Saturday, April 4, 2015

Colbertisme and the French Economy

Jean Baptiste Colbert
Under the rule of the Sun King – Louis XIV – France embark into its ancient regime’s golden age. The King ruled France with his divine absolutist power. From that, he went into a spending spree, building palaces, waging wars, and funding expeditions. With such a manner, the King needed an official that balanced his income with his spending. The duty fell into one of his time’s well known economic manager – Jean Baptiste Colbert.

Jean Baptiste Colbert, born on August 29, 1619, came from a Bourgeoisie family from Reims, France. His family became successful in the fields of finance and international trade. His family background earned him the mindset, knowledge, and skills of a manager, which became useful when he assumed the job of Comptroller-General. With his family’s wealth and connection, the Colberts managed to get Jean-Baptiste in the government. His disciplined work ethics earned him the trust of two chief councilors of King Louis XIII and XIV – Cardinal Richelieu and Cardinal Mazarin. Under Mazarin’s tutelage, Colbert’s closeness to the Cardinal led to him becoming close to the King as well. And so, when Mazarin passed away in 1661, Colbert became a chief adviser of the King in 1661 and formally became the finance minister in 1665.

Colbert did not had any difficulty gaining the King’s trust and confidence. The King trusted Colbert when he revealed the enormous wealth of the former chief minister, Cardinal Mazarin. He also had the king’s confidence when he and the Sun King had similarities in their aims. As Louis XIV’s finance and economic minister, Colbert envisioned a self-sufficient and a very powerful Kingdom of France. This what Louis XIV also wanted, a France that dominate Europe politically and culturally. The rest of the economics Louis left to Colbert.

Colbert, however, faced a daunting task in order to realize his agenda and that of the King’s. Corruption, inefficiency, and disorganization clouted France. The King’s absolute power covered even the finances. The King had the power to levy taxes on his own estate and on essential goods. The King may spend it all in his own discretion, which meant either to luxury or war. In order to fill the coffers and supplement taxation, the practice of selling offices became widely practiced. It became effective way to raise money, so much so that higher officials sold offices with the same duties to numerous individuals. As a result of the selling of offices, abuses, corruption, and inefficiency rose tremendously. Besides selling government offices, selling bonds became another means. The King sell bonds during the times of huge revenue shortfalls. The previous Kings and even Louis XIV himself borrowed heavily from wealthy government officials. When the King borrowed, the lenders surely had a huge profit. Huge interest payment followed the amount of the loans. The former chief minister Mazarin himself became wealthy trough that way. But setting up tax farms proved to be the most notorious way to collect money. Tax farms meant that the tax collection of a region would be sold to a bourgeoisie or any wealthy individual. The tax farmer would have the right to collect taxes within that area ranging from excise taxes called aides and gabelle or salt tax. They also had the right to collect customs from any goods entering the region from another place both locally and internationally. Abuses and excesses became rampant. The economic system that Colbert inherited from Mazarin marred with inefficiency and institutional problems.

Colbert wanted to change the economy from a loosely governed economy, to a strong centralized mercantilist economy. Mercantilist economic polices reflected similarly, if not preceded, the idea of economic nationalism. Under mercantilism, the wealth of countries or kingdoms became depended on the amount of metallic species, thus, the more gold and silver the richer and powerful. This also meant that the country must gain an upper hand when it came to trade balances. Countries had to rely on their own resources and products rather than import; or better yet, more exports than imports. Protective tariffs imposed in order to protect local industries and also to discourage large amounts of imports. Strengthening local industries became also a critical part of the mercantilist policies in order to increase exports to increase income. Abut for Colbert, he aimed France to dominate the export market.

At the start of his office, he began to collect intelligence first. In 1666, he ordered a massive survey of the French economy, including a comparison with the economies of its neighboring countries. The survey resulted to the enquete. The enquete revealed the financial problems and economic weakness of the French economy. In addition, it showed that France was an underdog compared to the economic might of the English and the Dutch. Even after the enquete, statistics, figures, and government, economic, and financial documents played key part of Colbert’s operation. Eventually, by the time he passed away in office, he left about 50,000 books and 15,000 documents.

During the enquete, Colbert began also to reform public finances. He started with the selling of offices. Under his order, offices formed from the past 30 years had to be abolished, clearing out possible inefficiencies and disorganization within the government. He also stopped the selling of offices. Then, he also rooted out officials that amassed huge wealth through lending to the King in enormous amount of interest. Among those he investigated for amassing wealth through that way included his former boss, Cardinal Mazarin, and his predecessor as finance minister, Nicolas Fouquot. Colbert also began to investigate and act against abuses and corruption within the tax farm system. An investigative body began to check all tax farmers, both living and dead, for any signs of cheating and deceit. Authorities punish those who failed to pay the due amount of tax revenues or those who lied on the amount that they remitted. Descendants of tax farmers proven to be guilty had to pay the fines or the dues. On the other hand, liars and frauds with transactions to government, especially loans, faced defaults. Families that impersonated as a nobility faced imprisonment, or payment of huge fines. Colbert also began to impose new taxes on salt and also started the implementation of the infamous land tax known as the taille. To tax the nobility, he also began to impose indirect taxation to gain revenue from them. All in all, within 10 years in office, Colbert succeeded in increasing government revenue, from 31 million livres to 75 million livres.

