Economic Problems and Royal Finance

Royal Debt:

1774 - Louis`s biggest problem was money as he was heavily in debt as a result of the cost of foreign wars:

• War of Austrian Succession (1740-48) came to an estimated cost of 1 billion livres
• Seven Years` War (1756-63) came to an estimated 1.8 billion livres

Louis couldn`t afford to pay off the debt - even during peacetime royal income wasn`t enough to cover the expenditure as a result of the size of interest payments. In the short term the Crown borrowed from international banks, but in the long term this just made things worse because of the build up of interest of these loans.

Inefficient tax system:

Most royal income came from taxation, but not enough was being raised for three main reasons -

• the nobles (richest subjects) were exempt from most taxes
• tax collection was chaotic and incomplete because of regional differences
• tax farming reduced the Crown`s income. The Farmers-General paid an agreed sum in advance for the right to collect certain taxes. What they collected above that sum was the profit.

Attempts to improve royal finances:

Louis tried…