5—
HYPOTHESES AND CONCLUSIONS

10—
Modernization, Revolution, and the State

One of the underlying intuitions of this analysis is that the ability of a society to develop mechanisms that institutionalize trust, credibility, and monitoring is critical to the process of modernization. Such institutions are necessary to sustain intertemporal trades in both political and economic markets.^[1] We shall now set aside consideration of the economic institutions necessary to achieve growth and concentrate on political institutions and practices. The ability of an economy to encourage the investment needed to sustain long-term economic growth ultimately depends on the sustain-ability of political contracts. If each new prince or minister overturns the contracts of his predecessor, a society will sustain only short-term investments, and economic growth will be stifled.

In both France and England in the early modern period, private groups benefited from the use of political means to redistribute the nation's income, inasmuch as the principal governing institutions became centers for the disbursement of patronage. In France, the principal redistributive mechanisms were tax farming, the granting of industrial and commercial monopolies to preferred businesses, and the distribution of sinecures, army commissions, and procurement contracts to preferred courtiers.

Redistribution of France's income was carried out by the executive authority of the King's Council, whose functional counterpart in England was Parliament. Parliamentary redistribution, by contrast, benefited more broadly defined social groups than those relatively smaller clans in France clustered around individual ministers. Corruption was another form of

[1] Intertemporal refers to trade that requires trust between parties who come together for the sole purpose of trade. Public goods needed to sustain trade include institutions that ensure contract enforcement by a neutral third party, such as a judicial system independent of political authority.

redistribution that flourished in England to a much greater extent than in France. Although both political systems produced socially inequitable outcomes, important differences between the two nations' political institutions led to differences in political stability.

A Comparison Rich in Paradox

The contrast between the French and English systems of government is rich in paradox. In France, discretion was concentrated in several government bureaus with highly differentiated functions. The French ministers were empowered to make wholesale reforms but could not remain in office once their zeal for reform was revealed. In England, power was dispersed in Parliament, where reforms could be blocked at many levels, yet adjustments were enacted with greater success than in France. Moreover, legislation enacted by Parliament was usually implemented, whereas the will of the much stronger executive in France was less frequently carried out. A significant implementation gap existed under absolutism. The king issued edicts pertaining to the entire nation, and instruments of coercion were mobilized, but the Crown's subordinates, even those directly subject to absolutism's command structure, did not implement reforms that conflicted with short-term tax collection. There were no legal limits on the French king's power or, by extension, that of his ministers, yet time and time again his ministers succumbed to cabals within the court, instrumented by individuals and groups that possessed no legal or formal means of influencing government decisions. In England, the king, and by implication the executive, admitted that "we at no time stand so highly in our estate royal as in the time of parliament."^[2] Despite the legal limits on the Crown's power imposed by Parliament, the English king managed to maintain his position and policies. It seemed to many contemporaries that George III's ministers were more powerful and more likely to be obeyed than the unaccountable and theoretically stronger ministers of the French king.^[3]

In contrast to those in England, French lobbyists could take a far more streamlined course.^[4] A client of the French government might be wholly

[2] Joel Hurstfield, Freedom, Corruption and Government in Elizabethan England (Cambridge, Mass.: Harvard University Press, 1973), 43. Margaret Levi makes this same point in Of Rule and Revenue (Berkeley and Los Angeles: University of California Press, 1988), 95–144.

[3] This perception underlies the revisionist writings of J. C. D. Clark, Revolution and Rebellion: State and Society in England in the Seventeenth and Eighteenth Centuries (New York: Cambridge University Press, 1986), 68–91, 120–63.

[4] For a summary of the political science literature on interest group behavior, see Robert H. Salisbury, "Interest Groups," in Handbook of Political Science: Non-Governmental Politics , ed. Fred I. Greenstein and Nelson W. Polsby (Reading, Mass.: Addison-Wesley, 1975), 171–228.

dependent on one or two central agencies, so that the forces of political persuasion could more economically be focused on the appropriate central structure. Not only was power concentrated at the national center in Old Regime France; tasks within the central structure were also highly specialized. From the time when Louis XIV set the precedent of working independently with each ministry, thereby eliminating the threat of rivalry from a prime minister, the ministries grew ever more autonomous.^[5] In the absence of a prime minister to coordinate all administrative affairs and implement consistent policies, the increasing autonomy of individual ministries meant an increasing susceptibility to the campaigns of pressure groups such as the financiers. This increasing susceptibility in turn reduced the security of ministerial tenure. Louis XIV never dismissed a minister on account of public opinion and hoped to endow his successors with the institutional means to resist similar pressures.^[6] Yet less than fifty years later, Louis XV remarked, "I appoint the controller general; public opinion dismisses him."^[7] During his fifty-four-year reign, Louis XIV had five controllers general, which averages out at almost eleven years per minister, each of whom either died in office or left of his own will.^[8] By contrast, nine controllers general were appointed between 1745 and the death of Louis XV in 1774, averaging just over three years per ministry.^[9] From the beginning of Louis XVI's reign to the calling of the Estates General, there were ten finance ministers, the average length of service dropping to

[5] As an example of how the principle of absolutism was passed down through the administrative hierarchy, Alfred Cobban tells how Louis XV found cabriolets in the streets of Paris disruptive. "If I were Lieutenant of Police I would ban cabriolets," he said; but, Cobban continues, "he was merely king, and his only sanction was to dismiss an official who refused to carry out his wishes" (Cobban, A History of Modern France, 1715–1799 [Harmondsworth: Penguin Books, 1957], 1:30).

[6] Before Louis XIV there was considerable ministerial instability. On the campaign of opposition to d'Hemery and the campaign for the restoration of La Vieuville, at the beginning of and during the Fronde, see Richard Bonney, The King's Debts: Finance and Politics in France (Oxford: Clarendon Press, 1981).

[7] Antoine-Jean-Baptiste Robert Auget de Montyon, Particularités et observations ... depuis 1660 jusqu'en 1791 (Paris: Le Normant, 1812), 388.

[8] Colbert (1661–83), Le Pelletier (1683–89), Phelypeaux (1689–99), Chamillart (1699–1708), and Desmaretz (1708–15). Considerable uncertainty surrounds the departure of Chamillart, who claimed to have left of his own will. Significant changes occurred after his departure, suggesting that he may have been prompted to leave the finance ministry. He did, however, remain in the government.

[9] Machault d'Arnouville (1745–54), Moreau de Séchelles (1754–56), Peirenc de Moras (1756–57), Boullongne (1757–59), Silhouette (March–November 1759), Bertin (1759–63), L'Averdy (1763–68), Mayon d'Inmvau (1768–69), Terray (1769–74).

roughly twenty months.^[10] What had changed to account for the greater vulnerability of controllers general to "public opinion"? Especially curious is the fact that ministerial discretion increased at the very point when private groups seem to have captured the principal governmental bureaus, including finance.

In both nations, bribery and maneuvering behind the scenes pervaded government. Despite widely known corruption, however, the appearance of legitimacy had an important role in empowering the British Parliament, while the decisions that emanated from the French executive were perceived as illegal and corrupt, although the actual activities of the French ministers were hidden from the public eye and tangible evidence of government corruption was less abundant in France.

Tax policy too was riddled with paradoxes. The English were able to tax a larger percentage of national production than could the French. However, because much of the revenue raised by the English government came in the form of excise taxes and tariffs, the English complained less about the weight of taxes than did the French, who were taxed at proportionally lower rates.

Despite the tendency of the French elite to become more homogeneous in the late eighteenth century, rivalry still stifled the cooperation needed to make necessary reforms. Theoretically, all subjects were equal before the French king, yet decision-making power was circumscribed by cliques. Although the English elites were divided into interest groups, they were able to cooperate in achieving a parliamentary consensus on major policy issues. Relatively broad interests of the nation were more frequently represented in governmental decisions, because Parliament provided an institutional forum in which English interest groups could reach a consensus.^[11]

[10] Turgot (1774–76), Clugny (May–October 1776), Taboureau des Réaux (October 1776–June 1777), Necker (1776–81), Joly de Fleury (1781–83), D'Ormesson (April–October 1783), Calonne (1783–87), Bouvard de Fourqueux (1787), Laurent de Villedeuil (1787), Lambert (1787–90), and we should also add Brienne, who had the power of controller general without the title from 1787 to August 1788, and Necker's second term in the office from September 1788 to September 1790. See Marcel Marion, Dictionnaire des institutions de la France aux XVIIet XVIIIsiècles (Paris: A. Picard, 1923; repr., New York: Burt Franklin, 1968), 144.

