LEARNING INTENTIONSOKnowledge:

O Identify events that led to financial and fiscal crisis in France

OUnderstanding: O Using evidence and examples, explain how

these events contributed to the crisisOSkill:

O Start creating your own annotated timeline that will help you to recall, explain and analyse the events that contributed to financial and fiscal crisis

SIGNIFICANT EVENTS

1740 – 1787

FINANCIAL CRISIS

THE THREE WARSLook a the class timeline and find the three wars between 1740 and 1783:

O ?O ?O ?

There was no increase in taxes during this time to fund the wars. The American War of Independence, for example, cost France over 1 billion livres.

NECKER’S COMPTE RENDU AO ROI 1781 (Necker’s Report to the King)

O Find this event on the timeline O Necker – Comptroller General: Swiss born – reputation as

financial geniusO First published account of the financial situation of the French

State (Compte Rendu 1781)O The report showed ordinary revenues to be exceeding

expenditure by over 10 million livres (very healthy)O No inclusion of extraordinary accounts where the real cost of

war was included – deep deficit

What would the consequence be if the Banks knew about the extraordinary accounts?

ATTEMPT AT REFORMO Necker tried to:

O Organise central accounting proceduresO Establish central treasuryO Nation-wide survey on venal offices – how many

and how much did they make?

This was funded by more borrowing. Between 1777 and May 1781 he borrowed 520 million livres in loans with high interest rates.

More borrowing by Calonne (appointed 1783) – 653 million livres.

FRANCE FACING BANKRUPTCY - 1786

O France’s income in 1775 - $377.2 million

O France’s expenditure in 1775 - $411.4 million

O By 1786 there was a deficit of $112 million livres

What solution do you think Calonne (Necker’s replacement) proposed?

PROPOSED SOLUTION

MAJOR TAX REFORMO Why might this have been controversial? O Why was there no choice?

FISCAL CRISIS

PROPOSED SOLUTION Cont.Calonne in correspondence with Necker:

“It is impossible to tax further, ruinous to be always borrowing and not enough to confine

ourselves to measures of the economy… Ordinary ways are unable to lead us to our goal…The only effective remedy, the only

means of managing finally to put the finances truly in order, must consist in reviving the

entire state by recasting all that is unsound in its constitution (make up)”

CALONNE’S PLAN FOR TAXATION REFORM

O 20 August 1786 – Calonne presented his Plan for the Improvement of the Finances. It proposed: O New direct tax – on all landowners

without exemptions determined by income – worth $35 million in revenue

O Termination of internal tax barriersO No more fixed price of grain

This was a move towards a national economy – stimulate trade.

RESISTANCEWho might oppose taxation

reform?

Why?

BORROWING MONEYO In order to borrow more money from

banks to keep the country going, Calonne needed to show that his proposed reforms would become law

SO…

O He proposed that King Louis XVI convoke an Assembly of Notables to convince them of his plan

WHY??

ASSEMBLY OF NOTABLES

O What was the purpose of the Assembly of Notables?

O Who would the assembly comprise? O Who decided who joined the

assembly? O Why was this important?

TO DO: Start your own annotated timeline. Include the following events: O The three warsO End of American War of IndependenceO Necker’s Compte RenduO Appointment of Calonne as controller generalO Calonne’s Plan for the Improvement of the FinancesO The Assembly of Notables

Make sure you include exact dates, short explanations, examples and evidence on your timeline. It should act as a storyboard for you.