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Assignats:
A Successful Failure

Charles Adams

Yale
University

 

 

 

 

 

 

 

 

 

 

 

 

The financial crisis surrounding
prerevolutionary France acted as an important catalyst towards the French
Revolution. This fiscal crisis encouraged the bourgeois, townspeople, and
peasants to seek a remedy for the grievances of the Crown.[1] To finance this
revolution, and alleviate the budget deficit, bonds backed by expropriated
property, called assignats, were issued. These assignats then transitioned into
legal tender and paper currency, which quickly experienced depreciation, and
caused inflation. Similar to the tax-backed currency of the American
Revolution, assignats were destined to suffer a similar fate of rapid depreciation
and worthlessness.[2]
However, in the same regard, the unsound continental paper currency helped save
the American Revolution by funding the war and leading to the creation of The
United States of America.[3] Similarly, the assignats,
despite their failure as a currency, were in fact a huge success that helped
finance French war efforts in 1792, preserve the Republic, and create a rural
middle class by allowing French peasants the opportunity to acquire land they
could not afford otherwise. Overall, The French Revolution would not have
succeeded without the help of assignats.

In the century leading up to the Revolution, the
French Crown suffered from constant budgetary crises.[4] With the political economy
of the Old Regime, the Monarchy’s financial crisis became worse and worse.[5] Under the Old Regime, the
power to spend and the power to tax were divided. The Crown controlled
expenditures while any tax reform had to be registered with the Parlement de
Paris.[6] Additionally, no permanent
changes in taxation could occur unless the nation as a whole was represented by
the Estates-General which, at the time, had not met since 1614.[7] As a result of this
political structure, tax rates were rarely altered except for slight, temporary
increases approved by parliament during times of war. However, these small
increases were never enough to offset the increased expenditures of combat,
forcing the Crown to take out loans on the deficit. Due to these fiscal
shortcomings, the Crown defaulted three separate times in the 18th
century leading up to the revolution, with the last default in 1770 acting as a
catalyst toward much-needed economic reform.[8]

            With minimal cuts to expenditure, an
inability to change taxation, and increased debt due to consistent loaning, the
Crown was on the brink of another financial default in the late 18th
century.[9] The Crown attempted to
implement an immediate stabilization program which was quickly blocked by rentiers, taxpayers, and Parlement.[10] As desperation for
increased tax revenue arose, the Crown was forced to make a very risky but
necessary decision, one that could ultimately threaten the Monarchy’s royal
absolutism.[11]
They called a constitutional convention of the Estates-General, which had not
met since 1614, for May 1st, 1789.[12] The Estates-General
consisted of three estates: the clergy, the nobility, and the rest of France.[13] However, upon meeting at
Versailles in 1789, problems arose in regards to voting procedure.
Traditionally, given the precedent of 1614, voting occurred on a per estate
basis.[14] This means that the Third
Estate, which represented 95% of France at the time, could be outvoted by an
old dominant minority consisting of the First and Second Estate. Outraged by
this discrepancy in voting rights, the Third Estate created the National Assembly
on June 17th, 1989 and then the National Constituent Assembly on
July 9th in order to draft a constitution.[15] This National Assembly,
consisting of the Third Estate, proclaimed itself as the sole representative of
France that advocated not just for the old dominant minority, but for the
majority and common man as a whole. Despite going against everything the Crown
had ever known, The National Assembly, with much hesitation, was legalized by
Louis XVI. With this, the National Assembly began the revolution by
overthrowing long-standing feudal rights.[16] The Assembly ratified
reduced power for the king, nobility, and clergy while eliminating their
previously held tax exemptions.[17] However, the financial
situation remained dismal and a source of funding was absolutely necessary.
Defaulting on debt was not an option while new taxes on the common man would
not aid the revolutions popularity.

