previous chapter
3— The Redistributive Role of the State
next part

The Redistributive Role of the State

Parliament's deal-making capabilities were to have unforeseen consequences for England's ability to adjust to economic opportunities. The ease of making political deals, in turn, had a direct influence on governability. England's unified legal system allowed contracts negotiated in Parliament to attain an objective market value in part because they were enforceable by the legal system. Shares in the French economy that derived from cronyism were, by contrast, largely unmarketable, since they constituted contracts founded on confidence in the private portfolios and stability of regime officials. In addition, local courts in France could always be used to dispute rights derived from deals with the king's officials. The inability of different groups to trade rights and privileges prevented necessary reforms in the property-rights structure of France. The notable disparities in political stability between France and England mirrored differences in the system of economic redistribution—in the negotiation and enforcement of political contracts allocating shares of the nation's economic pie.

The lobbying activities of private groups had an important redistributive influence on national economic policies in both England and France; however, the different organization of government in the two nations gave a distinctive shape and structure to the redistributive character of national politics in each case. In England, Parliament's role in the legislative process made gaining economic concessions from the government long and difficult. Over the course of the eighteenth century, the British government's role was increasingly limited to adjudicating, under the restraint of law, the claims of influential but conflicting groups. In France, by contrast, the government's economic decisions were subject to neither parliamentary scrutiny nor open public discussion. Whereas the rules of the redistributional game in eighteenth-century England were increasingly public


knowledge, the administrative and political process that allowed the French government to pursue its mercantilist programs was private. Furthermore, the rules in France changed according to ministerial whim. As one historian puts it, public law was a forbidden domain, "a mystery reserved to the king and his ministers,"[1] permitting select members of privileged clans, rather than broadly defined interest groups, to enjoy the benefits of government patronage. Although the creation of sophisticated interests and competitive lobbies allowed the British Parliament to do special favors for particular industries during the eighteenth century, unlike the French executive, neither Parliament nor the English executive was able to distribute monopoly rents to particular ministerial or royal favorites. In England the government"s distribution of spoils followed procedures more open to the English political elite as a whole; still, corruption was more pervasive in English public administration than in France, where executive supervision of central government agents was more comprehensive.

The greater discretionary powers of the French ministers allowed select groups of preferred clients to receive the benefits of economic regulation, but those powers were diluted by the rise of the interest groups they created. Legislation aimed at the wholesale liberalization of agriculture and industry thus failed. By contrast, the British government used political and legal methods over the course of the eighteenth century to restructure the economy in ways that made substantial agricultural and industrial change possible. The resulting redistribution of the nation's income was more dramatic in eighteenth-century England than in France despite the French ministers' greater discretionary powers.

The essential institutional element of the French government's redistributional capability was the office of controller general, whose functional equivalent in England was Parliament. Differences between these two decision-making structures can explain why interest groups with similar preferences could not always influence policy in the same way or to the same extent in each country. A comparison of these differences suggests important links between stability and the patterns of redistribution produced by variations in the political structure. The corruption of early modern England has its parallels in the early stages of the development of democratic institutions in a number of nations. Twentieth-century India and Israel and nineteenth-century America are well-studied examples. Iran under the Shah, the Philippines under Marcos, and Indonesia under Su-


harto are all examples of cronyism analogous to the patterns of Old Regime France. Outside observers often underestimate the political stability of corrupt regimes and overestimate the stability of nations in which governmental cronyism dictates development. Comparison of eighteenth-century France and England suggests that the difference between corruption and cronyism is crucial in several regards. Whereas in France individual clans and favorites clustered around particular ministers enjoyed monopoly rents not available to other members of their class, in England a much broader segment of the population benefited from regulation and enjoyed the spoils of government. The English upper classes were also more likely to view the decisions of Parliament as legitimate, making them more acceptable and easier to enforce than those of French ministers, who acted on their own. As a result, while using political and legal institutions to redistribute the nation's income, the English did not pay the high price in stability that the French regime ultimately paid.

The Regulation of Commerce and Industry in France

In seventeenth-century France, the monarchy did not want the government to be ruled by the interests of narrowly defined social groups. To insulate the government from interest-group penetration, the French kings created an exceedingly simple administrative structure. Its central organ was the Council of State, the King's Council, which Michel Antoine refers to as the soul of the monarchy; the word "council" thus became synonymous with government under Louis XIV.[2] The kings endowed their councils with a high degree of discretion in order to insulate them from the impact of interest groups and, in particular, to reduce their vulnerability to pressures from the old landed nobility. The council's most effective tool was the arrêt, an order in the king's name. Arrêts were the expression of the king's absolute authority and could not be tested by any other body. Although an arrêt had to be signed by the king, many arrêts issued in the king's name pertained to issues too trivial to have ever been brought to the king's direct attention. Arrêts were often signed in the king's name by lesser ministers.


Second only to the Conseil d'en haut, which defined the broad policy outline for the many individual councils that formed the King's Council, was the Conseil royale des finances, headed by the controller general. It was the engine of finance and the general administration of the kingdom, and emerged as the most powerful and dynamic organ of central government. About half of the personnel of the royal bureaucracy reported to the controller general, and roughly half of the legislation issued by the Council of State came directly from the Conseil royal des finances. Six ministers (intendants of finance), 300 administrators and 35,000 agents of the Ferme générale, 32 provincial intendants, and 400 subdelegates, as well as inspectors of manufactures, were under the authority of the controller general in 1789.[3] The Conseil royal des finances fixed the sum of direct taxes, farmed out the taxes, and established the sum of the impositions of each generality and each election. This council also decided upon monetary policy, the creation or suppression of offices, the payment of rentes, and the increase of gages . In addition, it supervised all projects concerned with the distribution of funds and verified the accounts of the Treasury's receivers, and therefore had a central role to play in the kingdom's industrial organization. It also authorized the licensing of industrial and commercial activity.

Because the authority that redistributed wealth in France emanated from the executive branch, the King's Council, political officials could control participation in the growing market economy. Paris and Versailles were transformed into elaborate centers of distributional play, since court politics determined what would be produced and who would benefit. The political judgments creating the rules and quotas became the result of private negotiation, not the subject of open debate. Economic regulation in France was the prerogative of bureaucratic discretion. Regulations, subsidies, taxes, and licenses were granted to favored producers and consumers so that the government could take a share of the excess profits created by the regulation.

In 1607, Henri IV created the Great Council of Commerce to deal with ocean commerce. Rather than appointing business people to the council, however, Henri appointed members of the parlement, as well as members of the fiscal courts, who reported to the minister of finance. The Ministry of Finance, led by the controller general, thereby played the dominant role in regulating economic activity, while intendants of commerce, direct subordinates of the controller general, regulated industry and commerce. With


this arrangement in place, the Great Council of Commerce was easily subsumed under the Council of Finance. The influential role played by financial imperatives in the regulation of commerce is further highlighted by controller generals who named tax farmers (members of the Ferme générale) to serve on the Council of Commerce.[4]

The Council of Commerce changed its name and structure several times, alternately appearing by royal command and disappearing into the Council of Finance. The Council of Commerce operated out of the Council of Finance until 1664, when Louis XIV reinstituted the Council of Commerce and ordered that it meet every two weeks. Two of the four members of this council were also members of the Royal Council of Finance.