[11] Even more curious, we learn from Michael W. McCahill that the House of Lords "often effectively represented the interests of localities and individuals despite the absence of a democratic mandate" (Order and Equipoise: The Peerage and the House of Lords, 1783–1806 [London: Royal Historical Society, 1978]). Nevertheless, while arguing for their continued importance, McCahill does not see the lords as dominating the Commons.

In England, offices were never for sale, yet political power could be bought by nouveaux riches (West Indies planters, Anglo-Indian nabobs). Paradoxically, in France one could literally buy an office, yet the offices did not bring political power; networks of connections and wealth were crucial in penetrating government bureaus.^[12] While exercising absolute power in theory, in reality the most powerful individual in the French administration, the controller general, depended upon his personal connections with private networks of financiers for the funds needed to run the government. The success of absolutism in rewarding ministerial favorites engendered bitter rivalries among members of the elite and intensified resentment by dividing the decisive elites into winners and losers, ins and outs. Although the centralization of the French Old Regime reduced the cost of negotiating with the king, it increased the costs of negotiating among themselves for private groups.

Specifying the regime-specific variations in the institutionalization of competition for rents will help unravel some of these paradoxes.

Absolutism, Cronyism, and the French State As an Abstraction

The lack of accountability of France's principal government officials permitted a system of patronage to develop in which narrow, redistributive coalitions flourished, held together by family ties (see chapter 8 for discussion of the economic logic of these connections). The king's ministers depended upon the loyalties of particular families, clans, or cronies, and, with few exceptions, were unable to generate broadly based national or public support. This reliance on familial loyalties during a period of rapid economic expansion split the society into groups that regarded one another with suspicion. When members of a society depend on marriage or close personal ties to finance their long-term investments, liquidity will be reduced, the number of transactions will be diminished, and economic activity will contract. In addition, the primacy of clique and family conflicted with political modernization and economic expansion during the eigh-

[12] The French monarchy created a political system that by comparison with England's did not allow new groups or interests to gain access to state power. The government's inability to assimilate Protestants was perhaps the most striking example of the closed character of the regime. Necker, despite his prominence in international banking circles and his appointment as financial minister, was barred from meetings of the king's council because he was not Catholic. Wealthy families could buy into the political sphere with the purchase of offices, but this means of accommodating new groups was inadequate. First, there were never enough offices. Second, the offices rarely carried real political or administrative authority.

teenth century by inhibiting the association of universalistic, achievement-oriented norms with the state.^[13]

Drawing the distinction between obligation to the state and obligation to family members, an important component of successful modernization, was further stymied by the official rhetoric of divine right monarchy. The king claimed the right to rule the state as a father would his family; the nation's resources were his patrimony. He further claimed not to be subject to human institutions.^[14] Being above the law meant that contracts between the king and his subjects were difficult to enforce legally, creating additional risks for the government's creditors, an extra cost that revealed itself in the interest rates paid by the state when it attempted to contract loans or sell annuities. So long as the Crown's commitments were dependent upon its discretion alone, it could only reduce the cost of credit transactions and increase the amount of liquidity in the economy by depending on intermediaries. While the delegation of finance to corporate intermediaries expanded credit and liquidity in the economy as a whole, the property rights assigned to the groups restricted necessary institutional reforms.

Another area in which absolutism failed to provide the moral leadership essential in modernization involved the distinction between private and public expenditures. Ministers personally used a percentage of the funds they handled as the king's representatives. For example, an intendant might set aside public money for the marriage of his daughter. Failing to distinguish between private interests and public welfare, the government found it hard to mobilize confidence in its conduct of public business.

Public access to information about how government decisions were made and the economy was regulated was lacking in France. Ministerial discretion meant that each bureaucrat decided largely according to his own pleasure how to rule in the domain under his authority. Was it not France that Marquis René-Louis d'Argenson (1694–1757) referred to when he spoke of a monarchy "ruled by five or six ministers who act without agreement, and what is even worse, without knowing what the others have ordered, lacking familiarity with each other's principles and without knowing what has been prescribed"? Argenson viewed the king as responsible for this breakdown of cooperation between various members of the government; "Under Louis XIV our government was arranged according to a new system, the absolute discretion [volonté ] of the ministers of each

[13] See Samuel Huntington, Political Order in Changing Societies (New Haven: Yale University Press, 1968), 32–39.

[14] Michel Antoine, "La Monarchie absolue," in The Political Culture of the Old Regime , ed Keith M. Baker (London: Pergamon Press, 1987), 3–24.

department; all sharing of authority stopped."^[15] Michel Antoine has argued that the majority of decisions made by the finance ministry were not even reviewed by the controller general but were the products of a single intendant of finance acting on his own.^[16] Roland Mousnier observes:

During the seventeenth and eighteenth centuries we see a gradual intensification of processes which began in the preceding centuries and led to the development of absolutism, or, rather, to increasing bureaucratic centralism, which was confused with absolutism. We witness a gradual shift from orders issued as personal letters to orders couched in the form of anonymous memoranda, from authenticated open letters to sealed letters not authenticated by any regular procedure, from verification by the Grande Chancellerie to verification by specialized bureaus, and from decisions made in council, at least in principle, to more or less openly avowed individual decision-making.^[17]

This discretion contrasted with the increasingly bureaucratic structure of authority required to manage government bureaus. In the absence of a set of predictable political procedures, the Crown's decisions seemed arbitrary.

Barry Weingast points out that in determining a citizen's or a parliament's judgment about the constitutionality of a government's behavior, the existence of a bill of rights, or lack thereof, can have an important influence on a society's capacity for collective action and resistance.^[18] With-

[15] René-Louis d'Argenson, Considérations sur le gouvernement ancien et présent comparé avec celui des autres états suivies d'un nouveau plan d'administration 2d ed. (Amsterdam, 1784), 13, 163. Argenson's father (1652–1721) had been lieutenant de police of Paris and garde de sceaux during the reign of Louis XIV.

[16] As proof of how meetings of the council became a fiction, Antoine provides examples where over one hundred decisions were issued by the council on days when the council did not meet ("Monarchie absolue," 398).

[17] Roland Mousnier, The Institutions of France under the Absolute Monarchy, 1598–1789: The Organs of State and Society , trans. Arthur Goldhammer (Chicago: University of Chicago Press, 1979), 2:238. "During the two centuries we are examining, however, the number of orders issued under the secret seal or over the king's signature alone continued to increase, as did the importance of the subjects treated in this way; the form of these orders shifted from that of a letter to that of an official report. In other words, the work of government and administration was increasingly done not by councils but by individuals working alone in offices dealing individually with their subordinates and private individuals from whom they received information and to whom they issued orders. They examined the files and made decisions on their own. This was what the parlements characterized as 'ministerial despotism' " (ibid., 244).

[18] See Barry R. Weingast, "Institutional Foundations of the 'Sinews of Power': British Financial and Military Success Following the Glorious Revolution" (mimeo, Hoover Institution, Stanford University, July 1991), which forms the basis of the following discussion. Without a constitution, a sovereign could violate the rights of subsets of the society without fearing the loss of broad support. A constitution facilitates coordination of the separate judgments of a large body of individuals. The existence of a constitution increases the ability of citizens to consolidate reaction by increasing the possibility of reaching a collective judgment. Policing a sovereign is more difficult when disagreement arises over the constitutionality of an action. A constitution will also be less effective if it does not pertain to all citizens equally, since then the government can discriminate against minorities whose political support it does not need. For a copy of the British Bill of Rights, see E. N. Williams, The Eighteenth-Century Constitution: Documents and Commentary (New York: Cambridge University Press, 1960), 26.

out a publicly accepted constitution that defines the rights of subjects, each individual or subgroup has to determine the legal and moral boundaries of its relationship to the sovereign on its own. By contrast, the existence of a bill of rights allows aggrieved citizens to appeal to common principles in order to mobilize support, which in turn increases the likelihood of a collective response to violations of the rights of a few.^[19] Because there was no universally acknowledged constitution in France, the Crown could violate the rights of the few without risking the ire of the many. The constraints on the Crown's behavior could then be set by the Crown's dependence on a particular group's support. Upon taking office, Louis XVI agreed to desist from arbitrary behavior, like declarations of bankruptcy and abrogations of habeas corpus. Nevertheless, subjects still feared the Crown's temptation to act in an arbitrary manner. As observed in chapter 8, despite the French Crown's claims to avoid arbitrary behavior in general, its promises were not seen as credible in the absence of binding institutions that could apply sanctions to the Crown. The perception that the Crown's incentive to protect its subjects' property was questionable made it more costly for the Crown to contract loans. The absence of a constitution also meant that the Crown could not be restrained from promoting preferred private interests at the expense of others. That no institutional mechanism existed to restrain the Crown from offering special privileges to clients and cronies increased divisiveness and resentment, thereby undermining the legitimacy of government.