            On November 2nd, 1789,
the National Assembly confiscated the land belonging to the Church and
nationalized them as biens nationaux
with support from the nobility and the Crown who saw this as an opportunity
towards financial stabilization.[18] After all, with the
inability to default nor raise taxes, there was no choice but to single out a
group for financial expropriation. With the seizure of Church land valued at
two to three billion livres, the National Assembly considered selling it all
off to cover the existing debts, however, it became apparent that the plan
would oversaturate the market and actually reduce valuations.[19] Instead, the National
Assembly issued assignats, which were bonds that represented land “assigned” to
the bond holder, securitized by the Church and Crown land.[20] On December 19th and the
21st of 1789, the National Assembly issued 400 million livres of assignats
in denominations of 1,000 livres which carried 5 percent coupons.[21] These assignats were paid
out by the Treasury to France’s creditors to eliminate short-term debt and
default risk, as well as to the Caisse
d’Escompte for the advances it gave to the government.[22] The government expected
the assignats to be used as payment for land purchases and taxes, where a
special fund called the Caisse de
L’extraordinaire would then retire those assignats.[23] In this regard, the
immediate impact of the assignats was quite a painless way to solve the
short-term fiscal problems France was experiencing. Overall, a balanced cycle
was in fact planned, where assignats would be issued, used to pay for land and
taxes, and then cancelled as soon as they were redeemed by the government.
However, this plan began to go awry when there was no development towards
actually selling the land, and as a result, no ecclesiastical properties were
sold at the time.[24] Additionally, due to
lacking tax revenues, the government was forced to further fund expenditures
with a second issuance of assignats on September 29th, 1790,
featuring no coupon, and lowering the smallest denomination to 50 livres, as a
result, making them into legal tender and the country’s official circulated
paper money.[25]
Overall, the assignats became a paper currency, whose backing was not gold, but
expropriated property.

            The governments expenditures during
the Revolution consistently outpaced revenues, as a result, assignats can be viewed
as a microhistory of the French Revolution because their production, valuation,
and effects ran in line with the fiscal demands of Revolutionary actions and
events. When tax revenues were insufficient, assignats were produced to cover
the necessary budget gaps.[26] Additionally, these newly
produced assignats had a strong influence on war and domestic policies as new
property was constantly needed to further back the currency. If the value of
the properties fell below the nominal value of the assignats, inflation would
occur. As a result, once the nominal value of the assignats exceeded the value
of the biens nationaux, the
acquisition of more land was paramount to stifling inflation.[27] Due to
counterrevolutionary activity in 1793, the government was able to expropriate
land from émigré nobles, refractory clergy, and convicted criminals.[28] This added to the pool of
properties backing the assignats, but a counterrevolutionary threat still
existed and when it came to finally selling these newly seized lands, they were
priced lower due to their title risk.[29] The sale of Church land
was seen as very secure, given that the sales were approved by the National
Assembly and the king himself.[30] However, with the sale of
émigré properties, there was a fear that if the old monarchy was restored and
the counterrevolutionary émigrés returned, that their properties would be
returned to them unlike the secured Church land.[31] With the advent of the
National Convention, which took the place of the National Assembly, and
proclaimed the Republic, France saw an expansion of the Revolution and an
insistence towards crushing the counterrevolutionary threat.[32] As a result, in 1972,
France victoriously invaded Belgium, extracted their resources, destroyed the
Belgian Old Regime, expropriated their Church properties, and forced loans upon
them (which would never get paid back).[33] By March 1793, The
National Convention had successfully annexed Belgium, Savoy, Nice, and certain
German territories while exploitation of their finances was attempted.[34] The Convention demanded
109 million livres from Belgium until 1974, but only 50 million were delivered,
not a complete success, but not a total failure either.[35] However, due to poor
performance along the battlefield, the goal of invading the Dutch Republic
never came to fruition.[36]

            Despite the fiscal exploitations of
foreign lands, the costs still outweighed the benefits. With the nominal value
of the assignats exceeding the value of the properties backing them, coupled
with mass counterfeiting movements by counterrevolutionaries to further
discredit the currency, assignats depreciated by 50 percent while prices
suffered from inflation.[37] Urban workers,
shopkeepers, and artisans complained of merchant’s greed and demanded price
controls to be instated just as the Reign of Terror under Robespierre was
beginning. On September 29th, 1793, the National Convention decreed
a price maximum stating that the prices of all necessities must be set at their
1790 level plus one-third and salaries at their 1790 level plus one half.[38] Meanwhile, all grain
producers were forced to report their harvests, be open for inspection, and
required to sell all their grains on the market.[39] Additionally, the law
decreed that receiving assignats at a rate lower than face value, differentiating
between coin and assignats in any transaction, refusing to accept assignats as
payment, or to negotiate a discount on assignats was illegal.[40] The Committee of Public
Safety under Robespierre was given the freedom to enforce these regulations any
way they pleased.[41] For the first offence,
the penalty was six months in prison, second offences were met with twenty years
in prison, and more than two were met with the death penalty.[42], [43] Despite these harsh
punishments, the assignats continued to depreciate to 80 percent of their
original value by December, 1794, as the Reign of Terror came to an end. Then,
when the National Convention came to a close, the assignats had deprecated to
98 percent of their face value, making them practically worthless.