Controller General Jean-Baptiste Colbert (intendant of finance, 1661–65; controller general, 1665–83) invited closer collaboration with provincial business people when in 1673 he recommended that the principal commercial cities each send representatives to Paris to discuss how to compete with the merchant fleets of France's commercial rivals. In 1676 the Council of Commerce disappeared when its functions were again subsumed by the Council of Finance.

The commerce council reappeared in 1700, this time as the Bureau of Commerce.[5] An arrêt of June 5, 1708, reoutlined the functions of the intendants of commerce and stipulated that four of them meet as a council once a week. Each of the four intendants was assigned responsibility for specific provinces and branches of industry. Their powers were both broad and specific: they could create industrial regulation to govern an entire industry and grant exemptions to loyal or preferred businesses. Even the smallest favor to a particular firm could be accommodated if the intendant was well disposed. In an arrêt of June 22, 1722, the Bureau of Commerce was officially renamed a Council of Commerce. This new council issued its decisions interchangeably as arrêts either of finance or of commerce, suggesting the subordination of commercial regulation to fiscal policy. Michel Antoine notes that after 1750, meetings of the Council of Commerce were less frequent because its activities had multiplied to such an


extent that decisions had to be made by individual members of the council; yet government efforts to control the economy had not diminished. In 1787, the Commerce Council was reabsorbed by the Council of Finance, illustrating again the subjugation of French commercial policy to royal financial imperatives.

Throughout the Old Regime, the controller general appointed the intendants of commerce; they owed their loyalty entirely to him. In fact, contemporaries viewed the Council of Commerce as a front for the controller general, through which he directly supervised nonmaritime commerce (maritime commerce was under the auspices of the secretary of state and marine).[6] Thus, the controller general, whose primary concern and responsibility was augmenting royal revenues, also directed France's economic development. It should come as no surprise, then, that the revenue imperative took priority over general prosperity. The fiscal orientation of the regime did not escape the notice of contemporaries. In his analysis of the political economy of the Old Regime, the marquis d'Argenson wrote that "the intendants of commerce were agents of the controller general or at least his clients; they knew only him. Finance and commerce identified with each other and rotated on the same axis."[7]

After the controller general acquired the means to control commerce at the national level through the appointment and domination of intendants of commerce and by absorbing the King's Council of Commerce,[8] controllers acted to gain control over commerce at the local level. To accomplish this, the controllers general put themselves in charge of the chambers of commerce in the major commercial cities. Since municipal leaders viewed the chambers as potential threats to local autonomy, with few exceptions, royal prodding was needed to prompt cities to create chambers.[9]


A 1701 edict established councils of commerce in eight more cities—Lille, Rouen, Bordeaux, La Rochelle, Nantes, Saint-Malo, Bayonne, and Montpellier.[10] Thomas Schaeper notes:

virtually the only thing that every locality had in common was royal supervision. From the very beginning, the controller general and the secretary of state for the navy rigorously supervised the operations of the chambers of commerce and the elections of the deputies of trade. The royal provincial intendants were authorized to preside over the local bodies whenever they wished, and it was up to them to ensure that qualified persons were chosen to attend the council in Paris. The Crown did not impose its own choices on the localities, but it did reserve the right to reject a candidate if it found him unacceptable.[11]

Membership in the councils was generally limited to an elite group of prominent local business people who usually had considerable prior influence over local town councils and governments.[12] These municipal chambers of commerce were responsible for forwarding correspondence from the city's merchants to the king. The chambers, though, were more than just letter boxes: no opinion was passed on to the controller general without the authorization and comments of chamber members, who designated the deputies sent to the national Council of Commerce. The archives of the local chambers of commerce, preserved at the Bourse, reveal a steady increase in activity over the course of the eighteenth century. While the archives contain material on problems of interest to the merchant community at large, maritime and colonial problems were especially frequent topics of consultation between the government and the business commu-


nity. Although the principal concern of the local chambers was the protection of local trading privileges, the deputies defended the liberty of trade whenever they stood to gain by it. They also shared with the finance ministers a strong belief in the basic tenets of mercantilism and in the need to regulate manufacturers. Much of the royal legislation of industry resulted from the deputies' consultation with the merchant community represented in the chambers. The establishment of an identifiable group of exclusive and influential merchants suited the state's efforts to control industry and the sources of revenue.[13] It was in the king's interest to have the chambers act as vehicles for favors from individual merchants and for him to grant some favors to those merchants. Thus the Crown encouraged the chambers to allow a select group of merchants to lobby for regulations, subsidies, and intervention to benefit their regions or themselves. Especially privileged were merchants in industries designated as essential to national defense.[14] This structure did not, however, give the merchants from different chambers the means of negotiating or trading privileges among themselves.

The chambers of commerce generally served larger commercial interests, often at the expense of smaller groups. Instead of attempting to encourage the development of a broad entrepreneurial class, French policy was designed to coordinate the needs of the business elite with the fiscal needs of the government. Small merchants tended to cluster in industries where government protection was lacking, and which therefore failed to attract credit and capital, among them the grain trade, leather-working, and metallurgy. All three made little technical progress relative to the same industries in Britain, where local capitalists could find loans to invest in new technology and to increase the scale of their operations. Because they benefited proportionally less from government policy, small merchants were less likely to be loyal to the king. In fact, independent merchants were often viewed as potentially unpatriotic and were depicted as more concerned with the egotistic pursuit of profit than with national interests. The king, of course, defined national interests in terms of his military and


diplomatic objectives. Expanding the economy and increasing the wealth of his subjects were secondary goals.

In 1710, a royal edict created twenty new jurisdictions that could entertain cases concerning merchants who were members of the king's companies. The parlements opposed these new jurisdictions. The Crown was so concerned about the issue in 1711 that it polled intendants of all generalities in order to determine their opinions; it went even further in 1715, ordering that the civil bankruptcy of merchants who did business for the king could not be subject to the rulings of ordinary jurisdictions. Privileged members of the commercial classes thereby had direct access to government ministers, and judges in their cases were given the authority to defy the parlements .[15]

A number of economic and political rationales concentrated redistribution of commercial and industrial profits upon preferred clients and sites.[16] First, monitoring the economic activities of a select group of elite merchants in a restricted geographic area was easier than dealing with a large number of less prominent merchants. An industry run by a multitude of small producers was difficult to control and difficult to tax. Second, as recipients of government privilege, established merchants could be called upon for loans and sometimes political favors. That the king might call upon privileged business groups for additional sums was well understood and openly admitted. "This group was chosen because it could render service to His Majesty when he might have need of funds," Samuel Bernard declared in choosing twenty individuals to create a new commercial company.[17] Supporting a handful of large capitalists was by far the most cost-effective solution to collecting the Crown's revenue, but it was less effective in encouraging economic development and general prosperity. In particular, small merchants and the industries in which they clustered were put at a competitive disadvantage because they rarely benefited from royal favors. Nevertheless, the high prices, low consumer incomes, great contrasts in the distribution of income, and intensification of rural-urban divisions that resulted did not deter the Crown from continuing these practices.

