baehrel, and many others, which have recovered information compiled during the old regime and for the first time brought it together in coherent pictures of significant parts of the French economy. Only because of this patient accumulation of data is it now possible to frame questions about the long-run course of economic activity and the short-run effects of events like war, with a reasonable expectation of arriving at satisfying answers. Of course, as Dardel warned, the answers will not depict matters as they actually were. A plethora of quantitative data about the old regime economy would not compensate for the inevitable imperfections of these statistics, or for the limits of statistical analysis, which can answer only certain questions. Even if the defects of the sources and methods require a degree of humility in the economic historian not called for in other historians, the data still permit the satisfaction of a compelling modern need to know the order and magnitude of things. The eighteenth-century ruler and his ministers felt the need to know order and magnitude, and therefore ordered the collection of data. But they did not often use those data to build quantitative and analytical portraits, which have become possible because we can combine the data collected then with theories and methodologies devised since.
Population is the first measure of economic activity, because it is a measure of the number of participants. As a result of the use of family reconstitution techniques in analyzing the parish registers, the last three decades have provided rapidly improving information about the numbers of the French people, the trend of those numbers, and vital statistics. The reports, which appear in scores of local and regional studies, have been summarized by Jacques Dupâquier and appear in Table 1.1. These figures revise sharply upward the size of the population believed to have been living during the eighteenth century within the present-day boundaries of France, an area not significantly larger than eighteenth-century France after the addition of Lorraine. Because the estimates for late in the century are higher than figures generally employed by scholars before 1979 when Dupâquier published these figures, previous adjustments of economic data into per capita figures now require correction. One consequence of this continuing process of maintaining a fit between economic and demographic data will show up in the discussion of output.
As Table 1.1 indicates, the eighteenth century was an era of population growth in France. But the scheme of growth there diverged from the experience of some neighboring states. French population growth exceeded the quite small growth experienced in the Dutch Republic, but it also peaked earlier than did growth in Britain. Dupâquier's estimates show an increase in numbers in each decade between 1700 and 1790, except for the 1740s, which opened with two years of serious grain shortages. The rate of growth was higher before 1740 than after, but the percentage growth before and after 1750 was approximately equal.
In 1700 France's population (including Lorraine, which did not formally become part of the monarchy until 1766) totalled 21.5 to 22 million. By 1790, following this process of unspectacular but persistent growth, it had reached a level of some 28.1 million. For these ninety years taken together, the growth rate was about 0.3 percent per annum, or three per thousand a year. To keep pace with population growth, economic output in real terms needed to grow at a comparable pace.
In 1735 France's rural population numbered some 20 million, and the urban population some 4.4 million, or about 18 percent of the total. Among the largest cities were the major ports of Marseilles, Bordeaux, Nantes, and Rouen, but even together these cities fell short of matching the population of Paris. Although these ports were distributed among France's maritime frontiers, the heaviest concentration of population was in the northwest, from Nantes (including Brittany) to Lille. Between 1740 and 1806, when an urban census was conducted, there was little net change in the level of urbanization, which remained 18.8 percent at the latter date.
The eighteenth century was also an age of inflation in France. The increase in prices was significant, distorting any measurements that fail to take it into account; and the course of inflation was irregular enough to undermine the use of rule-of-thumb estimates. French price history, like French employment, is skewed toward the agricultural sector. The most extensive sources are mercuriales from urban markets reporting wholesale prices of basic commodities — wheat, rye, barley, oats, and wine — and thus reporting on the supply of basic foodstuffs and the probability of food riots, a matter of ceaseless concern to public authorities. Whereas the kingdom was well supplied with important enough grain markets to warrant keeping such records, it lacked an entrepôt on the scale of Amsterdam. The course of prices for other goods remains obscure because no price currents listing the broad range of commodities in trade in the eighteenth century have come to light, and because historians have not found a way to exploit the records of institutions like asylums, hôpitaux, or prisons for substitute information. Thus the record is biased in a way that impedes an effort to detect shifts in the terms of trade between agricultural goods, for which data are plentiful, and non-agricultural goods and services, for which data are sparse. Did prices of other goods advance more or less rapidly than those of wheat and rye? What was the overall price trend?
To build a price index that will serve as a deflator to avoid money illusion — the comparison of sums across time without any adjustment for price change — requires information about a wide variety of goods in trade. As noted above, French price studies furnish the most important data set, the price of the basic grains, wheat and rye. These bulky commodities moved at greater expense than most goods in trade within France and between France and other countries. Therefore, grain prices in France are less likely to move in close association with grain prices elsewhere than are the prices of other goods — precious metals, wool, linen, spices, sugar, tobacco, potash, iron, and so forth — which were everyday objects of international and interregional trade, but which did not worry officials in the same way that grain prices did. From early in the eighteenth century, however, the wheat price series for the Amsterdam market, for which a broad spectrum of non-grain prices is also available, show a high degree of association with those for Paris. For these two reasons — the close association between Paris and Amsterdam wheat prices and the likelihood of still closer associations for other goods cheaper to transport or more selectively available — prices recorded in the Amsterdam market for non-grain items may be used to estimate inflation among these items in French markets.