Cronyism and Political Stability

The prevalence of cronyism led to rivalry among potential recipients, to factional conflict, to grudging commitments from the winners, and to re-

[19] "Indeed, on close examination 'the constitution' resolves itself into no more than a large number of men making claims about what the constitution is," remarks J. C. D. Clark, who vehemently rejects the importance of the Constitutional Settlement of 1688 (Revolution and Rebellion , 90). Of course it is easier to agree on standards than to agree on how a standard applies to a particular issue at hand.

sentment among the losers. By splitting society into winners and losers, cronyism increased instability in the long run. A key appointment or a construction contract delivered to a family member had few systematic rules to follow.^[20] Cronyism thus bore the threat of deteriorating into rivalry as disappointments led to internecine feuds. Court cases between rival clans of financiers fill the judicial archives of the Old Regime. To restrain the disruptive effects of court cases between rival financial clans, the king ruled that all cases concerning his finances had to be settled in his courts or council.^[21] The emergence of collective liability for financiers was another means of restraining the effects of conflicts among financiers.

Cronyism at the highest levels of government was a potent source of resentment, which worked to undermine public support for the government. The activities of controllers general perceived as opportunistic, such as Desmaretz or Terray, left the nation feeling it had been looted. While reneging on commitments to creditors, officeholders, and bondholders, both controllers general and their cronies made fortunes that aroused enormous resentment among the general population and among the courtiers excluded from the governing clique. For the sake of the argument here, a distinction must be made between reneging—which was publicly mandated—and the private corruption of individual ministers. Despite his efforts at fiscal reform, Calonne was despised because he was thought to have lined his own pockets and those of his cronies. In contrast, although unpopular among many courtiers, Necker and Turgot enjoyed relative public support because they were viewed as incorruptible and above cronyism.

Although cronyism drew small influential groups together into networks of mutual interest and obligation, it also fostered a collective interest in maintaining secrecy and excluding outsiders. Feelings of exclusion were perhaps less widespread before Louis XIV brought the kingdom's elites to the court, where attention could be more closely focused on which groups

[20] Despite the relative infrequency of exchange between members of different clans, the dowry, by providing a permanent and significant bond, played a crucial role in maintaining intergenerational continuity within the elite. To further ensure the continuity of the elite, the dowry was exempt from legal seizure; in the case of bankruptcy it could not be assigned. The practice of giving dowries meant that the terms of exchange between families were worked out in advance. However, a transaction that cannot soon be repeated contains a strong incentive for parties to maximize returns as in a one-period game. Hence, while playing a critical role in maintaining stability, dowries could not ensure against the breakdown of cooperation among rival families.

[21] In England, by contrast, disputes concerning financiers could be settled by a theoretically independent judiciary.

got which benefits. It became more difficult for the Crown to shroud its deals in secrecy during the eighteenth century. As wealth and education became more common among the population, more individuals felt excluded from the benefits. The growing sense of exclusion gave opposing groups specific grievances and a generalized sense of being deprived of access to power.

Where cronyism thrives, the decisive elites are loyal to particular ministers in power rather than to the regime itself. By contrast, the parliamentary pattern of redistribution, characterized by cooperation based on informal arrangements among interest groups, generates relatively greater legitimacy. The elite continues to benefit regardless of who comes to power, and as a result it remains more loyal to the regime. Parliament, an institution that could mediate conflicts between rivals in the competition for political and economic rents, was crucial to political stability in early modern England. Greater informal cooperation among political actors resulted. Greater stability allows for lower interest rates, which in turn result in a higher percentage of long-term as opposed to short-term investments, thus expanding the threshold of economic possibilities.

The different ways in which competition for rents were institutionalized under the two regimes generated important variations in economic performance. Under mercantilist regimes, government controls generated two basic economic costs: (1) deadweight losses from monopolies and inefficient regulations that prevented efficient allocation of resources through competition, and (2) rent-seeking costs incurred in the pursuit of monopolies or other redistributive benefits, whether by individuals or by groups. Rent-seeking costs reflect a net loss to society, inasmuch as resources are diverted from productive investments to rent extraction. In a world in which groups have to outbid one another to acquire rents or redistributive goods, rent-seeking costs might conceivably be greater than in an environment in which only a limited elite can acquire such goods. Thus, in the quest for redistributional goods, cronyism is not by definition more prone to economic waste (once the sunk costs of becoming a crony are taken into account) than is competition for rents under a parliamentary regime. In fact, cronyism may actually waste less social capital than competitive rent seeking under a parliamentary regime, because direct competition for rents is reduced. In short, when many groups are allowed to bid for rents, they may waste more total resources in pursuit of those rents than would be wasted under a regime that does not encourage competitive rent seeking. Hence, there may be less direct economic waste when only the relatives of a particular minister can obtain a particular monopoly or property right.

While excluded groups may expend resources unproductively in their pursuit of rents, there is another, perhaps more important, class of costs

associated with cronyism—political instability. Frustrated by their inability to gain access to rents, excluded groups may disrupt the political system by the dissemination of anti-government propaganda, vilification of regime leaders, palace coups, and finally revolution. The fall of contrôleurs généraux during the Old Regime can be understood as a series of palace coups. A cottage industry of regime vilifiers proliferated in France during the late eighteenth century, contributing to the impression of general moral decay and impending doom. The resulting increase in instability prejudiced investments in favor of short-term projects. Cronyism inflicted its greatest harm on the economy by shortening investment horizons.

In the standard economic models of rent seeking, the costs over time of different types of rent seeking are not considered. Nor do theoretical grounds exist to assign different welfare consequences to various forms of rent seeking, of which cronyism may be one. Standard economic arguments do not assume external effects on the political system: the political system continues as is despite the action of rent seekers. Although welfare differences between the results of different forms of rent seeking are not significant in a static economic sense, cronyism may be worse than other forms of redistribution because it undermines the political and legal system that makes economic trade possible. Welfare losses also occur when feasible trades are not consummated because individuals do not trust the justice system to enforce contracts.

Redistribution and Parliament

English historians generally view eighteenth-century British politics as struggles between rival clans and families. Indeed, just as in France, English family groups coalesced around their chosen leader and jockeyed for control of the administration.^[22] However, controlling the administration was not sufficient. Even a majority in Parliament was not a reliable instrument for redistributing the nation's income to one's friends and relations.^[23]

[22] "Political society was, of course, extremely intimate and inbred and this, as well as the intrigue for place and the control of influence, led to the development of clans as well as factions," remarks J. H. Plumb. "For a member, like Joseph Ashe in 1710, to have fifty relatives who were MPs was a commonplace. At the head of clans there was usually a peer who aspired and intrigued for ministerial office, and his standing was measured by the number and reliability of the relatives he controlled" (Plumb, England in the Eighteenth Century, 1714–1815 [Harmondsworth: Penguin Books, 1950], 41). Nevertheless, Plumb cautions there were deeper issues involved.

[23] Plumb explains how eighteenth-century politicians of the opposition might "exert all their skill to win over patrons of importance, then to provoke a ministerial crisis, and in the resulting intrigue to capture the treasury, a manoeuvre of great strategic and tactical complexity, frequently attempted and rarely achieved" (ibid., 40). Although rarely accomplished in England, it was achieved on average every four years in eighteenth-century France.

Whereas MPs had to build coalitions with rival groups in order to be effective, French pressure groups could depend on their relations with the bureaucrats and ministers who were the direct decision makers. Linkages among French families and particular members of the bureaucracy or a ministry much more reliably secured preferential treatment than were efforts by English clans to influence parliamentary decisions. The nature of English parliamentary institutions made it more costly for networks of kin to use government regulations to divert income to family members.

By contrast with the disintegrative effects of exclusionary French-style cronyism, the parliamentary system of wealth redistribution may have had an integrative effect, extending benefits more broadly across the political elite. Although cliques and factions were equally active in the politics of both nations, the emergence of political parties in England had the effect of reducing the direct impact of cliques on policymaking.^[24] As a result, the benefits of government economic regulation were divided among a wider elite, and the dissemination of spoils was not rooted in the kinship system. Because of this mutual trust and social cooperation, a well-developed sense of civic duty characterized the English ruling class. Parliament became the focal point of a civic community capable of both sustaining informal cooperation and uniting in the face of an outside threat. That unity was elevated to the status of a principle in the philosophy of Burke. Competitive rent seeking open to all members of the elite was the hallmark of this British civic tradition.

When compared to French absolutism, the British parliamentary regime seems to have been more capable of accommodating several of the political and social needs that arose during modernization. The greater accountability of the parliamentary regime provided the basis for a political culture that was more open to achievement-based, merit-oriented norms. These norms were more universalistic than those based on birth and political competition between competing clans characteristic of French court politics.^[25] Broader access to political authority led to more abstract loyalties to

[24] The emphasis on Tory survival and persistence in Linda Colley's In Defiance of Oligarchy: The Tory Party, 1714–1760 (Cambridge: Cambridge University Press, 1982) corrects the earlier view that Tory influence died with the Hanoverian succession.