The value of the privileges accorded favored towns is most obvious when we consider the response they elicited during the Revolutionary period. In the cahiers de doléance written in 1789, many of the cities


without a chamber of commerce asked that one be created. The prevalence of this desire in the cahiers suggests that the chambers were perceived by their authors as sources of important benefits for those cities lucky enough to have them. Especially revealing was that these same cahiers, which condemned the commercial privileges of rival towns, also requested the privilege of having a chamber of commerce. Each group or city clamored for the suppression of privileges enjoyed by other groups while advocating the preservation or extension of its own special rights.

The Constituent Assembly abolished all of the chambers of commerce on October 16, 1791. The chambers were viewed as part of the apparatus of Old Regime privilege because they allowed a small coterie of urban merchants to dominate commercial relations with the king, pass off their interests as those of the majority, use formal channels to cultivate personal networks, and vie for royal favors and contracts. In suppressing the chambers, the Assembly evoked the same principles that led it to suppress the guilds.

The Revolution also brought about the end of the intendants of commerce and the dismantling of the King's Council, leaving the large commercial concerns without an official voice in the new government. Commercial concerns then had to lobby the Constituent Assembly directly to achieve their goals. Jean-Michel Deveau provides an illustrative example of the change in Le Commerce rochelais face à la Révolution, a book based on the letters of Jean-Baptiste Nairac, a merchant who was sent to Paris to represent the commercial interests of the town of La Rochelle and report back on the activities of the Constituent Assembly. Nairac's frequent correspondence with the merchants of La Rochelle reveals the loss of access to power that accompanied the rise of the representative assembly. From these letters we learn that the lobbying process, too, was dramatically altered. Nairac was quick to understand and adjust to this change, but his colleagues in La Rochelle were not. His efforts to relate the changes to them and their resistance to the changes are instructive.

Retaining the right to deal in slaves, subsidies encouraging long-distance trade, and a guaranteed monopoly on colonial trade were of particular concern to the merchants of La Rochelle, as was suppression of the commercial operations of other cities.[18] Before the Revolution, the merchants of privileged ports like La Rochelle had been accustomed to quick


responses to their questions and needs, and government decisions in large part determined how and where they would invest when the opportunity arose. But much had changed. No longer did they share ideas and values with those in power. Unlike the king's intendants of commerce, the deputies of the Assembly did not subscribe to the belief that the interests of large merchants were those of the nation as a whole. The deputies claimed to be concerned with recreating the nation on the basis of egalitarian ideals. They believed themselves to be less dependent on the privileged merchants as sources of revenue. Moreover, the new institutional arrangement changed the lobbying process. "Since the entire new edifice was based on the principle of popular representation, the Assembly needed a small group of appointed deputies who would overcome the opposition of those new members who disapproved of this pressure group," Deveau explains.[19] The Assembly organized a committee of thirty-five deputies to examine all issues pertaining to commerce and agriculture. From Nairac's letters we learn that the Assembly was planning to withhold 600,000 livres in bonuses for commerce formerly dispersed by the Crown to its merchant clients, indicating how successful the chambers of commerce had been as pressure groups before the Revolution. It is unlikely that the extent and frequency of these bonuses were known to the public, as subsidies were allocated on an individual basis. One group of merchants was not privy to the special arrangements its rivals secured, just as tax exemptions in today's complex tax codes are known generally only to the groups that benefit from them.

During the early days of the Revolution, the merchant representatives met incessantly, publishing reports, responding to reports from the Assembly, and addressing it. Committee meetings of five hours a day, followed by more specialized work and correspondence with the home office, were common. Despite unrelenting efforts, representatives like Nairac achieved few results. The legal rights of Africans and the morality of the slave trade dominated the debates in the Assembly. Accustomed to quick results, the home offices of chambers of commerce, including Nairac's, sent letters conveying their impatience to their representatives.

Before the Revolution, French commerce depended upon working privately with the intendants of commerce; afterward, the merchants had to lobby an assembly that represented a broad set of interests. The new situation the merchants faced was similar to the one their British counterparts faced throughout the eighteenth century. The British merchants


could organize and form a lobby, but they could not influence a representative body as easily as a single minister of the king.[20]

Interest-Group Penetration and Ministerial Discretion

As previously noted, the Council of Commerce was subordinate to the King's Council, just as the intendants of commerce were subordinate to the controller general. In theory, the king decided all issues, whether or not he attended the council meetings; in practice, however, the controller general's role in these councils was paramount.[21] Michel Antoine notes that although the composition, convocation, meetings, discipline, etiquette, and procedure were at the king's complete discretion, the controller general was the real master of the council and often determined the decisions and arrêts coming from the royal council.[22] Most important, the royal officials who represented the king in the provinces, the intendants, reported to the controller general.

In principle, the Council of Finance should have met every week (under Louis XIV it met twice a week) and the Council of Commerce every two weeks; however, during the course of the eighteenth century, the Council of Finance met less frequently, and the Council of Commerce did not meet at all. In 1736, the only year for which we possess complete records, the Council of Finance met twenty-eight times and the Council of Commerce registered no formal meetings. By the end of Louis XV's reign, the Council of Finance met not more than eight or twelve times annually.[23] Although


the Council of Finance met less frequently, it issued the same number of arrêts as it had in the past. One can therefore assume that a smaller proportion of arrêts were products of the deliberation of the full council.[24] Jacques Necker, controller general in 1777–81 and again in 1788–89, claimed that a number of arrêts were never even presented before the Council, and that the decisions of the Council of Finance were simply decisions of the controller general.[25] Council members often simply approved without discussion and signed a prepared edict read by the controller general. In short, the Council of Finance had become a fiction, with the controller general exercising full discretion.[26]

Administrative autonomy of the various royal ministers was another characteristic of the system Louis XIV created. During his reign, he regularly attended council meetings to provide general direction to his government. Autonomy increased after Louis XIV's death, especially as subsequent kings had little interest or competence in finance and allowed the controller general almost total independence. Despite their own infrequent attendance of council meetings, neither Louis XV or Louis XVI appointed a prime minister to oversee the actions of the finance minister or to give overall direction to governmental policy.

In addition to being all-powerful in the Council of Finance when it came to matters of general policy, the controller general was also able to award favors to particular individuals or groups. Arrêts issued by the Council of Finance treated such minutiae as maintaining village churches or cemeteries and exemptions from transport taxes for selected products of individual merchants in particular regions. Controllers general like Calonne might distribute favors to develop a clientele at court. Terray is reputed to have issued lush sinecures to army officers so that they would not interfere with his grain monopoly. Without having to account to any superior authority, the office of the controller general could offer monopolies or subsidies to preferred industries and favored merchants.

Industrial licenses originating in the British Parliament had a much more circuitous path to follow, adding costs to the legislative process of creating economic regulation. Except for private bills, British lobbyists had to attempt to influence the king's ministers as well as members of Parlia-


ment. The ministers, however, were not as powerful as their French counterparts. For example, their accounts were subject to parliamentary review, and they could be impeached by Parliament in extreme cases. At the very least, the ministers (who were often members of Parliament) needed the support of Parliament to effect major legislation, which meant that they, too, had to lobby Parliament. English ministers had to walk a very fine line, plying Parliament with favors while trying very hard not to appear to be cultivating favorites or cronies.

