Inflation and the French Revolution: The Story of a Monetary Catastrophe

As in so much else, the French revolutionary regime (1789–94) was the precursor of the centralized, totalitarian, managerial, pseudo-democratic despotisms that now reign over the West. It is also reminder that mass democracy and inflation go together, as surely as thunder and lightning. Let us revisit the Revolution, from a free-market, hard-money perspective.

After two centuries, there remains no better analysis of the first two years of the French Revolution than Edmund Burke’s Reflections on the Revolution in France (1790). Astute, penetrating, prescient—Burke, an Anglo-Irish MP and a liberal Whig, was of a rare type: both practical statesman and political philosopher. Had the English ministry and his fellow Parliamentarians followed his advice in the 1770s, they would never have driven the Americans to revolt and hence lost their most valuable colonies in the world. Had the French, they would have been spared the Terror, total war, and Napoleon. Burke continues to be accused by clueless academics and ignorant pundits either of inconsistency or deviationism for his very different reactions to the American and French Revolutions.

Burke was both a liberal and a man of the Right. He believed in religious toleration but supported an established church, the Anglican Communion. A friend and admirer of Adam Smith, he defended commercial liberty, but he also believed that civilization depended on the perpetuation of a landed aristocracy with its own separate political representation. While he denied that a king could tax his subjects without their consent, he was a fierce opponent of democracy and universal suffrage. Burke denied that liberty could be achieved by revolution or intellectual endeavor. For him, it was the product of tradition and history, and its victories had to be embodied in institutions.

The power of the French king was checked by public opinion, by an independent clergy, and by the parlements of the judicial nobility. The nobility itself was filled with admiration for the mixed constitution of England, with its limited monarch, its Parliament, its bills of rights, its toleration of religious dissent, its freer economy, and they wished to find a French approximation, and they were well on the road to doing so.Burke thought the French Revolution, rather than being a necessary if needlessly bloody hill on the path of progress and freedom, was a catastrophe for France, for western civilization, and for ordered, hierarchical liberty. Before the Revolution, French royal absolutism, and the stifling mercantilism that was its handmaiden, was on the wane. Already its rigors and severities were considerably softened from the reign of the Sun King, Louis XIV; and his great-great grandson possessed a reformist ethos that was liberalizing the economy and resurrecting the representative institutions of medieval liberty—provincial assemblies and the Estates General. Burke called the modern French monarchy “a despotism rather in appearance than in reality” in which, if anything, “rather too much countenance was given to the spirit of innovation,” rather than too little.

As Burke noted, the noble cahiers and instructions for their delegates to the Estates General “breathe with the spirit of liberty as warmly, and they recommend reformation as strongly as any other order.” Maybe more. The spirit of laissez faire, mixed constitutionalism, and civil libertarianism was stronger in the nobility than among the bourgeoisie, and certainly stronger than among the urban artisans and peasantry.

The political argument in the Estates General in May–June 1789 that led to the outbreak of the Revolution was over voting. The question at issue was whether the three estates should vote by order (the traditional practice) or by head. The monarchy rightly sided with the first two estates on the question, but the Third Estate eventually grew tired of the controversy and declared itself to be the National Assembly, the other two orders be damned. They were only following the logic of their position to its logical conclusion, but they were also fulfilling the visionary and naive expectation of the French masses that the ancient social orders be erased so they could live lives of greater abundance and freedom. Many “conservative” and “liberal” historians have applauded the Third Estate’s seizure of power and argued that the Revolution went wrong later with the ascendancy of Robespierre and the Mountain. Burke knew better.

By its arrogant usurpation, the Third Estate expressed its rash “preference for a despotic democracy to a government of reciprocal control.” Big mistake, thought Burke. “I cannot help concurring” with the opinion of Aristotle and other ancient critics of democracy, “that an absolute democracy, no more than an absolute monarchy, is [not] to be reckoned among the legitimate forms of government. They think it rather the corruption and degeneracy than the sound constitution of a republic.”

Aristotle pointed out that “a democracy has many striking points of resemblance with a tyranny.” Burke translates: “Their ethical character is the same; both exercise despotism over the better class of citizens; … the demagogue, too, and the court favorite are not unfrequently the same identical men, and always bear a close analogy; and these have the principal power, each in their respective forms of government, favorites with the absolute monarch, and demagogues with a people such as I have described.”

Burke was not so naïve as to believe that France with its 26 million people, its wide extent of territory, its diverse interests, could ever be a genuine democracy. He expected effective power to be wielded by “an ignoble oligarchy,” in alliance with “the monied interest” of Paris, fattening on government bonds and rioting in feverish speculations in the confiscated estates of the clergy and nobility. As far as the braying mob, “the swinish multitude,” they would prove a very effective instrument in the hands of the elite, especially when shouting down free market economic reform. Burke foresaw a government that would combine the vices of democracy with those of oligarchy and that would substitute a despotism of lawyers and sycophants for a government of laws and socia

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