[25] Necker thus went back to the idea of using administrators who were commis and almost functionaries rather than royal officeholders who owned their offices. Necker brought about the victory of bureaucracy over aristocracy, yet the victorious bureaucracy was still staffed by clients devoted to patrons. See Mousnier, Institutions of France , 2:213.

the state, albeit fewer lasting loyalties among individual families.^[26] Parliament was also a public forum for bargaining and compromise among groups with conflicting objectives. For example, pin makers and haberdashers might desire different import and export schedules. In Parliament they might be able to achieve a compromise and benefit from political decisions that accommodated the interests of both groups. In this sense, the possibility of face-to-face negotiating in Parliament created incentives for a pattern of political behavior that emphasized consensus over command in the resolution of conflicts. A more open and stable relationship among conflicting interests may have resulted, and a format for trading policy preferences allowed for gains from trade. Moreover, Parliament displayed the policy preferences of its constituents. The French Crown was constrained in its ability to determine the preferences of constituent groups, which is one reason the king focused on the interests of a few or one at a time. While negotiating in Parliament did not necessarily lead to more efficient economic outcomes, it reduced factional friction. A similar ability to aggregate interests and reconcile political differences was absent in the French polity.

As a way of understanding the different redistributive outcomes of parliamentary versus autocratic governments, we might reflect on the fact that to achieve redistribution, many more bargains have to be struck under a parliamentary than under an autocratic regime. As a result, the potential net return to an interest group is lower, because the cost of passing the necessary regulations will consume many of the potential rents. In other words, the transaction costs of acquiring monopolies are higher under a parliamentary regime, so that potential returns on rents are lower. This, however, may not necessarily reduce the lobbying activity among pressure groups and may expand the numbers of participants, lowering the cost to any one participant.

Parliament, The People, and Stability

The high point of corruption in English public life is generally considered by English historians to have occurred during the eighteenth century.^[27] Most notable was widespread electoral corruption. Ironically,

[26] Mark Granovetter, "The Strength of Weak Ties," American Journal of Sociology 78 (1973): 1360–80.

[27] Corruption has not escaped the attention of English historians. See, e.g., Hurstfield, Freedom, Corruption and Government; Linda Levy Peck, "Corruption and Political Development in Early Modern Britain," in Political Corruption: A Handbook, ed. Arnold J. Heidenheimer, Michael Johnston, and Victor T. Levine (New Brunswick, N.J.: Transaction Publishers, 1989).

the fact that English political parties paid for votes rather than extracting them by force, threat, or fraud may have advanced the cause of popular democracy.^[28] The process of buying votes led to broader participation in politics and precipitated the breakdown of traditional family-based patronage systems. By reducing group pressures for policy changes, corruption tended to create stability. He who corrupts a judge or a customs official may identify with the institutions he is corrupting. That a landlord would expect his tenants to vote on his behalf might seem corrupt to us, but it was instrumental in creating political coherence in a traditional society. The handing out of bribes or local offices may have humanized the state for a village farmer, encouraging identification with the activities of the national government.^[29] Electoral corruption permitted newly enfranchised groups to use their voting powers to acquire something useful, such as a job in the civil service. There was no similar method of bringing national politics into the small towns and villages of France. Participating in elections might make a wealthy peasant in England feel he had a role to play in the formation of the national government, but a village leader in France had no institutional link to the national policymaking process. He did not share the interests of the groups responsible for important national political decisions. To the extent that British elections offered concrete payoffs to participants, they may have generated more commitment to electoral procedures in national politics than in France.

Readers will observe that the French peasantry appears in only one of this book's chapters. Contemporary observers generally agreed that the peasantry bore the burden of absolutism but received few of the benefits. As a group, the peasants were organizationally too weak to impose demands for redistributive benefits upon the polity. It is also suggested in this analysis that the peasantry's direct influence on the outbreak of the French Revolution was less decisive than previous accounts have suggested.^[30] Because of a focus on the fiscal crisis that precipitated

[28] See J. A. Phillips, Electoral Behaviour in Unreformed England (Princeton: Princeton University Press, 1982).

[29] Studies of contemporary American politics confirm this observation. David May-hew reports candidates with bases in "the traditional parts of the old machine ... seldom take positions on anything (except for roll calls), but devote a great deal of time and energy to the distribution of benefits. On the other hand, congressmen with upper-middle class bases ... tend to deal in positions" (Mayhew, Congress: The Electoral Connection [New Haven: Yale University Press, 1974], 74).

[30] The French Crown's reinforcement of the village community resulted in a higher level of successful collective action by the peasantry in France than in England. For a discussion of how village communities in Burgundy provided a base for peasant collective action both before and during the Revolution, see Hilton L. Root, Peasants and King in Burgundy: Agrarian Foundations of French Absolutism (Berkeley and Los Angeles: University of California Press, 1987).

the Revolution, the masses of the people, and social issues more generally, are not emphasized. Instead, the analysis here concentrates on institutional arrangements and conflicts among elite groups. The bankruptcy of the state, which resulted in the loss of the central government's coercive capabilities, permitted popular unrest to snowball into revolutionary upheaval. What was unusual in 1789 was the state's inability to limit the impact of familiar outbreaks of collective resistance, such as grain riots. Access to or possession of resources, social solidarity, bargaining power, and perceptions of the probability of success all contributed to collective action. However, the inability to resolve the fiscal crisis with the available institutions for conflict resolution was crucial and becomes all the more striking when one considers how much the French elite had to lose if the crisis expanded to include the demands of the populace.

In States and Social Revolutions, Theda Skocpol presents a case for the causes of state breakdowns that parallels the argument being presented here. Skocpol argues that three of the great revolutions of modern times—the French, Russian, and Chinese—were precipitated by state breakdowns. In these revolutions, the state collapsed because internal contradictions prevented it from coping with exogenous shocks, such as the appearance of a dangerous military competitor. Unable to obtain political and economic concessions from dominant social groups, the autocracy fell apart, opening the way for social-revolutionary transformations, initiated by revolts from below. To explain the institutional rigidity and failure of the state-sponsored reform movements that often preceded state breakdowns, Skocpol focuses on "the political capacities of landed upper classes as these were shaped by the structures and activities of monarchical bureaucratic states."^[31] Thus, in Skocpol's treatment, the law of increasing misery did not lead the exploited to overthrow the state. Misery and class conflict were endemic among pre-industrial popular classes. Anomic factors such as riots or demonstrations, Skocpol suggests, played their world historic revolutionary role only once the forces of state breakdown had materialized.

As we have seen in previous chapters, both the awareness that reform was necessary and the economic expertise to guide the reforms were

[31] Theda Skocpol, States and Social Revolutions (New York: Cambridge University Press, 1979), 47, 50.

present in eighteenth-century France. Lacking, however, were the institutional mechanisms needed for complex, face-to-face bargaining among privileged members of the elites. Absolutism's greatest political achievement—the king as arbiter of conflict among groups and regions—prevented necessary, direct negotiations between groups and regions. Here again comparison with the parliamentarianism of England is particularly relevant. Parliament provided the English elites with the means to resolve conflicts such as the fiscal crisis caused by the American War. In fact, English elites took upon themselves a large share of the burden of paying for the war precisely to avoid precipitating a social crisis. Resolving the fiscal crisis within Parliament, where the masses were not represented, prevented the mobilization of popular discontent and the creation of a general crisis. As a result, public disturbances in England, such as the frequent grain riots, did not have the same impact that disturbances had in France, where the regime was weakened by its inability to resolve the dispute among the elites and the provinces. The important point was that the political machinery available to the British prime minister, William Pitt, allowed him to resolve England's fiscal crisis within the existing institutional structure. The French kings did not have the means to resolve the 1789 debt crisis without calling the Estates, drawing participants into a debate in which fiscal issues were secondary to social privilege.

The key component accounting for the British Parliament's contribution to eighteenth-century stability was not more democratic representation or more socially equitable policies than those emanating from the French executive. We have seen that in many respects Parliament offered public policies that were less democratic and less fair in their re-distributive consequences than those issued by the French bureaucracy.^[32] When comparing Old Regime England and France, the critical difference for stability goes beyond the extent of democratic consent or franchise to the mechanisms available to French elites to resolve the fiscal crises and implement complex, simultaneous bargaining among groups and regions. Absolutism represented a failure of bureaucratic administration

[32] It has not been the purpose of this analysis to assert that parliamentary regimes are inherently more stable than authoritarian regimes. The literature on stability and parliaments is in its infancy, and recent events in eastern Europe will certainly help expand it. Comparative history can make crucial contributions to the literature, but the key variables for such comparisons have yet to be identified. Although France was relatively democratic and had a national assembly in the nineteenth century, revolutionary turmoil occurred, and the ensuing Fourth Republic, also relatively democratic, was likewise unstable and unable to resolve crucial issues.

because elements of centralization and decentralization were not coordinated. The absence of facilities for bilateral and multilateral bargaining among different social and political units was to prove fatal.

