Two Fiscal Crises: London's Credit and Versailles' Debt

Both Britain and France emerged from the wars of the eighteenth century deep in debt, yet only France's monarchy collapsed. The difference lay in how each state borrowed and taxed. Since 1688, Britain's Parliament approved taxes and guaranteed the national debt, and the Bank of England, founded in 1694, helped the government borrow cheaply because lenders trusted it to repay. France had no such institution; its kings borrowed at higher interest, and nobles and clergy enjoyed tax exemptions that made reform politically explosive.

By the late 1780s interest payments consumed roughly half of French royal spending. When an Assembly of Notables refused reform in 1787, Louis XVI agreed to summon the Estates-General, which had not met since 1614. Comparison shows a deep link between 1688 and 1789: Britain's revolution created the fiscal credibility whose absence helped bring down the French monarchy.