The Physiocrats and the State

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(1) Fiscal Mess in the Ancien Régime
(2) Physiocrats vs. Bureaucrats
(3) A Political Education

(1) Fiscal Insanity in the Ancien Régime

In order to understand what the Physiocrats were up against with their doctrine of the "Single Tax", a few words must be reserved for the mess that pretended to be the fiscal "system" of 18th Century France. There were several systems in place.

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The inequity and insanity of the French fiscal system had been denounced by enlightened men long before the Physiocrats came onto the scene. Pierre de Boisguilbert, Sébastien de Vauban, René d'Argenson, Claude Herbert, Vincent de Gournay, Veron de Forbonnais, and many others had railed against it. But there was a division of opinion on what should be done.

For technocrats like the Marechal de Vauban and Veron de Forbonnais, the vanishing tax-base was the most urgent problem. In their view, the race for "tax exemptions" had created a venal public sector which failed to serve either king or country. Their solution? Eliminate the tax-exemptions and you kill two birds with one stone: the wealthy, titled amateurs who passed for public servants would disappear; the extra funds that emerged from the larger tax base would pay the salaries of a new, professional and competent bureaucracy.

The scheme to professionalize the bureaucracy was in tandem with the Enlightenment belief that it was the duty of the State to be useful to society, and not merely a parasite. In the early part of the 18th Century, Vauban's Corps of engineers had shown the way. The Corps were hired on the basis of a nation-wide examination which brought in the best and the brightest French boys (not the wealthiest or best-connected). Through its numerous civil engineering projects -- building roads, bridges, tunnels and canals -- the Corps had shown what a group of determined, efficient, middle-class professionals could do for the common good. Vauban wanted to extend his Corps scheme to the entire French government. To fund a professional bureaucracy, Vauban (1707) proposed the dixieme or the "royal tenth", a 10% property tax applied to all with absolutely no exemptions.

Vauban's fight led nowhere. But a few decades later, at the beginning of the Seven-Years War, Forbonnais, who had read and greatly admired Vauban, pushed for the vingtieme, the "royal twentieth", or 5% tax with no exemptions. However, this magnificent policy was short-lived.

Who was opposed to the idea of a professional bureacuracy? The Physiocrats, for one. This may seem paradoxical as some historians have pushed the notion that the Physiocrats were at the "vanguard" of an underlying bourgeois revolution. But this is not exactly true. They certainly pushed for loosening some ancient feudal-era restrictions – notably on the movement of labor and trade in grains – but their view of the state was notoriously conservative, indeed, we can even say they called for the restoration of the supremacy of ancient nobility. It was the Neo-Colbertistes, like Forbonnais and Diderot, who, seeing the source of national wealth in commerce rather than land, pushed for the enbourgeoisement of the French State. The Physiocrats -- notably the Marquis de Mirabeau (1760) and Turgot (1768) -- pushed for exactly the opposite.

By hiring professional bureaucrats rather than just using idle aristocrats for State affairs, the Physiocrats argued, the government is drawing useful citizens away from manufacturing and commerce, where their skills would be best employed. If divested of administrative responsibilities, the aristocrats will not use their new-found time in useful economic activities. They will continue their parasitic existence -- just a little more ennui. And, as history has proved, there is no creature more dangerous to the stability of nations and the peace of Europe than a bored aristocrat with time on his hands (allegedly, King Louis XIV ran the Versailles court in an obscurantist manner precisely to keep unemployed aristocrats busy with intricate backroom dealings, palace gossip and duelling cliques)

But the Physiocrats went further. In their view, an aristocratic civil service was superior to professional bureaucracy precisely because the aristocracy has a vested interest in land, the very source of the net product of the kingdom, whereas a professional middle-class bureaucracy had no such stake. As their rents are directly derived from the net product, aristocratic officials would be keen promote the upkeep and improvement of land, thus increasing the nation's produit net over the long-run. But middle-class civil servants, drawing a fixed salary, could not care less about the net product.

Mirabeau (1760) predicted that if the French monarch abandoned his aristocratic civil service in a favor of a professional bureaucracy, the maintenance of land would be neglected, public works would be allowed to deteriorate, there would be greater corruption and embezzlement among State officials, soldiers and judges would have "weaker" and more "servile" dispositions, etc. As evidence, he pointed to the horrors of the intendants and private tax farmers, which were the closest thing to a "professional" bureaucracy in France at the time.