There is one large caveat. Although the Amsterdam grain market was closely associated with Paris, and grain markets in northern France with Paris, this association did not hold for the entire kingdom. Marseilles imported grain from the Levant, and wheat prices in that great port show no association with prices in Paris. Likewise, Toulouse stood at the center of an inland grain-growing area in the south, and its prices show periods of high association with Paris mixed with periods of low association. Except for coastal traffic, transportation costs between the northern market structure and the Garonne Valley around Toulouse were considerable, making the actual movement of grain feasible only in periods of exceptional price disparity. Thus France did not possess a national grain market, but rather one large and integrated market covering approximately the northern two-thirds of the country, and a southern tier of markets only partially integrated with the north in grains. There were associations between the two regions. The south provided seed-grain for the area of "la grande culture" in the north, and grain-growing regions made exchanges with viticultural areas. But these associations were not yet strong enough to create a national market. Levels of integration among items less expensive to transport may have been greater than in wheat, but the data do not provide enough insight for a conclusion.
Under these circumstances, it follows that the grain price series constructed for individual markets by a number of scholars, and for France as a whole from 1726 to 1789 by Ernest Labrousse, should be supplemented by other series. Table 1.2 reproduces Labrousse's multi-grain series, Micheline Baulant's wheat series for the Paris market, N. W. Posthumus' weighted series covering forty-four items traded on the Amsterdam market, the Frêches' wheat series for Toulouse, and René Baehrel's wheat series for Marseilles imports from the Levant. Tests for integration compare variances in the price movement between two markets, showing whether prices at the two sites fluctuated in harmony. Such tests establish strict standards that need not apply when the issue is the long-run trend. Chart 1.1 plots price changes among these markets. It reveals both the universality of inflation in France and the similarity in the inflation curve among French markets and between French markets and Amsterdam. Prices in the south and the north of France did not vibrate together, but both were subject to the same pressures: population growth in a place and period of nearly stable agricultural technology and agricultural productivity, and growth in the money stock. To measure price change in French trade, heavily weighted, like Amsterdam's trade, toward textiles, wines, and colonial goods, it will be preferable to use the Posthumus series, which is weighted toward non-grain items. For other purposes, such as the measurement of price change in central government revenues, it will be preferable to use Labrousse's national grain index or the series of Paris wheat prices. No one series will perfectly capture price movement throughout France because these movements were not entirely harmonious. But deflation using the more appropriate of the two indexes will be superior to a rule-of-thumb approach, or to overlooking price change altogether.
The investigation of French national income toward the end of the eighteenth century, led by Jean Marczewski, has produced an estimate of the value of French agricultural and manufacturing output during the 1780s in current prices: 5.1 billion livres tournois (l.t.). Other estimates, which are meant to include the value of services, government spending, investment, and net trade flows, produce a higher figure. All of these attempts to reconstruct output may be compared with eighteenth-century estimates — those gathered by Marczewski, which are skewed toward the pessimistic views of the physiocrats, and others. The more realistic mid-century estimates placed national income at 3 to 3.4 billion livres, depending on the population estimate preferred. Asked to gauge the scale of transactions, including apparently secondhand sales and perhaps also barter exchanges, a group of secrétaires d'état, intendants des finances, intendants du commerce, and wholesale merchants suggested 5.8 billion for a period of eighteen months in 1751-1752, or an annual total of 3.9 billion. The different sources cannot be expected to agree, since they are often discussing different issues: gross national product, national income, personal consumption, rural income, or all transactions (which is a significantly higher figure than GNP). But they are in accord in describing a pattern of growth during the eighteenth century. The issue of greatest significance is the scale of that growth.
Two visions exist about the scale of growth. One, fashioned by Patrick O'Brien and Caglar Keyder, projects backward a growth rate of 1.0 percent per annum. Using Marczewski's figure for agricultural and manufacturing output during 1781-1790, O'Brien and Keyder imply that output during the first decade of the century totalled some 2.3 billion livres in prices of the 1780s. This estimate refers to aggregate commodity output, and therefore sets forth a higher rate of growth than would be inferred from a calculation of per capita change. If the population totalled 21.5 million during 1701-1710, and averaged 27.6 million during 1781-1790, per capita output for these sectors would appear to have increased from some 107 Lt. to some 185 l.t. in constant prices. Or, since the rate of population growth was 0.3 percent a year, then the conversion from an aggregate to a per capita measure of change in output will deduct 0.3 percent. O'Brien and Keyder thus imply a per capita growth rate of 0.7 percent per annum, a figure that represents an upper limit among views on French economic performance.
Excerpted from The Seven Years War and the Old Regime in France by Princeton University Press. Copyright © 1986 Princeton University Press. Excerpted by permission of PRINCETON UNIVERSITY PRESS.
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Table of Contents
- FrontMatter, pg. i
- Contents, pg. vii
- LIST OF TABLES, pg. ix
- LIST OF CHARTS, pg. xi
- PREFACE AND ACKNOWLEDGMENTS, pg. xv
- 1. ECONOMIC GROWTH AT RISK, pg. 1
- 2. FRENCH FINANCES ON THE EVE OF WAR, pg. 38
- 3. THE SEVEN YEARS WAR, pg. 72
- 4. THE SEVEN YEARS WAR AND THE FRENCH ECONOMY, pg. 104
- 5. FINANCING THE WAR, pg. 132
- 6. THE DEBT, pg. 162
- 7. A CRISIS OF CONFIDENCE, pg. 192
- CONCLUSION, pg. 223
- APPENDIX 1. ESTIMATING THE PRICE TREND IN FRENCH TRADE, pg. 237
- APPENDIX 2. CALCULATING THE PRINCIPAL OF LIFE ANNUITY LOANS, pg. 241
- MANUSCRIPT SOURCES CITED, pg. 243
- INDEX, pg. 249