The Great Trading Companies of France

The redistributive character of the great French trading companies illustrates the links between state finance and commerce. All the great trading companies were dominated by financiers, and almost all were created by direct government action and held strict monopolies.[27] Colbert started the tradition of allowing financiers to direct the trading companies, but it continued well after his death until the end of the Old Regime.[28]

Colbert preferred the leadership of financiers to that of merchants in the chartered companies for two reasons. First, financiers had their networks of family and personal contacts, enabling them to come up with needed funds in the absence of other subscribers, an obligation of their appointment.[29] Second, he feared merchants would act more independently of the royal will than would financiers, who depended upon the king's favor for their role as court bankers. Because the Crown did not want the groups who possessed the most mobile assets to gain control over policy, it turned over the operation of lucrative commercial companies to finan-


ciers whose assets partly consisted of advances to the Crown and offices purchased from the Crown. Merchants had greater bargaining power relative to rulers than financiers; the mobility of their assets made tax avoidance easier and confiscation more difficult. One of the reasons Louis XIV feared the Dutch Republic was that the Dutch merchants had acquired great control over state policies in exchange for tax revenues. The French Crown feared that because they could defect with their assets, independent business groups might come to exert a disproportionate influence on government policy. Financiers could not threaten as easily as merchants or bankers to defect from the market, because their assets were relatively immobile.[30] Their wealth was tied up in advances to the king, and they depended on the Crown's support for the collection of taxes. Moreover, participation in tax farms, which offered profits surpassing those of alternative investments, depended on the Crown's approval. Handing foreign trade over to these groups gave the Crown greater control over economic policy. The financiers acted, then, not only as farmers general but as entrepreneurs general, further concentrating wealth in a few hands.[31]

Because France did not have a central bank that held and disbursed funds from a wide group of sources, French merchants were more dependent on the resources of family members than English or Dutch merchants. As a result, the principal commercial affairs of the kingdom were in the hands of a small elite group of financial families.[32] The English companies, by contrast, evolved into joint stock companies combining the wealth of many individuals, who might represent a plurality of political interests.[33]


One merchant financier, Antoine Crozat, emerged as the dominant figure in French commerce during 1710-15. As the principal director of numerous trading companies—Guinée, Asiento, Saint-Dominique, Mers du sud, Indes orientales, and the Compagnie de Louisiane—he was the master of almost all French maritime traffic.[34] This status allowed Crozat to acquire the funds needed during difficult moments without going outside his family. Moreover, with his large standing accounts with merchants and banks in London and Amsterdam, he could rapidly transfer funds when and wherthey were needed. Most important, Crozat could pay the Crown more for the rights to overseas commerce than could any combination of rival merchants who did not enjoy the monopoly rents derived from the king's favor.

The efforts to organize the Guinée company are an example of Crozat's monopoly power and influence. The Crown had envisioned a company representing a number of the commercial capitals: La Rochelle, Bordeaux, Marseilles, Saint-Malo, and Nantes. Crozat argued that the plan was impractical; if the company were to succeed, he believed, "it should be in the hands of a few people, those who would lead it soberly, and who, being devoted to the orders of the ministers, would carry them out without having to make them public."[35] As a result, the Crown chose eight directors for the company, all of whom had performed other duties for the king and held financial offices. The Crown thus instituted a commercial policy based on the principle of allowing a small group of individual merchants with connections to the financial system to work closely with the government officials handling foreign affairs and finance. Although this policy culminated in the disastrous union of finance and foreign trade under the leadership of John Law, it continued on a reduced scale throughout the eighteenth century.

Initially, the profits of the trading companies were considerable. Crozat's monopoly on trade earned him 100 to 300 percent on everything he


exported to Louisiana, and 100 to 200 percent on the goods he brought back to France,[36] but his management did little to encourage long-term growth or attract settlers. The profits of the Louisiana Trading Company, which was put under Crozat's leadership in 1712, came at the price of suffocating the colony.

From a fiscal point of view, the Crown's mercantilist policies worked relatively well as a source of revenue during the reign of Louis XIV. However, mercantilism's success prevented the development of public institutions to support commerce on a wider scale. The major commercial transactions were restricted to a small coterie of families in a few cities. The commercial history of this period is one example of how the administrative structure of France allowed leading merchants to benefit from redistributional play. The same institutional structures provided benefits to the nobility. While attempting to limit the old landed families' opportunities to exercise independent political authority, the king offered the nobility many opportunities to share in the redistribution of the nation's income at court.

The Nobility Joins in Redistributional Play

During the reign of Louis XIV, competition for access to the spoils of government transformed the character of the French aristocracy. The great families of the realm had to establish residences in the capital or the court itself because the political and factional struggles between the king's courtiers often determined both major and minor economic decisions. Because seeking out royal patronage was more highly rewarded than staying in the provinces to oversee the local economy and local affairs, nobles moved to Paris and devoted themselves to competing for the unearned income handed out by the king. However, nobles needed to invest time and money to acquire the political information that would win them sinecures, posts in the Church, access to commercial or industrial patents of monopoly, or shares in tax farms (often using a false name or straw man).[37] Like firms in the highly centralized nations of present-day Latin America, they had to move their offices to the capital at the expense of their provincial activ-


ities.[38] Once transformed into courtiers, the nobility directed much of their activities toward gaining shares in short-term loans to the Crown and trying to persuade the government that the projects of their clients were best suited to national priorities. One hidden cost the mercantile economy had to bear was the extravagant court and social life of Paris, which by the time of Louis XVI consumed almost 6 percent of the state's revenues and an equally significant, but difficult to measure, proportion of private revenues.[39] The calculation scarcely captures the full economic costs of the competition for privilege.

Louis XIV's goal was to control the social success of aristocratic French families. Analyzing this process in Court Society, a classic of historical sociology, Norbert Elias writes:

It is possible, within the framework of such a social system, to control and direct the rise of certain families from the royal perspective, even as the king can within certain limits, control and direct their fall. Thus, he could slow or even prevent the impoverishment of an aristocratic family by personal favors; he could save it by the granting of an octroi at court or by a military or diplomatic appointment. He could give the family a gift of money in the form of a pension. The benevolence of the king is thus one of the most important opportunities of which noble families dispose in order to escape the vicious cycle provoked by their court related expenses.[40]

The transformation of the nobility into revenue seekers marked the beginning of their alienation from the rest of society. Once the nobles had lost their role as provincial leaders, their remaining privileges came to seem gratuitous and earned the contempt of the peasantry and local bourgeois.

Whereas favoritism flourished in France, it aroused strong resentment in England and created political problems for the monarchy.[41] The Stuarts' attempts to develop a system of awarding monopolies and sinecures to


their favorites was one of the causes of the Civil War, which English historians sometimes describe as a conflict between the ins (those who benefited from royal favors) and the outs (those who did not). After the Restoration, Parliament attempted to limit the Crown's means of rewarding royal favorites: the granting of pensions and favors probably diminished, as did the royal share of the national budget. The purpose of governmental rewards and methods of bestowing them changed significantly from the Stuart model. Unlike the Stuarts, the Whig oligarchy employed patronage primarily to ensure political security, not fiscal survival. They did not, for example, grant monopolies in exchange for short-term fiscal assistance. The duke of Newcastle became infamous for his patronage; however, the recipients were members of Parliament or employees of the administration, not Crown favorites or moneylenders. The rise of Parliament made it more difficult for the Crown to offer favors to particular merchants or nobles. The policies of Parliament may have privileged the economic pursuits of the landed gentry as a class, but it did not reward individual gentlemen at the expense of their peers or individual ministerial families at the expense of the aristocracy more generally.