The preferred system of Mirabeau and Dupont – the decentralized system of noble-run regional assemblies of the Pays d'Etats – was seen as the solution to the problems of the French state on several counts. These assemblies ensured the continued role of the nobility in the civil service – focused on raising the king's denier, ensuring law and order and improving local conditions. That is the proper and natural role of the nobility in society. The penchant for centralization and bureaucratization was reducing the nobility to an unnatural and dangerously destabilizing role as bored Versailles courtiers, dangerously gnawing away at the organic order of society, straining the social order, snapping the ancient contract between state and society,

The Physiocrats perversely appealed to Montesquieu's Esprit des lois in defense of their feudal-heavy vision of a natural, organic society. But, and this must be stressed, for all their talk of organic order and decentralization, they never sympathized with the republican vision, they never doubted that the absolutist power of the monarchy was right and proper. Rather, they sold their system as a defense of absolutist state – one that makes it possible. The king, they argued, is mistaken in thinking that his power is enhanced by a centralized bureaucracy and stuffing the nobility into the halls of Versailles. That only destabilizes and weakens the monarchy. The king's power is bolstered, not reduced, by the decentralized regional assemblies – the tax revenues are greater, the productive power of France mobilized to its maximum, the State will be more powerful than ever. From a political view, there is no need to take out loans, make concessions and become ever more dependent on the uppity bourgeoisie – they remain in their 'naturally' assigned place. And the nobles, kept busy with local concerns, will be integrated seamlessly as part of the French state, as is natural, no longer on the sidelines, an unpredictable, ambitious elite trying to find a way back in to relevance by working together with the internal and external enemies of the French monarch. In short, decentralization works for centralized, absolutist power, not against it. The Physiocratic doctrine shows exactly how.

At any rate, the Physiocrats concluded, if the government refrained from professionalizing its bureaucracy and relied on amateur aristocrats as before, then the need for tax revenues would be minimal. The inequity and horror of the tax-collection process, which did so much to rend the fabric of French society, could be much reduced. In sum, the Physiocrats argued, although the "single tax" is still the only appropriate fiscal structure, this tax should nonetheless be kept as small as possible so that the size of the government bureaucracy remain as small as possible.

This surprisingly "conservative" conclusion earned the Physiocrats much emnity from fellow Enlightenment philosophers of a more republican persuasion -- such as Voltaire, Diderot, Galiani, Forbonnais, de Mably, Condorcet and others. Unlike the Physiocrats, these thinkers did not regard the State as just a parasitical entity. Rather, if reorganized in a "rational" manner, they believed the State could actually be useful to society. In their view, the very fact that the French State was run by aristocratic amateurs, rather than middle-class professionals, was precisely the problem.

If, as the Physiocrats argued, a large State is unnecessary, if France would be better run by amateur aristocrats than by professional bureaucrats, why did they place so much emphasis on the Single Tax? After all, the Single Tax seems to "unfairly" target the landlord class -- the heroes of the Physiocratic textbook, the workhorses of the French State -- and lets all the other classes off the hook.

The Physiocrats were well aware that their landlord friends were suspicious of their Single Tax proposition. And they were right to be wary. It was not the first time that their rental incomes and precious tax exemptions were threatened by fiscal overhauls. Whenever the economy descended into crisis and the French State's budget shortfalls ballooned, the middle and lower classes felt the load of higher taxes. Naturally, it seemed to them as if the rich landowners were not pulling their weight -- and they grumbled accordingly. It was precisely at these times that agitators and pamphleteers crawled out of the woodwork and pressed for fiscal reforms.

But the landlords did not see themselves as particularly fortunate. The very same economic crisis meant that they were feeling the pinch of falling rents. If anything, they were less capable of paying now than they were before. As such, they were apt to believe that the calls for fiscal overhaul was being directed by a conspiratorial coterie of avaricious, slanderous, bourgeois manufacturers, bankers and capitalist farmers who were simply out to deprive them of their patrimony and undermine their social position. The fact that religious minorities, like Huguenots and Jews, were over-represented among these classes, made the whole idea of fiscal reform even more suspicious. The ancient nobility and Catholic clergy of France believed every attempt to reform the fiscal structure of the economy had to be resisted tooth-and-nail, lest the Protestants (and their Jewish friends) finally accomplish politically and economically what their forbearers failed to accomplish centuries earlier on the battlefield. They used every political lever they had -- most importantly, their influence in the Parlements -- to freeze any such rumblings.

This is precisely why the Physiocrats went to such lengths to popularize their theory. If the middle classes realized that shifting taxes away from them and onto landlords would be exactly counteracted by rising rents, they might not be so quick to push for a fiscal overhaul -- or at least not believe that a more equitable levying of would immediately "solve" all their problems. Similarly, if the landlords realized that they were, in fact, already paying the taxes by taking in lower rents, they might not hold on so tenaciously to their tax exemptions. The Physiocrats felt that the introduction of the single tax -- or even just the widespread acknowledgement of the "truth" of their tax equivalence hypothesis -- would lead immediately to economic, political and social harmony in France.

Were the Physiocrats possessed by a misplaced, wide-eyed optimism? Well, that is certainly what many critical contemporaries, like Galiani and  Voltaire, thought. But it was not the first -- nor the last -- time that the "single tax" on land rents was seen as the "solution" to everything. A little over a century later, a journalist named Henry George would energize an entire generation of Americans with exactly the same panacea.

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