Nevertheless, problems remained. For instance, the nobility and clergy remained untouchable when it came to taxation. The taille fell as an additional burden to the peasantry and to the poor, which became one of the reasons of the French Revolution more than a century later. In addition, tax farms remained. Although he saw them as a problem in centralizing economic control and increasing domestic trade, but because of huge opposition from nobility and the bourgeoisie, abolishing of the tax farm never materialize until a century later.

Colbert became very active in making France gain an advantage in trade balances. He began to enforce protective tariffs to discourage and deter any importation. In 1664, France enacted the first round of protective tariffs. Then, when it failed to make major changes in the balance sheets, Colbert amended it and increased the rate in 1667. A trade war with the Netherlands followed. The economic war then escalated into a real military war in 1672 when the Franco-Dutch War raged for about 6 years. In the end, stalemate brought the belligerent to the negotiating table, resulting to the signing of treaties in Nijmegen. The peace made France to abandon the 1667 rates and returning it to the rate of 1664.

Besides advantageous trade balances, Colbert also sought to increase France’s presence in international trade. He saw that the Dutch dominated world trade with its large merchant marine fleet. And in order to beat the Dutch in trade, Colbert saw fit to increase France’s merchant marine, equal and even surpass the size of the Dutch. Because of this, it stimulated the French shipbuilding industry. In order to increase trade of France with its colonies In Canada, West Indies, and India, he and the King founded joint-stock companies like the French East India Company and French West India Company both established in 1664. However, the companies did not follow the system of the English and the Dutch. Instead being run by private consortium, French joint-stock company became also a part of the absolute rule of the King. Members of the royal family or closest companions of the king managed the company. Most of them however, were incompetent, leading to some of the joint-stock companies to fail after a decade or so.

In order for France to make a mark in world trade, Colbert aimed in making France an exporter country of high end goods. He viewed that high end market meant less volatility in prices and less problems during times of economic crisis.

And so, he began to rule French industries with discipline, standards, and stringency. His overall policy aimed in creating product standards across France. He used those who worked in the enquete to become his eyes and hands as inspectors and judges in factories. They made sure that Colbert’s standards remain in place. In addition to an army of judges and inspectors, Colbert also supported trade guilds, which he viewed as allies to maintain standards.

Colbert also gave various support towards industries. He granted tax breaks, easy loans, monopolies. He also handed out hundreds of instruction for the manufacturing of many products. He also initiated the Ordinance of Trade in 1673, that codified commercial law, and made industries and domestic trade organized. The greatest form of support by Colbert, however, appeared in form of being designated as a royal factory. Gobelin Works and Manufactory became one of Colbert’s successful Royal Factories. He placed the famous artist, Charles Le Brun, in charge. Gobelin became a supplier of artistic goods to the royals, ranging from paintings, tapestries, and furniture. It supplied many of the decoration found in the Palace of Versailles and in the famous Hall of Mirrors.

Colbet’s policies only achieved limited success. His strict standards led to few room for innovation and product development. Brain drain settled when in 1685 Louis XIV expelled the Huguenots, most of which worked in industries.
Colbert also founded school to create new creative minds in the arts. In 1666, he founded the Academy of Science, followed by the Academy of Architecture in 1671. He also founded an art school in Rome, whose greatest product was Charles Le Brun.

Colbert stimulate the economy and created jobs with his public works. He ordered the construction of road and canal systems to increase domestic trade. He also renovated Paris into a premier and grand city, with a renovated Lourve and wide boulevards. But Colbert showed his disagreement towards King Louis XIV’s greatest monument – the Palace of Versailles. It created demand for Colbert’s royal factories, but the expense of the construction worth enormous and drained a lot from coffers. Nevertheless, Colbert’s excellent skill as a financier allowed France to survive the long period of construction of Versailles.

Colbert continued to serve as Finance Minister of Louis XIV for about two decades. He ruled with discipline and strictness. He hated inefficiencies and punish those who came in late. The famous letter writer of Louis XIV’s reign, Madame de Sevigne, described Colbert as a Man of Marble, because of his attitude and his incorruptibility. Nevertheless, Colbert did accumulated a huge personal wealth during his time as Finance Minister. Colbert served as finance minister of King Louis XIV until his demise in 1683.

Colbert left an economically and financially strong France. Although with limitations, he did bring in reforms that allowed France to survive the extravagance of its majestic King. However, after he passed away, his successor failed to manage the finances well. And so, with Louis’ Wars, France succumbed to financial decline, which lasted for decades and ending with the French Revolution. Jean Baptiste Collbert embodied the mercantilist ideas of his time, leading to the creation of the word Colbertisme that defined his policies.

See also:

Bibliography:
Cameron, Rondo. A Concise Economic History of the World: From Paleolithic Times to the Present. New York: Oxford University Press, Inc, 1993.

Chappell, william. "Colbert, Jean Baptiste." in Economic Thinkers: A Biographical Encyclopedia. Edited by David Dieterie. Santa Barbara: ABC-CLIO, LLC, 2013.

Davidson, Marshall. France: A History. New Word City.

Rosner, Lisa & John Theibault. A Short History of Europe, 1600 - 1915: Search fora Reasonable World. Armonk, New York: M.E. Sharpe, Inc., 2000.

Vittoria, Antonio. An Economic History of Europe: From Expansion to Development. New York, New York: Routledge, 2006.

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