The venality of seventeenth-century ministers of the French Crown far surpassed that of their English counterparts. Richelieu became one of the wealthiest men in Europe serving the Crown, and Mazarin acquired a fortune without precedent in the history of the French monarchy.[42] Mazarin abandoned management of the Crown's fiscal and financial resources to a hierarchy of relatives and cronies, and his venality was often invoked by those who led the Fronde in 1648. The political grievances underlying that rebellion have received much attention from historians, but Daniel Dessert asserts that it was not only a conflict over the exercise of political authority but also a reaction to what he calls the new "feudalism" of a state eager to enrich itself at its subjects' expense.[43]

Colbert, who began his career as a personal agent of Mazarin's, continued the tradition of ministerial venality associated with his mentor, acquiring a fortune surpassed only by those of Richelieu and Mazarin.[44] One


of Colbert's outstanding achievements as minister was the ability to hide personal gain under the cloak of service to the state. It was an illusion so well maintained that until very recently it has gone practically unchallenged by historians. Colbert's ministry began by purging the groups that could oppose his domination of the nation's financial system. Nicolas Fouquet, the previous finance minister, was denounced and imprisoned for initiating a system of clientelism, for creating a corps of parasites who consumed the nation's resources; he was accused of lèse-majesté for having usurped the Crown's authority. The kingdom's finances were turned over to Colbert's cronies, who were also awarded the management of the Crown's great economic enterprises: maritime commerce, the colonial trade, and the new state manufactures. Colbert's family and cronies constituted what Dessert has called the best-organized lobby in the history of the French monarchy. As Dessert explains, it was not Colbert who made his family but rather the family that made Colbert; it held on to power long after the death of Jean-Baptiste.[45] The last ministry of Louis XIV's 54-year reign was that of Nicolas Desmaretz, Colbert's nephew, whose reputation for being unable to distinguish his private purse from that of the king was established long before he was appointed to the office of controller general. Desmaretz had been involved in a scheme for reminting the nation's money in which the gold and silver content of coins was reduced and he pocketed the difference. Nevertheless, his reputation did not prevent Desmaretz from becoming finance minister. Nor did the desperate economic condition of the nation during the War of the Spanish Succession prevent Desmaretz from adding to the fortune he had already illicitly acquired.[46] Because Desmaretz also allowed his cronies to make considerable fortunes, he was often praised as a reliable business partner. Like Colbert, Desmaretz provided needed assurance to other investors by taking a share in a project. The participation of the controller general was needed to overcome information asymmetry and the threat of confiscation, which inhibited private sector investment.[47]


Making Law in the British Parliament

Unlike their French counterparts, British lobbyists had to operate on two levels and confronted substantial obstacles. First, they had to develop private relationships with the appropriate officers of state. Whatever the issue, to succeed in Parliament required the support of the minister whose province it was, or at least assurances that he was not hostile. Even with the support of the minister, however, interest groups faced open public debate in Parliament.

The procedure that led to placing a new law on the statute book was long and circuitous. A member of the House of Commons had to submit a petition, risking possible obstruction by MPs who disapproved. Once a petition had been presented, a second reading could be postponed, effectively killing it. Members were not allowed to peruse its contents privately; only the approval of a motion made by an MP could bring a petition out of obscurity. Petitions by lobbies against taxes were allowed only after their enactment. Once read, a petition might have to be vigorously defended from hostile forces. A lobbying campaign tied up in committee might have to be renewed the following year. Lobbying Parliament was time-consuming, expensive, and required considerable organization to succeed.[48]

By contrast, the King's Council in France issued legislation by decree practically without limit (which is not to say that it could ensure enforcement), allowing the executive to regulate the economy to an extent unequaled in England. Consider the amount of legislation generated by the King's Council in the form of arrêts . Michel Antoine has observed that "by way of arrêts or lettres patentes, by the orders transmitted by the ministers or by the intendants, the many decisions made by the king in his council were diffused daily through the kingdom and the colonies."[49] Approximately four thousand arrêts were issued each year during the reign of Louis XV, a slightly smaller quantity than under Louis XIV.[50] Many of these arrêts were similar in scope to what the British called private bills: legislation in response to a petition from a member or members of the public, authorizing the construction of a bridge or a road, or granting permission to enclose one's fields. The King's Council in France was able


to issue more legislation in an average four months than Parliament could during the entire reign of George I, more legislation in one year than during the entire reign of George II, and more legislation in any four years than the British Parliament accomplished during the entire sixty-year reign of George III.[51]





Session No.

William III (1689–1702)




Anne (1702–1714)




George I (1714–1727)




George II (1727–1760)




George III (1760–1820)




One shortcut was available to English interest groups seeking to bargain with political authority to improve their positions. Lobbyists could hope to influence government policy by appealing directly to ministers of state. The executive ministers of the government could make recommendations and submit legislation to Parliament, thereby exercising a certain degree of agenda control in policymaking. However, the ministers were generally careful not to take a position that might antagonize substantial portions of the electorate. Moreover, the support of the executive ministers did not necessarily guarantee the passage of legislation in Parliament, as the cases of the Anglo-French trade treaty of 1713 and the tobacco excise bill of 1733 both clearly demonstrate.[52] The opponents of the Anglo-French trade treaty successfully lobbied Parliament, bringing about the defeat of the treaty despite ministerial support. Even with high-level connections, merchants or manufacturers wishing to form new companies or effect a change in commercial regulations still had to obtain a charter from Parliament. Their French counterparts, by contrast, needed only a royal decree. The executive shortcut could reduce the lobbying costs incurred by English interest groups; still, it was necessary for them to exert pressure in Parliament in order to secure passage of their legislation.


Although only well organized and substantial groups like the Bank, the Royal Assurance Company, and the East India Company could hope to influence Parliament directly, the Board of Trade offered an avenue for smaller groups to gain concessions from the government. The Board, generally viewed as a failure by historians, does seem to have been influential where colonial matters were concerned.[53] Created in 1696, the Board of Trade reviewed colonial laws, prepared instructions for colonial governors, helped settle emigrant groups in the colonies, and nominated members to the colonial councils. The Board developed a relatively comfortable relationship with a number of colonial interest groups, but by catering to relatively small interests that did not risk alienating the major players in English politics. The Board was accessible to Anglo-American interests largely because Parliament tended to allow executive independence on colonial matters, but even there the Board would not act if it risked domestic opposition. Although the Board was particularly successful at meeting the needs of small groups involved in foreign trade and colonization, its authority in domestic affairs was extremely limited. Parliament's crucial role is underscored by the absence of a board for granting domestic favors. It was possible to create new privileges in the colonies and allow them to be governed by an autonomous body because there were no prior interests in Parliament that were infringed upon.[54] For groups desiring major changes in domestic policy, there was no alternative to the slow and costly lobbying of Parliament.[55]

In short, the path to economic advantage in England through the manipulation of government regulation and parliamentary statute was long. In France, a single minister could often push through whatever legislation he wanted in a comparatively short time. This should perhaps make us appreciate why those who wanted to reform French society did not welcome the development of parliamentary institutions. The reformers did not realize, however, that legislation enacted by the British Parliament was more likely to be viewed as legitimate by the public and was more likely to be reinforced by the common law courts than the decrees of French ministers were to be enforced in local courts or parlements claiming overlapping jurisdictions.