Having placed all power to settle disputes in the hands of the king, the Old Regime did not develop institutions capable of supporting the complex bargaining needed to adjudicate differences among competing interest groups. As Talleyrand put it: "France seemed to be made up of a certain number of societies with which the government bargained. In this way, it kept each one under control using the credit that it had. Then the government turned to another, dealing with it in the same way. How could such a state of things continue?"^[33]

The practice of resolving conflicts by separate negotiations with each group was inadequate in 1789 when the complexity of the trading necessary to achieve parity among the various groups required face-to-face negotiations among those groups.

Corruption and Modernization

As argued in chapter 3, one of the crucial distinctions between English and French modernization is that between corruption and cronyism. Corruption is a competitive form of rent seeking, while cronyism is a monopolistic form. Cronyism throve in France because of the French king's relatively unrestricted power to allocate favors to his supporters. We tend to view both as economically wasteful, politically destabilizing, and destructive of government capacity. Yet in chapter 7 we saw that corruption may not necessarily be a hindrance to economic growth and progressive social change. It contributed to the decline of mercantilism in England and may also have had positive political consequences in helping to overcome divisions in the British ruling elite that might have otherwise produced destructive conflict.^[34] Any English person possessing the capital could bribe an official, but to get the same advantages in France one needed connections, which presupposed family ties to influential courtiers. The history

[33] Talleyrand quoted in Jean-François Solnon, La Cour de France (Paris: Fayard, 1987), 523.

[34] The slow speed of parliamentary action may have increased the incentive for corrupt behavior. Analysts of political modernization in the developing world have observed that when officials attempt to avoid responsibility for policy decisions in a bureaucratic regime, corruption may help to cut excessive red tape. See Joseph S. Nye, "Corruption and Political Development: A Cost-Benefit Analysis," American Political Science Review 61 (1967): 417–27. Scholars have observed that corruption allowed European Jews to gain access to the political decisions necessary for them to provide their skills. Because of corruption, however, they were further isolated from the respect needed to enter the mainstream.

of England, then, suggests that political development does not necessarily mean rational, honest government.^[35] Nor does the prevalence of corruption suggest the absence of a "developed" society.^[36]

Political Stability in England and France

Despite its commitment to national goals and to drawing politics out of the decision-making process, the French legislative system had the reverse effect. Although committed to the rationalization of authority, Crown policies intensified government dependence on clique and family. The new elite of civil servants of the French bureaucracy was caught up in the clientele and patronage systems of the past. Instead of regional integration, absolutism embedded regional privilege. Instead of promoting national consensus, the political process in France intensified mistrust and hostility among conflicting groups. Groups clung to their particular privileges because there was no open format to trade privileges and rights with other regions or groups.^[37] Thus, the institutions of absolutism did not meet the needs for personal identity, social welfare, and social advancement created by the century's rapid economic development, greater wealth, and broader markets.

Louis XIV made an effort to identify the interests of the nation with the King's Council, which acquired its legitimacy as an embodiment of the national will during his reign. By the late eighteenth century, however, the King's Council had become a fiction. Once denied the veneer of disinterest provided by the notion that government decisions originated in council, government actions seemed less legitimate, since they appeared to express the will of an individual rather than an institution. By establishing their autonomy and independence from the council, the king's ministers may have increased their authority in the short run, but by weakening

[35] One of the most unstudied topics in European economic history is how the corrupt state was changed into a strong, uncorrupt liberal state. How were morals strengthened in the higher strata? How did the elites of Victorian England come to internalize conceptions of public interest? One element of this change was the transformation of customary bribes into legalized fees. John Brewer suggests that an open political culture that internalized integrity was perhaps being nurtured in eighteenth-century England; the outcome was "the creation of sophisticated 'interests' whose political conduct was, in turn, informed by the open and accountable political system in which they operate" (Brewer, The Sinews of Power: War, Money, and the English State, 1688–1783 [New York: Knopf, 1989], 249).

[36] Scholars are much further from possessing a standard of political development or modernization than they are from a common definition of economic development.

[37] Despite the East India Company's strong webs of patronage, Pitt's reforms subjected the company to greater government regulation in 1784.

government credibility in the long run, they undermined their power.^[38] With the council's demise, the monarchy was left with no single institution that could be identified with the national interest.

With the goal of promoting modernization, the defenders of absolutism rejected parliamentary government to avoid the patronage, influence peddling, and compromise they thought were characteristic of party politics. France's bureaucratically organized system of governance, with its differentiated structure and merit system of promotion, was, they believed, a more logical and efficient tool for implementing modernization. However, the French kings' efforts to insulate government from social forces made their government less stable than the parliamentary system they eschewed.

Contrary to the hopes and predictions of its advocates, absolutism did not facilitate social and economic change; instead, it resulted in cronyism. The distribution of rents on the basis of personal loyalty prevents conflicts from being mediated and thus produces pressures for constant changes in regime. Moreover, the role of discretionary government in promoting cronyism prevented the emergence of more abstract and universal loyalties to the state.^[39] The power of the unelected executive branch of the French government to redistribute the national income to private individuals made the Old Regime prone to revolutionary upheaval.^[40]

Although Old Regime centralization in France exhibits many important features of political modernization, particularly structural differentiation and the rationalization of authority, it seems that England's more pluralistic and feudal polity was more flexible. That greater adaptability had several facets. Being less capable of supporting commercial or industrial monopolies and of disbursing sinecures and pensions to particular families, parliamentary regulation did not encourage internecine rivalries between elite clans. Parliamentary decisions were the outcomes of a process of con-

[38] One consequence of too much discretion concentrated in a single place was ministers who were cut off from discussion and debate with their colleagues.

[39] Joseph Strayer remarks that the most important test of the development of the state occurs when there is "a shift in loyalty from family, local community, or religious organization to the state and the acquisition by the state of a moral authority to back up its institutional structure and its theoretical legal supremacy. At the end of the process, subjects accept the idea that the interest of the state must prevail, that the preservation of the state is the highest social good. But the change is usually so gradual that the process is hard to document; it is impossible to say that at a certain point on the time scale loyalty to the state becomes the dominant loyalty" (On the Medieval Origins of the Modern State [Princeton: Princeton University Press, 1970], 9–10; for his definition of the state, see 3–19).

[40] See Hernando De Soto, The Other Path (New York: Harper & Row, 1989), 189–231.

flict and compromise in which various interested parties participated. An important feature of that process, lacking in France, was the ability of parties to negotiate and trade votes and rights directly. Vote trading did not necessarily lead to more efficient economic decisions, but it did lead to greater stability, which is, after all, an important component of growth. One of absolutism's greatest failures was its inability to discriminate between public expenditure and the private purses of the king and his financial officials; conversely, this distinction was one of Parliament's greatest successes. The French royal administration was open to the constant suspicion of malfeasance by the public. The English political system took an additional step forward in combining the needs of social with economic modernization by providing participation beyond the village and beyond the clan to social groups throughout the social hierarchy and the kingdom. Finally, the party organization generated by Parliament allowed more general interests to transcend those of individual, family, and clan.^[41] Parliament was thus able to claim more credibly than the institutions of French absolutism that its interests were the public interest, and, as a result, it was able to "increase the mutual trust prevailing at the heart of the social whole."^[42]

Lacking a commitment to broad philosophical ideals, however, eighteenth-century English politics often seems less innovative than French politics. The edicts of French kings often took the form of philosophical treatises articulating abstract rights and policies, in which the public interest was stated in ideal values such as natural law, justice, or right reason. Rooted in issues of immediate concern, English political debates were focused on remedies to particular problems rather than on the platitudes about free markets characteristic of French edicts and legislative processes.^[43] Similarly, the programs of English political parties had little to offer in the way of philosophical merit, although perhaps more to offer as a source of practical enthusiasm. One could identify oneself as a Tory or a Whig without subscribing to an abstract philosophy. Even though the issues that dominated parliamentary debates were narrow, they may have

[41] Even J. H. Plumb, who emphasizes the clannish and factional nature of English politics, concludes: "Both houses of Parliament contained a number of pressure groups, bound closely by family as well as political ties. Their attempts to secure or retain office clutter the history of the eighteenth century with trivial detail and obscure the deeper issues which were involved" (England in the Eighteenth Century, 41).

