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Jacques Necker, 1732-1804
French Enlightenment economist, Neo-Colbertiste and minister of finance.
The Geneva-born Jacques Necker started off as a clerk in a Swiss bank of Issac Vernet at the age of 15 and worked his way to the top quickly. In 1750, Necker moved to bank's Paris branch and, by 1762, was made a partner. As a result of his speculative activities, by 1765, Necker a very wealthy man and the sole director of the bank. Necker became gradually involved in public affairs. Necker made numerous loans to the French government, was appointed minister for Geneva in Paris and sat on the board of directors of the French Compagnie des Indes (which, in 1769, he vainly defended from the attacks of the Abbé Morellet).
In 1772, Necker retired from the bank and began writing his ideas on contemporary economic and financial topics. A Neo-Colbertiste, Necker was opposed to the Physiocrats. He was particularly (and very personally) antagonistic to Morellet and his master, Jacques Turgot. In 1773, Necker laid out his defense of State corporatism in a "eulogy" to Colbert, an essay that was crowned by the French Academy. His 1775 tract attacked Turgot's plan for free trade in grains.
After Turgot was dismissed from government in 1776, Necker replaced him as director-general of finances, effectively the French minister of finance for King Louis XVI (Necker could not hold the formal title of comptroller-general (contrôleur général) because he was a Protestant and a foreigner). Necker quickly reversed most of Turgot's famous edicts. Following a policy of borrowing rather than raising taxes to finance state expenditures (then exploding because of the American Revolutionary war), Necker earned a good degree of popularity among the people of France. His push for the creation of new provincial assemblies were well-received by commoners, but earned him enemies in the court and parlements. However, Necker's short-term, high-interest loans pushed the government closer to bankruptcy.
Jacques Necker's reputation as a financial "genius" came with his famous 1781 Compte Rendu report where, by manipulating the figures, he made it appear that French crown finances were not in crisis, but in fact enjoying a surplus. He did this by restricting his report to "ordinary" revenues and expenditures paid in and out of the French Treasury (Trésor Royal), calculating a budget surplus of 10.2 million livres. Necker concealed most war-related costs, assigning them to "extraordinary" expenditures (which he did not publish), and omitted mention of new government borrowing to finance the yawning budget deficit. Necker's credited the surplus to the reforms of the bureaucracy made under his tenure. Necker's optimistic report was severely criticized by contemporaries - his successors would calculate the true budget to be a deficit of 70m livres.
By piercing the veil of secrecy surrounding crown finances at the time, the Comte Rendu, was a sensational best-seller and rocketed Necker to sky-high popularity. But inside the royal court, already sore at Necker's belated attempts to curtail spending, the reception was different. Many felt it was unseemly for Necker to publicly share the details of the crown's accounts with common people. Like so many finance ministers before him, Necker soon found himself isolated and unable to push his more serious financial reforms through. Louis XVI dismissed Necker in May 1781, a mere four months after the report, replacing him with Joly de Fleury. (a collection of evaluations of Necker's administration were re-printed in a 1781 Collection complette; most were largely negative, many from financiers, harping on Necker's foreignness, his accumulated fortune and unflatteringly comparing him with John Law)
Although courted by Austria and Russia, Necker preferred to remain in the wilderness. Necker wrote his famous Traité (1784), one of his better treatises. In the meantime, Necker's successor, Alexandre de Calonne, had realized the truly desperate condition of French state finances and tried to reinstate some of Turgot's old reforms, which were greeted by howls of opposition in the assembly of notables. Calonne and Necker entered into a very public confrontation in 1787, which resulted in Necker's exile from Paris.
In August 1788, as bankruptcy loomed and the reforms of Calonne and his successor Brienne were unable to stem the bleeding, Necker was called back by the king as director-general and minister of state in order to work his magic again Realizing that bankruptcy was imminent, Necker urged for the convocation of the Estates-General to raise new funds. Although the Estates-General had not met in 175 years, this was reluctantly announced by King Louis XVI. In the meantime, anticipating trouble from the crop failures, Necker reinstated price controls. At Necker's recommendation, King Louis XVI issued an edict creating short-term, interest-bearing paper (intended to circulate as money). However, facing a storm of protest, the edict was withdrawn a month later. Necker arranged for a series of last-minute loans to stave off bankruptcy, but realized there was no avenue left but to wait for the convocation of the Estates-General . The rest of the court, however, remained antagonistic
After the opening of the Estates-General in May 1789, and the tribulations of the Third Estate, Necker was one of the main voices in the royal council urging Louis XVI to reconcile himself with the self-proclaimed "National Assembly" (Assemblée nationale). But at length the conservative elements of the court engineered his dismissal on July 11.
It was upon the news of Necker's removal that Camille Desmoulins rallied the population of Paris, and spontaneous marches wound through the streets of the city, carrying wax busts of Necker, demanding his reinstatement. This culminated in the storming of the Bastille on July 14, 1789. The humbled Louis XIV, on visiting Paris a few days later on July 17, restored Necker as minister of finance.
Finances, however, were still no better, and in early August, Necker arranged for an emergency loan of 30 million livres (Aug 9), and then another of 80 million livres (Aug 27). In September 24, Necker delivered his stunning financial report to the Assembly, reporting that that he only managed to collect 12m of the 113m expected from the loans. The country's credit was gone, and Necker requested a 25% income tax. This was granted by the assembly the next day (but they also forgave all unpaid taxes before 1789). But things were only getting worse. The "great fear" in the countryside through the summer of 1789 had left many landowners with bigger problems on their hands. The Autumn of 1789 was marked by starvation in France (October Days, etc.). On November 14, Necker pleaded with the Assembly to give him permission to borrow 170 million livres from the Caisse d'Escompte, and authorize the bank to issue 240 million livres in paper money (covering the 90 million already borrowed). However, the scheme was turned down. But a month later, on December 19, the French National Assembly voted for an issue of 400 million livres of treasury bearer bills, known as assignats. In its first issue, the assignats bore an interest rate of 5% and were secured on confiscated church lands. The radical journalist Jean-Paul Marat promptly launched a smear campaign against Necker, accusing him of selling the nation to bankers.
But economic policy was no longer really in Necker's hands, nor the king's, but in the Assembly. In April 1790, there was a second issue of assignats of 400 million livres, this time only 3% and declared legal tender. Through the first half of 1790, crown lands were sold off to make up for revenues and old Colbertiste policies that had been previously dear to Necker, like the internal controls on the grain trade, the French Indies company, the hated salt tax (gabelle) and labor dues (corvée), etc. were abolished. In the popular press, Necker continued to be associated with the assignats, and hounded for it. Necker was implicated by association in the bloody crackdown on the mutiny of Nancy. Having had enough, Necker finally resigned as minister of finance on September 4, 1790, and went into retirement on his Swiss estates.
After Necker, control of the French treasury was taken up directly by the Assembly. They fared little better - a mere month after Necker's departure, there was an additional issue of 1,200 million in assignats, and the declaration (Oct 14) suspending all interest payments, turning the assignats into fiat paper money proper.
Necker continued largely quietly at his Chateau de Coppet in Switzerland. He published a small memoir in 1791 defending his tenure as finance minister. He only returned to Paris in late 1792 to make a passionate plea before the National Assembly to spare the life of King Louis XVI. Necker went on write a history of the French Revolution in 1796.
Jacques Necker was the father of Anne Louise Germaine, Baronness de Staël-Holstein,
the legendary Germanophile writer and salon-mistress, Madame de Staël,
who wrote a personal memoir of her father.
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