The claim that the British Parliament was the functional equivalent of the French controller general's office where economic regulation was concerned may surprise students of English politics accustomed to viewing the Crown as the center of eighteenth-century British administration. In fact, the duties of the English king's ministers were limited to diplomacy and patronage—the dissemination of offices needed to keep Parliament in line. As J. H. Plumb notes: "The king controlled an immense field of patronage. Every civil servant was the king's own servant, appointed by him and paid out of the royal pocket. The entire administration of the country was carried on by the royal household."[56]

There was nothing to prevent the king from using the entire government work force for patronage. Offices generally provided sinecures, obligating their recipients to the Crown, which helped sway the loyalties of Mps and weakened the party basis of politics. Moreover, as electioneering became more expensive during the eighteenth century, gaining a lucrative office became increasingly desirable. Emphasizing the centrality of royal patronage to the political system, Plumb notes that in consequence, although "the country was essentially left to govern itself as best it could, any increase in the government's power, any extension of its activity, was bitterly resented."[57]

The English Crown's authority fell primarily in the areas of state administration, foreign affairs, and in the management of the army and navy. In other words royal administrators in England did not have means similar to those of their French counterparts to regulate the economy and divide the nation's commercial and industrial wealth. "Patronage in all its complexity became the dominant theme in [English] political life," Plumb observes,[58] but it was a patronage limited to the dissemination of perquisites and had little real impact on the structure of the economy. To American


eyes the Crown's venality seemed particularly blatant and pervasive, since the king's direct jurisdiction over the colonies was greater than his control over domestic policies. As Sir Lewis Namier sums up the king's role: "In reality, George III never left the safe ground of parliamentary government and merely acted the Primus inter pares, the first among the borough-mongering, electioneering gentlemen of England. While the Stuarts tried to browbeat the House and circumscribe the range of its actions, George III fully accepted its constitution and recognized its powers and merely tried to work it in accordance with the customs of the time."[59]

The authority to control entire industries and to dominate the nation's finances was not vested in royal officials as it was in France. The reason for this difference was simple. The English Crown's ability to offer privilege was dramatically circumscribed by the powers of Parliament, which determined the chief financial and commercial questions. Increases of the national debt, changes in the rate of interest, the advantages of a sinking fund, the existence of bounties and protective duties for trade, the extent of excise taxes, the weight of land taxes and of the continental subsidies—all were subjects of parliamentary rather than royal discretion.

The Market for Political Favors: The Distinction between Cronyism and Corruption

An analysis of income redistribution in England would not be complete without a discussion of the role of corruption, a form of income transfer for which eighteenth-century Britain was especially renowned.[60] Government in eighteenth-century England seemed to be driven by corruption, especially to American colonials.[61] One of their often-stated concerns was


the desire to avoid the contamination of English corruption. If the king or ministers wanted to see legislation through Parliament, they literally bought the votes of MPs. A large number of seats in Parliament were owned in fee. Parliamentary elections invariably involved bribing the electorate.

Colonial Americans viewed even lobbies and interest groups with a jaundiced eye and equated their work with corruption. However, there is a substantial difference between corruption and cronyism. Corruption is an informal, illegal method of redistribution, whereas cronyism is a more formal, legal, institutionalized, and socially sanctioned method. Influence peddling and lobbying are not necessarily the consequence of either corruption or cronyism. The distribution of privileges and perquisites was cronyism but not corruption. The success of interest groups in gaining favorable treatment is not by itself corruption unless accompanied by corrupt actions such as bribing an official. Conversely, the ability of economic actors to evade compliance with regulation by bribing the officials responsible for enforcement and the ability of political actors to influence the outcome of elections by buying votes are both forms of corruption, and both were more openly prevalent in English than in French public administration. Cronyism, however, was more visible in France.

Corruption and cronyism thus constitute two politically mandated types of market imperfection: informal contracts in political markets that shape how economic markets evolved over time. Corruption is open to market forces and indirectly allows for the allocation of resources according to a criterion of efficiency that cronyism lacks.[62] Here I am referring to the traditional definition of efficiency in economics: a resource is used efficiently when allocated to the user who has the highest marginal willingness and ability to pay. Thus, the most efficient producer in a world without corruption would be the most efficient in a world with corruption. Corruption provides information about the relative efficiency of different regulations. Corruption's main inefficiency lies in its transaction costs—the price of making deals. It is less discriminatory than cronyism, since


there are no nonprice barriers to market entry. Cronyism allocates property rights according to nonmarket criteria, however, since favoritism is of the essence. As a result, the chance of resources being misallocated is greater. Efficient producers see their advantages confiscated. Cronyism may even allow the costs of inefficient producers to be reduced below those of efficient ones, so that the former may thus be able to drive the latter out of the market.

In sum, greater efficiency results from corruption because it makes resources available to those who have the higher-valued uses. Cronyism, by contrast, excludes many potential users or leaves them without a method of signaling their needs. If the political system is in the same hands as the legal system, bids for the property rights of the king's favorites will not occur. Cronyism thereby reduces production possibilities and prevents necessary adjustments to market forces.[63] Corruption in Britain was the equivalent of an auction market for rents and political favors. That rents could be auctioned to the highest bidder increased the liquidity of the social system by creating a market for privilege. In France, rent-extracting possibilities or favors could only be placed privately, preventing a public market or deals among rent seekers from developing.

Secrecy was critical to the success of French cronyism. By monopolizing the sources of information about political regulations and their effects, the Crown made itself indispensable. A private market for privilege or independent deals among rent seekers were impossible so long as the Crown controlled the sources of information. The political or economic favors the Crown dispersed were highly illiquid; they could not be traded, because no one outside of the governing circle knew what the favors were worth. Even if it was known who held a given right, the amount the rights-holder extracted was not. Cronies must make their information proprietary to avoid confiscation of their rents. Since a right's owner has an incentive to restrict public knowledge of its value, credit is also restricted. Moreover, in France, property rights ceased to be enforceable as soon as they left the hands of the circle of cronies. A public market for favors could not develop when political favors or privilege had no value to someone who was not connected to a particular minister. Cronyism was inherently unstable because individuals and private relationships rather than institutional reputations were critical in maintaining confidence in contracts. Political contracts sustained by cronyism depended on continual secret interactions


with individuals in power.[64] A controller general's participation in a project was often needed to persuade investors that it had the necessary government support. Shrouding its deals in secrecy became more difficult for the French Crown as the end of the eighteenth century approached. The growth of public opinion, nurtured by a burgeoning underground press, slowly whittled away at the secrecy cronyism thrived on.

The use ministerial families made of their places in government to benefit their private interests can be described as "bureaucratic capitalism," a term coined by Karl Wittfogel to depict Old Regime China.[65] Wittfogel used the term to define a system characterized by (1) tax collectors acting as fiscal agents of the ruling bureaucracy; (2) officials or nonofficiating members of such a bureaucracy who, on the strength of their political position, engage in private enterprise such as money lending and tax farming; (3) private business people acting as commercial agents or contractors who do business for the state; (4) bureaucrats who use their place in government to benefit their economic interests or to buttress those of their political group. The conduct of state business by the ministers of Louis XIII and XIV meets all the criteria of Wittfogel's definition. Mazarin, Colbert, and Pontchartrain (controller general, 1689–99) all maintained patrimonial control over decision making in the economy; the distribution of patrimonial services and prebends allowed them to develop networks of clients. Ministers and their families typically reinvested the funds they collected as state tax officials in royal industries and commercial monopolies.[66] State enterprises were almost always turned over to members of the bureaucratic family or clan. As Dessert puts it, "these ministers lived not only for the state, but of it."[67] The term cronyism overlaps with Witt-


fogel's conception and helps to distinguish it from the more sweeping scope of corruption.