[42] Bertrand de Jouvenel, Sovereignty: An Inquiry into the Political Good (Chicago: University of Chicago Press, 1957), 123.

[43] The petitions from the provincial parlements and estates to the king were encased in abstractions about rights and principles of economics.

generated a greater public awareness of, and commitment to, the political process.^[44]

Cronyism and the Fall of the Old Regime

Tocqueville was one of the few writers on the French Revolution to ask why the Old Regime collapsed so suddenly. Why did the elites who enjoyed its many benefits not come to its defense in its hour of need? He sought the answer in an analysis of the links between the administrative traditions of the Old Regime and the revolutionary condition that caused its demise. Tocqueville speculated that the Old Regime's administrative traditions had split society up into "small, isolated, self-regarding groups." This fragmentation, Tocqueville believed, was responsible for what he considered to be one of the three great anomalies leading to the outbreak of the French Revolution—namely, why the monarchy, which had weathered so many storms in the past, collapsed so suddenly and catastrophically.^[45]

[44] Individuals in both England and France sought public knowledge in order to enjoy private advantage. Government remained arcane, obscure, and private in France, whereas in England, information about it was more widely available. The larger the governing circle, the more difficult it is to guard secrets. In the seventeenth century, few government papers or committee reports were available to the public in England. By the early eighteenth century, a journal called the Votes, intended initially for the MPs, was being distributed to the general public (a thousand copies were sold). It provided only a minimum of information, but other sources became available in the 1740s, when journals previously available only in manuscript were published. After 1767, the publication of a separate series of collected parliamentary reports appeared while Parliament was actually in session. See Brewer, Sinews of Power, 227. Interested parties in England thus had access to material for which there was no equivalent in France, where such information had to be secured through family membership.

Information about government is one of cronyism's greatest enemies. One reason the much greater cronyism of the late seventeenth century had less direct consequences for the duration of ministerial tenures was that little information was publicly available. The governing circle was much narrower and more tightly drawn during the seventeenth as compared to the eighteenth century. The greater role of the parlements during the late eighteenth century also contributed significantly to the dissemination of information about cronyism. In fact, the parlements may have exaggerated the venality of eighteenth-century ministers to a public whose tolerance of cronyism had fallen. An understanding of the growing intolerance of cronyism and an insistence on distinguishing the private from the public were essential to the development of a democratic culture in early modern France and England.

[45] Alexis de Tocqueville, The Old Regime and the French Revolution (1856; New York: Anchor Books, 1955). The other two main aims of Tocqueville's study were to explain why the Great Revolution appeared first and foremost in France and secondly why the Revolution "presented itself as an almost natural outcome of the very social order it made such haste to destroy." Oddly, the third question has received the least attention from scholars of the French Revolution. In the great outpouring of publications to commemorate the Revolution's 200th anniversary, I know of no article or book that addresses the reasons of the Old Regime's sudden collapse. Yet recent history, the fall of the Marcos regime in the Philippines and that of the shah of Iran, suggests that the sudden collapse of an authoritarian regime merits direct scholarly attention.

According to Norbert Elias, the fragmentation of society into self-regarding groups was a deliberate consequence of royal policy.^[46] Louis XIV initiated the policy to prevent a collusion of social forces that could pose a threat to the monarchy. As a child, Louis XIV had observed that, when able to surmount their aversion for each other, the nobility of the sword and the magistrates of the robe could join forces and challenge the king. To prevent a repeat of rebellions such as the Fronde, Louis attempted to use social stratification and the control over definitions of social mobility as instruments of domination. He consciously cultivated the differences between orders and social levels and established court etiquette that reinforced the differences.^[47] To establish the primacy of vertical ties to the Crown, the French monarchy systematically promoted mutual distrust among the kingdom's elites so that the Crown was the arbiter of disputes and information.

Tocqueville pointed out that members of the landed nobility were the first victims of the Crown's effort to become the sole determinant of social status. The Crown ruled that a royal charter was needed to bestow nobility on a family regardless of its status in provincial society; even the most notable families had to show justification of their titles and privileges. To accommodate the king, many noble families had to purchase titles to permit them to enjoy the privileges they were accustomed to exercising by tradition. Louis XIV invited the great families of the realm to Versailles, where court life became an elaborate ritual of hierarchy, in which the privileged few could carry the king's candle to bed, hand him his spoon at dinner, and carry his nightshirt to his dressing room. Underlying the ritual lay fierce competition for sinecures, posts in the army and in the church, and, occasionally, access to commercial or industrial patents of monopoly and shares in the tax farms. Consumed by the competition for access to the spoils of government, the nobility lost the habit of thinking of society as a whole, or of leading society. Partly in consequence, the nobles, who were among absolutism's first victims, were similarly to be among the first victims of the Revolution.^[48]

[46] Norbert Elias, La Société de cour, trans. Pierre Kamitzer (Paris: Calmann-Levy, 1974).

[47] Montesquieu too saw the Crown's ability to manipulate social stratification as a key to the success of absolute government in France.

[48] Tocqueville, The Old Regime and the French Revolution, 86.

Louis XIV encouraged the formation of an elaborate and highly articulated distributional hierarchy. Alongside the pyramid of nobles, he constructed a pyramid of bourgeois offices, many bestowing nobility, that produced great rivalry among members of the elite. The nobles were further divided by rivalry between robe and sword. The nobility of the robe monopolized the hereditary civil offices in the superior courts. The nobles of the sword dominated rural property, owning special monopolies on peasant production and consumption, as well as monopolizing many posts in the army, the Church, and the diplomatic corps. The king maintained his distance from the two groups and exploited their rivalry to assert his own authority, which was enhanced by adherence to the principle that differences in rank depended ultimately on the king's discretion; he claimed the right to limit the mobility of his subjects no matter how powerful they were. As a further challenge to the old nobility's social status, the king sponsored many new monopolies on the kingdom's financial resources, the most important of which was tax farming.

The middle classes were as "eager to secure preferential treatment ... as any noble to retain his privileges," Tocqueville noted.^[49] At the summit of the post-feudal distributional hierarchy stood the tax farmers. Further down were the non-noble owners of offices, many of which bestowed fiscal privileges. These were followed by wealthy members of the bourgeoisie who possessed monopolies on production in the new trades, on procurement for the army, and in the international trading companies. Still lower down the chain were the guild masters granted monopolies on artisanal production.^[50] The vast majority of the population, who could not play the rent-seeking game because they were unable to find an appropriate form of organization, were left out of this distributional hierarchy. Peasants were by far the largest segment of this group.

The redistributive tradition consummated by the reforms of Louis XIV transformed economic and social organization into a zero-sum game. In economic life, a zero-sum mentality was fostered by mercantilism, which assumes that the total sum of wealth cannot be increased. Since one individual's gain was another's loss, mercantilism incited social resentment. The political system provided a strong incentive for merchants to seek excess profits through rent seeking. Merchants during the Old Regime invariably professed to be free traders, except when it concerned the restrictions on trade that protected them. As for the guilds, the zero-sum

[49] Ibid., 136.

[50] Like the other privileged groups, the Catholic Church, too, had its monopoly: that over belief. In exchange for tax exemptions, the Church supported absolutism, giving its benediction to divine right monarchy.

mentality of their membership has never been doubted. No historian has yet found evidence of guild spokespeople subscribing to a belief in the benefits of a competitive order. The zero-sum mentality also had its parallel in politics in the emphasis on court etiquette and on place, which implied that a change in the rights attributed to one group altered its relation to rival groups. Where hierarchy is carefully articulated, any loss of professional status is keenly felt socially, since each improvement in rank of one group or individual diminishes the status of another. For example, the eighteenth-century financial elites bitterly opposed reforms limiting their control over the kingdom's finances because they did not want their status diminished in relation to old landed families.

A society divided into closed self-regarding groups was the result of Louis XIV's policies. "The fact is that the reinforcement of the existing differences and rivalries, especially among the elites and within them, and between the different rungs of the hierarchy was one of his fixed maxims as a ruler," Norbert Elias explains. "It is quite obvious that these differences and petty jealousies between the most powerful elite groups in the realm were among the basic preconditions for the abundance of power held by the king and denoted by the term 'absolutist.' "^[51] After Louis's death, the exploitation of social mobility was more influenced by the internal power struggles of the court than by the king's discretion. In conclusion, Elias emphasizes that, despite the decline in the Crown's capacity to manipulate the social hierarchy, becoming accustomed to imposed standards of behavior reinforced by dependence and subjugation contributed to transforming tensions and conflicts among groups into a relationship of permanent hostility. Keenly aware of differences and unable to forget past rivalries, the elites could not close ranks to protect the system that ensured their status.