            The Directory, which succeeded the
Convention, aimed to rid itself of the worthless assignats.[44] Their solution was a new
paper currency called land scrip which could be obtained at a rate of 30 livres
in assignats for 1 livre of land scrip.[45] The land scrips were
actually quite similar to assignats in that they were backed by land, however,
the main difference was that they could be converted at any time for a portion
of land from what was known as the “land bank”.[46] This way, instead of the
currency being backed by land, the
currency itself actually represented small pieces of land, for which the
currency could be immediately traded for at a moments notice. However, given
its similarity to assignats, it too suffered a similar fate as land scrip value
dropped, and the Directory decreed on the 21st of May, 1797 that the
worthless 21 billion assignats and 24,000 million land scrips were no longer
currency.[47]
The issues of inflation and depreciation surrounding paper currencies were put
to an end by Napoleon in 1803, who opposed fiat currency, and made the gold and
silver franc the new coin currency of the time.[48] The franc was very
successful into the 19th and 20th century until the
European Union was formed, and the Euro became the preferred standard currency
in the region.

            Overall, the Crown’s fiscal crisis
helped catalyze the formation of the National Assembly which led the French
Revolution. This budgetary failure helped prolong the Revolution, and despite
the failure of the assignats as a longstanding currency, their implementation
was paramount to funding the Revolution and driving it towards success. Of
course, in hindsight one can imagine a situation in which assignats were never
introduced, and perhaps better alternatives were implemented with a higher
degree of success, but those assumptions are simply speculative. For example, if
assignats were never introduced, the National Assembly could have closed the
budget deficit by selling the expropriated Church properties at a slow rate to
prevent the oversaturation of the market and the undervaluation of the
properties. While waiting to sell the land, the Assembly could have continued
to run the establishments they had taken in order to collect the natural
revenues those properties would have reaped.[49] As a result, selling the
expropriated equity while simultaneously using them to produce revenue may have
been more effective than assignats at alleviating the fiscal problems the
French Revolution was facing. This reasoning, however, suffers from hindsight
bias, and there is no proof that this alternative would have been any more
successful. Additionally, the assignats, despite their failure as a currency,
were in fact a huge success that helped finance the war effort in 1792, preserve
the French Republic, and aid French peasants in the acquisition of land they otherwise
could not afford, thus creating the foundation for a rural middle class. Overall,
The French Revolution would not have succeeded without the help of assignats.

[1] Eugene Nelson White, “The French Revolution and the Politics of
Government Finance, 1770-1815,” The
Journal of Economic History 55, no. 2 (1995): 227.

[2] Ibid., 237.

[3] E. Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” Journal of Political
Economy 2, no. 2 (1894): 184.

[4] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 229.

[5] Ibid.

[6] Ibid.

[7] Ibid.

[8] Ibid.

[9] Ibid., 232.

[10] Ibid., 233.

[11] R.C. Van Caenegem, An Historical
Introduction to Western Constitutional Law (Cambridge University Press,
1995), 175.

[12] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 233.

[13] Van Caenegem, An Historical
Introduction to Western Constitutional Law, 175.

[14] Ibid.

[15] Ibid.

[16] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 180.

[17] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 234.

[18] Ibid.

[19] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 180.

[20] Van Caenegem, An Historical
Introduction to Western Constitutional Law, 176.

[21] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 236.

[22] Ibid.

[23] Ibid.

[24] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 181.

[25] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 236.

[26] Ibid., 241.

[27] Ibid.

[28] Ibid.

[29] Ibid.

[30] Ibid.

[31] Ibid.

[32] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 187.

[33] White, “The French Revolution and the Politics of Government Finance,
1770-1815.”

[34] Ibid.

[35] Ibid.

[36] Ibid.

[37] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 189.

[38] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 244.

[39] Ibid.

[40] R. G. Hawtrey, “The Collapse of the French Assignats,” The Economic Journal 28, no. 111 (1918):
301.

[41] Ibid.

[42] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 189.

[43] Hawtrey, “The Collapse of the French Assignats,” 301.

[44] Levasseur, “The Assignats: A Study in the Finances of the French
Revolution,” 191.

[45] Ibid., 193.

[46] Ibid., 194.

[47] Ibid., 195.

[48] Elise S Brezis and François H Crouzet, “The Role of Assignats During
the French Revolution: An Evil or a Rescuer?,” Journal of European Economic History 24, no. 1 (1995).

[49] White, “The French Revolution and the Politics of Government Finance,
1770-1815,” 235.