The workings of the finance ministry in France clearly illustrate the importance of drawing the distinction between corruption and cronyism. The finance ministry epitomized cronyism but was relatively free of corruption. The French Ferme générale became a model of bureaucratic administration, known in eighteenth-century Europe for its hierarchical model of command and efficiency. Because its members were highly supervised, corruption was reduced. The king's financial ministers, sometimes reputed to be incorruptible, generally used their power to allocate economic privileges to family members or to favorites, thus developing a powerful and wealthy clientele. Although the intendants of finance and of commerce generally enjoyed a reputation for honesty, a number of practices considered legal provided the pretext for later criticism, which became increasingly widespread as knowledge about the financial system circulated among the public during the eighteenth century. For example, the commission, called a pot de vin , that was traditionally taken by the controller general for signing a lease with the Ferme générale became the object of criticism in the late eighteenth century. Additional sums of money were typically offered to the controller general in exchange for appointments sought by would-be fermiers généraux (new ones had to be appointed by the Crown). In 1774, Turgot ordered the previous controller general, Abbé Joseph-Marie Terray, to return the pot de vin of 300,000 livres he had collected. Turgot's act reflected the public's growing concern about the blurred distinction between private and public finance. Intendants of finance were entitled to pensions or payments from the corporations of financiers whose business they had handled. One first secretary of finance, Intendant Ormesson, received a I percent interest in a tax farm the size of Languedoc as compensation for his work.[68] As minister of the Treasury, N. F. Mollien received a pension of 3,000 livres for negotiating the lease of 1784 with the Ferme générale.[69] Tax officials usually received payment both from the Crown and from the financial groups they supervised. Although cronyism was more deeply rooted in the administrative practices of the seventeenth century, during the eighteenth century the public was beginning to expect members of the government to divorce their private from their public activities.[70]


The corruption of the spoils system that emerged in eighteenth-century England permitted the governing party and the electorate, which numbered from 200,000 to 250,000, to monopolize public offices. Prior to the younger Pitt's reforms in the 1780s, private bidding for government contracts was not required. As a result, MPs were often rewarded for their loyalty to the government with lucrative provisioning contracts or the right to administer a government loan. Namier notes that thirty-seven of fifty merchants who sat in the Parliament of 1761 were government contractors. Such allocations were technically not corruption prior to the reforms of the 1780s, but the government also maintained a secret fund taken from the Treasury for bribes, pensions, and the election expenses of its friends. In five years, a total of £291,000 in bribes was paid out of the Treasury.[71] The Crown also, of course, acquired supporters by creating and disbursing government jobs, which, although not corruption per se, was nonetheless a way of putting the recipients in a position to collect fees and bribes.[72]

It thus appears that England's public administration could rival that of France in clientalism, but there was one very important difference. Although the British Crown's ministers used nepotism, peculation, and malfeasance to ensure the loyalty of a majority of MPs and to pay their electioneering expenses, the British government's corruption increased its exposure to the play of market forces and did not limit access to the market economy in the same way the bureaucracy did in France. Although patronage was deeply rooted in English political practice, it did not redistribute the nation's surplus income among a select group of clans. Members of Parliament might be receptive to bribes, especially when they came in the form of government contracts, but Parliament could not be effectively manipulated by private parties seeking monopoly rights over a particular industry. Compared to the central authorities of the French government, it was more difficult for Parliament to use its political control to determine who participated in and benefited from the market economy. The English system of redistribution let the market, and therefore economic competition, determine outcomes.

Because of the French executive's more explicit regulation of commerce and industry, success in French society required the ability to seize or


influence political power on behalf of one's particular interests. Economic dirigisme by ministers of the Crown transformed France into a nation of self-centered clans and corporations, each fighting to maintain or expand its privileges. By contrast, the party structure in the British Parliament aggregated and articulated the interests of various social groups.

English-style corruption and clientalism may even have increased the political stability of the state, because a high percentage of those English people whose votes and resources were needed to run the government received direct, positive benefits in return from the government. English voters could feel they had a shot at the spoils of political power, whereas in France only a small coterie around each minister were thought to benefit. The relatively broader sharing of the spoils may have increased support for the government among the English electorate. That the French system emphasized private distribution among particular clans at the expense of others probably had the opposite effect, undermining the regime's support. The differences become especially meaningful when we consider why the French monarchy fell so suddenly when confronted with a fiscal crisis. When a tax increase was needed to avoid a fiscal crisis similar in scope to the French crisis of 1789, Pitt was able to get parliamentary approval for new forms of taxation, but the French ministers could not find support among the nation's wealthy for new taxes or for the elimination of exemptions.[73]

Corruption was the most conspicuous form of government redistribution in England. Beneath the commotion generated by corruption, however, a quiet transfer of income from poor to rich was occurring in England as a result of parliamentary action, which aroused little attention among contemporaries. The enclosure movement and the grain bounties, both achieved through legislative action, are outstanding examples of how politics could be used to transfer income from poor to rich in England. English historians now generally agree that the enclosure movement made great progress during the eighteenth century, when the cumulative effect of numerous private bills was the enclosure of a large percentage of the English countryside, thereby channeling much of the country's agrarian income through large estates. Similarly, the grain bounties that Parliament


endorsed helped to sustain large estates and make them economically viable during a period of reduced demand and depressed agricultural prices.

The slow and quiet transformation brought about by the piecemeal enclosure of England's countryside thus buttressed the dominant class of landlords without destabilizing political consequences. French landlords were unable to find similarly effective support for their agricultural enterprises through government action. The French Crown was unable to provide enforceable legislation in favor of enclosure, so that small and middle-sized holdings continued to dominate French agricultural production. In addition, unlike the English grain bounties, the French government's intervention on the side of grain producers benefited only particular ministerial favorites, not an entire class of large grain producers.

The Perception of Government Corruption in France: The Famine Plot

That the use of discretionary powers contributes to the spread of conspiracy theories was explained by Karl Popper, who wrote, "This tendency [the increasing use of discretionary powers by members of the government] must greatly increase the irrationality of the system, creating in many the impression that there are hidden powers behind the scenes, and making them susceptible to the conspiracy theory of society with all its consequences—heresy hunts, national, social, and class hostility."[74] Persistent rumors of famine plots and conspiracies to starve the people circulated in France during the Old Regime. The government's direct or indirect involvement in these plots was a central theme of the rumors. Although the existence of these presumed plots has never been confirmed as historical fact, Steven Kaplan has pointed out, "whether the plots existed or not ... is less interesting than the belief in their existence."[75] The widespread belief that such conspiracies were possible is emblematic of how contemporaries perceived the political system. One such rumor concerned the ministry of Controller General Abbé Terray, reputed to have been among the most venal of Louis XV's finance ministers, who was thought to have used his position at court to contrive with a small coterie of grain dealers to exploit shortages and to generate panic prices, using legislation in favor of free trade as a means of disguising the operation. In the name of free trade, they were reputed to have caused prices to fall where grain was abundant and to increase where it was in demand. When opposition


to royal provisioning policies occurred at Montauban, for example, the intendant was replaced by Terray's twenty-two-year-old nephew. To assure the cooperation of the army, Terray is alleged to have made sure that military salaries and pensions were paid with an exactitude previously unknown.