Privilege and Revolution

The economic theorists of the eighteenth century recognized the enormous burden the proliferation of privilege placed on the state. But programs for reform never enjoyed wide support within the elites because the beneficiaries of the monopolies had no common spokesperson. Another fundamental problem was that no institution existed in which privileged groups could negotiate with one another or with the groups excluded from power. Elias explains that the leading groups or monopoly elites of the regime had become imprisoned by the institutions that maintained their privileged positions. "Their incapacity to look at their own dysfunction, along with

[51] Elias, Société de cour, 52.

their inflexible sources of income, prevented a nonviolent transformation of the institutions by the voluntary limitation of privileges."^[52]

In Old Regime France, no two industries or imports were taxed the same way, no two provinces or social groups paid the same taxes or held the same privileges. Residents of Paris had privileges in relationship to residents of other cities; the bourgeoisie of La Rochelle had little in common with the bourgeoisie of Toulouse. David Bien has suggested that differences among members of the nobility may have been more intense than those between the nobility and other social groups.^[53] Since "differentiation had taken place within each of these three classes, with the result that each was split up into a number of small groups almost completely shut off from each other, the inevitable consequence was that, though the nation came to seem a homogeneous whole, its parts no longer held together," Tocqueville notes.^[54] In his memoir Sur les administrations provinciales, published posthumously in 1787, Turgot commented on the consequences of this atomization of society into self-regarding clans:

The cause of the evil, sire, stems from the fact that your nation has no constitution. It is a society composed of different orders badly united, and of a people among whose members there are but very few social ties. In consequence, each individual is occupied only with his own particular, exclusive interest; and almost no one bothers to fulfill his duties or to know his relationship to others. As a result, there is a perpetual war of claims and counterclaims, which reason and mutual understanding have never regulated, in which Your Majesty is obliged to decide everything personally or through your agents. Everyone insists on your special orders to contribute to the public good, to respect the rights of others, sometimes even to make use of his own rights. You are forced to decree on everything, in most cases by particular acts of will, whereas you could govern like God by general laws if the various parts composing your realm had a regular organization and clearly established relationship.^[55]

[52] Ibid., 316. One difficulty was that the various privileged orders possessed assets in the form of offices and fiscal privileges that could not easily be negotiated in a new order.

[53] See David Bien, "La Réaction aristocratique avant 1789: L'Exemple de l'armée," Annales: Economies, sociétés, civilisations 29 (1974): 23–48, 505–34, and "The Army in the French Enlightenment: Reform, Reaction, and Revolution," Past and Present 85 (November 1979): 68–98.

[54] Tocqueville, The Old Regime and the French Revolution, 137.

[55] Anne-Robert-Jacques Turgot, Oeuvres posthumes de M. Turgot, ou Memoir de M. Turgot sur les administrations provinciales (Lausanne, 1787), 9; reprinted in Pierre-Samuel du Pont de Nemours, Oeuvres politiques et économiques (Nendeln: KTO Press, 1979), 4:159.

Turgot's testimony can be explained by the fact that in a centralized, autocratic regime, strategic or cooperative interactions are not observed among different social groups, because no one finds that his own interests or choices depend on the choices of any other individual or group. No group in Old Regime France had an incentive to bargain with other groups. One consequence of the absence of strategic interaction was that no group had a coherent vision of the distributional system of which it was a part. Instead, the relationship among the different groups was governed by resentment of one another's privileges, while each jealously guarded its own. Norms and networks of civic engagement between and among members of the various elites were shattered during the process by which the Crown became the guarantor of civic order. The vote by the third estate of Brittany against the vingtième (a tax on all individuals regardless of status) in 1752 was an example of the inability to cooperate to achieve long-term goals. Just like the first and the second, the third order voted against the tax, fearing an increase in its taxes, thinking only in terms of protecting its own privileges. No leader emerged within Brittany's third estate with the foresight to realize that it would be beneficial to the group if the vingtième was approved, because it would mean submitting the privileged first and second estates to the same taxes as the third.

The economic expansion of the eighteenth century further contributed to the tension. Mobility certainly increased during the century, especially at the very top of the social hierarchy, where wealthy financiers intermarried with members of the old aristocracy.^[56] Nevertheless, the groups excluded from the power monopoly also grew in strength during the Old Regime. Despite the accession of newcomers, the growing demand for privilege created by the century's rapid economic expansion was not met.^[57] The demands of peasants for access to the surpluses generated by markets were unsatisfied. The formal sector could not grow fast enough to absorb the growing informal sector. One barrier to reform came from the existence of property rights that had reinforced the power of corporate groups. Because of the Crown's support of the guilds, the new proto-industrial

[56] Brugière cautions that the majority of the children of financiers did not conclude prestigious marriages with the old nobility; most married in their milieu of origin. Only the children of several very significant financiers were able to marry into the upper aristocracy, but those financiers were already in the king's direct service. See Michèle Brugière, "L'Aristocratique Descendance des affairistes de la Révolution," in Pour une renaissance de l'histoire financièreXVIII –XX siècles (Comité pour l'histoire econornique et financière de la France, 1991), 312–25.

[57] See David Bien, "Manufacturing Nobles: The Chancelleries in France to 1789," Journal of Modern History 61 (1989): 450–86.

sector was legally isolated and forced to operate informally. Since the administrative structure of the Old Regime had become autonomous, composed of offices that had become private property, which the state could no longer afford to buy back, institutional gridlock resulted.

Mancur Olson has studied the effects of distributional coalitions on political life. As groups begin to distinguish themselves from one another by highly nuanced codes of behavior, they become increasingly castelike, and political life becomes increasingly divisive.^[58] Louis XIV's legacy to the eighteenth century was a society in which privilege incited social disintegration. The status quo established by the Sun King's reforms still reigned on the eve of the Revolution. Each group was willing to support limits on the privileges of the others, while unwilling to be dominated or lose place to some other social subset. Groups would not tolerate the loss of even a ceremonial privilege and were too preoccupied with their own particular privileges to speak for the regime when it was in trouble. Ties of collaboration within and among the social orders were ruptured; civic solidarity was fractured. Groups that viewed each other as adversaries could not represent the nation, since efforts at reform were viewed as a challenge to social equilibrium. No one branch of the government was strong enough to impose reforms on any other branch, and the king was no longer in a position to risk losing the support of a group like the clergy or the nobility by hazarding radical change. "Like boxers frozen in a stand-off, none of the privileged groups dared change position for fear that the slightest change in attitude would compromise its privileges or benefit its rivals," Elias writes. "Unlike a boxing match, however, there was no referee who could separate the boxers in order to continue the match."^[59]

In its hour of need, the Old Regime could find few defenders. "Nowhere else in the world were citizens less inclined to join forces and stand by each other in emergencies," Tocqueville observes.^[60] Instead of uniting to defend the structure that provided their rents and privileges, the elites of Old Regime France regarded the privileges of adjacent groups with resentment. Each group came to the Estates General in 1789 with the goal of defending its exemptions from unreimbursed loss, but no group was prepared to defend the system itself. In other words, the elites who benefited from the redistributional game did not enjoy the blessings of class consciousness.

[58] Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven: Yale University Press, 1982), 47–53.

[59] Elias, Société de cour, 314–15.

[60] Tocqueville, The Old Regime and the French Revolution, 77.

They did not identify the Crown or its government with any broader public interest that was worth defending. Once assembled, the national community did not view the regime as having something greater than the sum of individual interests to offer. So it was that what had taken the kings of France so many generations to build could disappear in the twinkling of an eye.

11—
Caveat Emptor
Markets and History

The source material upon which this book is based was collected primarily from French sources. In effect it offers a view of France in an English mirror, much in the spirit of the eighteenth-century French political economists, who similarly contrasted the two nations in order to highlight particular characteristics of French economic organization. They believed that much can be learned about a particular nation by using a common methodology to study others. Only a partial coverage of the economy is offered; an assessment of the level of production and a comparison of relative growth rates are not attempted. This, then, is not a book about the relative retardation of French industrial and agricultural development. Debates concerning measurement and calculation that such a study would entail are outside of the scope of this analysis.^[1] Nor do I venture into questions of family or domestic organization or demography.^[2] Instead, the emphasis is on the motivations underlying institutional innovation in Old Regime France and England and on the centrality of political arrangements in determining economic outcomes. This perspective has permitted the exploration of how the institutions developed to sustain intertemporal trades in political markets influenced variations in the public policies of Old Regime France and England.

Between structure and individual action is a domain governed by symbols, rhetoric, and ideology. A more complete explanation of the transition to industrial society depends on incorporating the ideas of scholars who

[1] See Patrick O'Brien and Caglar Keydor, Economic Growth in Britain and France, 1780–1914: Two Paths to the Twentieth Century (London: George Allen & Unwin, 1978).

