Partisan Politics and Public Debt in France,
It has become received wisdom in recent years that the weakness of representative institutions in eighteenth-century France undermined the monarchy’s credibility as a borrower. A logical implication of this argument is that if the Crown had revived the Estates General, it would have been able to borrow at lower rates of interest. While recognizing that this is a counterfactual question that cannot be answered with certainty, in this chapter I argue that default risk on sovereign debt in France had as much to do with the balance of partisan forces in French society as with the weakness of representative institutions. In fact, the observed absence of credibility in France is consistent with an alternative argument that credibility for sovereign debt would have been absent even if English-style institutions had been adopted. What was missing in France was the possibility for a coalition such as the English Whigs to form, based on a compromise between financial interests who had invested in government debt and other social groups. This finding supports my argument that constitutional checks and balances may not suffice to ensure commitment, while it is also consistent with my second main argument about the effect of party formation in a plural society. In considering eighteenth-century French politics I also hope to shed light on another recent debate concerning the extent to which it was possible, in the absence of national representative institutions, for the French Crown to gain credibility by bureaucratic innovations such as indirect borrowing or establishing a national bank. I conclude that the French experience provides an excellent illustration of the inefficacy of bureaucratic delegation as a commitment device under autocracy.
Though some of the arguments considered in this chapter are counterfactual, it is still possible to evaluate them rigorously by identifying