Turgot broke up Terray's monopoly in an arrêt of September 13, 1775, which declared free trade within the kingdom and put the right to regulate grain exports in the king's hands. Although the monopolists could no longer count on the king's protection, they had already made an estimated 1,200,000 livres.[76] The proliferation of the belief in a royal grain monopoly is highly illustrative of differences between the political cultures of England and France. The private character of nationally significant government decisions in France made possible the widespread belief in the plot. The notion that highly placed individuals could conspire with the government to starve the people would have seemed less plausible to the English public.[77] There, a similar plot would have been more difficult to orchestrate. Because many members of Parliament were landowners producing grain for the market, a monopoly giving a few dealers or producers the right to monopolize the trade would not have won wide approval. In fact, during the eighteenth century, Parliament granted producers bounties to export grain, a policy benefiting all large landholders equally. Similarly the British Navigation Acts did not establish particular groups of British shippers with a monopoly over any particular branch of shipping; the acts did not


discriminate among shippers but provided all with equal advantages.[78] Proposals by particular industries to exclude rivals were less likely to succeed than in France.

In eighteenth-century England, parliamentary decision making became increasingly public, and by the end of the century, parliamentary debates were even disseminated in the press.[79] The efforts to influence Parliament also became more open as private interest groups often made their case public in an effort to win support for their cause. As a consequence, historians of England consider the rise of lobbies as occurring after 1780. Although lobbies worked more openly and hence seemed to have become more influential after 1780, it was probably in an earlier period, characterized by greater governmental secrecy, when they were more effective. The increasingly public character of influence peddling in England made it still more difficult to use political means to achieve private redistribution of the nation's income. English lobbying gave rise to public knowledge and information, while in France knowledge about who received what from the government remained private, leaving many groups feeling excluded.

Social Division and Redistributive Politics in Early Modern England and France

In order to cultivate a pro-government majority in Parliament, the British Crown selectively distributed contracts, honors, and offices.[80] In France, similar favors were distributed by a particular minister to gain a personal network of support in the court. Despite these similarities, one important


difference stands out. In England, broader access to the spoils of government and public service may have consolidated a more heterogeneous elite, who desired to perpetuate the regime. Because the governing elite in Britain represented a wider cross section of the population, government policies could enlist greater social support than could the policies of French kings. As a result, a broader sector of the English elite endorsed the rules and the policies they produced. Parliament provided the English political elites with real distributional benefits through private enclosure acts, grain bounties, and patents for overseas trading companies in which elites held shares. The elite of 250,000 voters were also the beneficiaries of the state's limited extractive capabilities. These benefits did not come at the cost of general political stability because they were not restricted to narrow networks of ministerial cronies. The colonies were, of course, quite another matter. They were managed much the way the French ministries regulated the French domestic economy.

By contrast with eighteenth-century England, it seems that conflict among groups in France became increasingly political and ideological. There, the public interest was articulated in such abstract, substantive, or ideal values and norms as natural law, justice, or right reason. Public interest was articulated in abstract concepts that had no basis in practice, perhaps because no institution emerged that could credibly claim to be an arbiter of the public good. Although the social organs of the dominant elites might have changed during the seventeenth century, the family- or clan-oriented character of the political system remained. Ironically, absolutism throve on and embedded the authority of clans and private networks into the structure of government, yet those who benefited most directly from the spoils of the government's redistributive mechanisms often subscribed to a general criticism of the regime and regarded the privileges of other groups with hostility. In England, the parliamentary practice of negotiation, compromise, and face-to-face bargaining became a political value shared by members of the elite. Parliament provided the elite, which probably constituted 3 percent of the population, with a forum in which to engage in face-to-face dialogue. Bargaining in Parliament contributed to the forging of a national culture shared by a broad segment of the nation's wealthy. A more open realm, in which public knowledge of government decision making was necessary, an emphasis on consensus over command as a method of conflict resolution, and a belief that public law should be based on a shared community of understanding among the nation's representatives distinguished the epistemology of parliamentary politics from the philosophical premises of absolutism. The philosophical differences over how public matters should be resolved may have had a decisive in-


fluence on the political evolution of the two nations. Groups that participated in the negotiating process by which English public law was created were likely to become more aware of how their interests corresponded to those of competing groups. At the least they learned to view their private interests in terms of national or public goals. As a result, England developed a more nationalistic and unified political culture that was less prone to revolution and more capable of cooperation in the face of crisis.

Economic Efficiency and Absolutism

While redistributing the nation's wealth to preferred clients, the French state provided property rights that increased net output. The weakness of competitive markets limited economic efficiency; nevertheless, output was increased by rules that protected the property rights of large investors. Although the Crown only selectively protected the property rights of its subjects, the protection encouraged investments that were socially useful. The Crown provided special courts to enforce contracts among merchants, albeit giving preference to specially chosen royal clients. The economy also benefited from the reinvestments by financiers of their profits from tax farming in the protected industries and privileged commercial companies sponsored by the Crown. Once such investments were made, the Crown generally resisted reneging on the privileges it had provided. While the Crown's finance ministers were likely to acquire private fortunes during their tenure of office, they often worked closely and reliably with their clients. The need to maintain an ongoing relationship with well-organized private business groups gave the Crown an incentive to defend the property rights of the private sector. Recognizing its dependence on repeated interactions with prominent business interests, the Crown took measures to protect private property rights, stabilize monetary policy, and reduce the frequency of debt repudiations. Had it not been for the hope of revenue from the protection of the property rights of its subjects, the king might have created and enforced less efficient property rights or perhaps even none at all. Had the French Crown acted as opportunistically toward business groups as the Spanish Crown did, less investment, and less commercial and technical progress, would have occurred.

Rulers are rarely able first to devise rules that maximize efficient production and then to negotiate the methods of revenue collection. Property rights that increase the wealth of private groups do not automatically lead to greater revenue for the state.[81] The property rights that emerged in Old


Regime France, while not necessarily the most efficient for the economy, did allow the Crown to capture the maximum revenue at the lowest cost.[82]

The expansion of monopolies and other protectionist practices in France may have produced the deadweight losses that economists expect to find in the exercise of monopolies as compared to competitive industries, but perhaps the choice in the Old Regime was between regulated industries or none at all.[83] The French government's rent seeking provided private business interests with institutional structures that facilitated trade and investment. A relatively stable currency and restrictions on the predatory behavior of its agents resulted, which increased the level of investment by comparison with the standards of previous centuries. Although the French monarchy strategically supplied property rights to selected business people to gain revenue, the investments encouraged had positive spillover effects, benefiting the economy overall.[84] The property rights the French state did offer should help us to understand why France's economic expansion was considerable during this period, surpassing that of many of its European rivals, with the exception of Britain.[85]


previous chapter
3— The Redistributive Role of the State
next part