[2] See Jack A. Goldstone, Revolution and Rebellion in the Early Modern World (Berkeley and Los Angeles: University of California Press, 1991).

work on such issues. Although a few important preliminary forays have been made by economic theory into those domains, a dialogue between economists and cultural historians is necessary in order to develop a more complete understanding of the relationship of the economic system to other domains of social behavior.^[3]

By far the most important caution that needs to be stated is the role played in this book by market analysis and market terminology. The argument here contrasts sharply with the neoclassical view that extols government inaction. It does not endorse the idea that the government that governs least is best, or that markets will solve all problems if only government would stand aside. Markets depend on rules that are politically determined. Government was involved in the considerable economic growth of England and France during the eighteenth century as arbiter of disputes and defender of property rights. In both nations competitive markets required the construction of jurisdictions that resisted capture by cartels of private groups whose local authority obstructed the formation of national and international markets. Here England was more successful than France in combining local economic decision making with free national markets. In France rights to participate in the market system were transferred to the center, but local obstacles to the distribution of goods and services were not entirely eliminated.

Because expansion of markets seems to intensify inequality in traditional societies, the view that markets are the source of social inequality and injustice finds much support. Linking the observed inequality with the growth of markets, however, confuses the impact of markets with the conditions under which markets evolve and ignores the role of politics on the governance of markets.

Increased specialization as a result of the expansion of trade beyond the village or region and the division of labor are two conditions universally acknowledged by economists to increase productivity. By increasing the number of trading partners, however, market expansion also greatly increases uncertainty. Dense social networks enforce informal rules in traditional societies, thereby reducing the uncertainties of trade and the costs of transacting; however, these norms depend upon the expectation of con-

[3] Most notable among attempts to translate insights about culture into terminology understood by economists are Douglass C. North, Structure and Change in Economic History (New York: Norton, 1981), 45–59. North has tried to reintroduce ideology in a way that would be consistent with economic theory, but it is too early to tell whether the effort will inspire successful work along this line. Also see Robert H. Frank, Choosing the Right Pond: Human Behavior and the Quest for Status (New York: Oxford University Press, 1985).

tinual interaction. As markets expand, trade with strangers increases in importance and the social networks sustained by the expectation of repeated interaction diminish in importance. New institutions to reduce uncertainty in exchange are needed to regulate the anonymous trade that develops. Local elites increase their control over the market in the name of policing or providing necessary services, such as safeguarding property rights and enforcing contracts. This allowed elites to increase their bargaining power vis-à-vis the peasantry, making it more costly for peasants to participate in market transactions. The beneficial effects of markets can be restricted when market officials are capable of collusion to capture monopoly rents and when unequal bargaining strength allows unequal access to resources, capital, and information. Although lower information costs, economies of scale, and improved enforcement of contracts all indirectly contributed to the well-being of the peasantry, the more conspicuous benefits tended to accrue to those groups who typically devised the rules to restrict the market access of weaker parties. The growth of markets did not automatically produce uneven distributional consequences; rather, the institutions devised to govern markets produced inequalities. The collusion or monopoly power of the elites to whom the original property rights were allocated permitted the transfer of income away from the peasants to urban merchants or seigneurial elites.^[4] Creating monopoly benefits for themselves, local elites limited the effectiveness of the markets they supervised. Efficiency losses occurred when peasants responded by resisting participation in markets.

Markets often originated as grants by the king to the nobility or the towns in exchange for loyalty or revenue. The exchange or elimination of these property rights did not occur, since in the absence of compensation for the expected value of the rents they were due over time, the elites would not relinquish rights once granted. A wealthier society would have resulted if peasant production had been fully integrated into the market system. When the potential benefits of markets to the peasants in the form of higher income and reduced uncertainty cannot be fully captured, peasants limit their participation in markets. French society was poorer because there was no market for political contracts allowing elites to negotiate the liquidation of their property rights over market governance.

[4] Political influence and the formation of cartels provided early modern elites with advantages they were unable to procure by competitive production strategies. The eighteenth-century grain bounties that protected large British estates during a period of declining grain prices are an excellent example of how elites dominated because their economic interests were backed by the coercive authority of the state.

The English enclosure acts provide a good example of the negotiation and liquidation of traditional property rights so that gains can be captured from the expansion of market relations. The gains from the negotiations could be captured by the lords in the form of higher rents, which could then be taxed by the king. The contractual solution required to facilitate enclosures was too costly to be negotiated locally because it required procedural regularities whose standardization and enforcement had to be predetermined. In England this could be done by parliamentary initiative because the king's property rights were not jeopardized. In France, such agreements required the king's consent and participation because he claimed that common fields and rights were ultimately a grant from the king and belonged to future generations as well as to the present one. The rights were protected by royal officials because the revenues they produced were linked to royal tax collection. The efficiency gains to enclosure in France were not easy for the king to capture, since the noble landlords who might benefit most from the enclosure often claimed tax exemptions.^[5]

The Old Regime in France did not produce political institutions that could capture and reallocate the efficiency gains of redefined property rights or abolished privileges. An institution or set of rules was needed to provide privileged elites with equity stakes in the efficiency gains that would have resulted from property-rights reform, as well as ex-post assurance that the rights would not be violated or confiscated.^[6] The failure to devise such a set of rules was owing to the central role of the king, upon whom the creation of such an institution would have depended. The king would not be a party to institutional changes that might even temporarily reduce the flow of revenues to the Crown's coffers.

A simple but powerful lesson can be drawn from the political failure of the French Old Regime: the formation of political markets that allow all social assets or property rights to be traded, transferred, and made liquid is essential to the survival of a regime.^[7] The system of economic trade ultimately depends on the degree to which politically contracted property

[5] See Hilton L. Root, Peasants and King in Burgundy: Agrarian Foundations of French Absolutism (Berkeley and Los Angeles: University of California Press, 1987), ch. 4.

[6] Similarly, the American Civil War might have been avoided if the North could have devised a method to reimburse Southern landlords for their slaves. The failure to come up with a contract ensuring subsequent enforcement of such a contract prevented a peaceful resolution of the conflict.

[7] Of course, commodifying everything runs into social and normative barriers. Constitutions must determine what can and cannot be commodified. Political markets must be restricted by a constitution that defines fundamental and inalienable rights.

rights can be negotiated so that society may capture the gains from new technology and markets.

The consequences of the different methods early modern French and English governments used to reduce the impediments to exchange and to determine the contractual parameters for trade are a central concern of this book. It is assumed that government's ability to provide society with the institutions necessary for individuals to trade to an efficient point—the point at which all welfare-enhancing trades were completed—was essential to European economic expansion. Economic activity is not frictionless or without costs. The frictions involved in most economic activity—transaction costs, uncertainty, and information asymmetry—may explain the contractual relationships that shape the evolution of society. Put differently, the need to cope with trading frictions and transaction costs is an important motivation for individuals to enter into contracts, both privately and with their government or king. The costs and the contracts designed to cope with trading frictions evolved differently in England compared to France, and as a result Old Regime England and France represent two rival paths to economic and political modernization. The great success of French absolutism lay in its unification of the politically fragmented French nation. The liberation of market forces was the great success of England's parliamentary regime. This liberation occurred because political markets evolved in which inefficiencies in the original allocation of property rights could be corrected by trade rather than by revolution. Where trade was not possible, corruption allowed those with the higher-valued usages to outbid the holders of inefficient property rights. Corruption thus created an auction market for property rights when face-to-face exchange in Parliament failed. The French system of centralized control institutionalized cronyism, which reduced both corruption and trade. Cronyism nevertheless provided sufficient security of property rights to allow for the level of investment needed to sustain growth.

One final caveat cannot be stated too forcefully. This analysis represents an effort to understand the economic logic underlying the evolution of Old Regime institutions. From this understanding, I have tried to extrapolate an analysis of the possible and probable costs those institutions imposed on society. In calculating those costs, many hypotheses have been presented whose validity has yet to be tested. The research needed to fully evaluate the costs of organizing the economic systems of early modern France and England will require the work of scholars needing many more pages to report their findings. This book represents a tentative first step toward understanding the origins of Old Regime institutions, the incentives that produced them, and their probable costs to the economy. Eco-

nomic theory, Lord Keynes noted, "is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions."^[8] Although it is beyond the means of a single author to be a specialist in all the issues raised here, I hope a useful way of thinking that can be applied to specific examples, according to the different background and perspective of readers, has been illustrated. Indeed, that approach may be more useful for some topics than for others. It is my hope that readers will be able to go further in drawing implications relevant to their special areas of interest.

[8] John Maynard Keynes, "Introduction," Cambridge Economic Handbook Series, quoted in Albert Breton, "Representative Governments and the Formation of National and International Policies," Revue économique , no. 2 (March 1981): 356–73.