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The Political Economy of the French-American Debt Debate: The Ideological Uses of Atlantic Commerce, 1787 to 1800
Allan Potofsky
| THE United States' debt to France played a decisive role in shattering the dream of a triumphant Atlantic free trade zone reserved for republics and reformed monarchies and first promised by the 1778 Treaty of Amity and Commerce. French loans granted from 1776 to 1782 to help the American cause against la perfide Albion eventually exposed the conflicting political and economic interests of the two Atlantic powers. As the debt increased in the context of currency changes, war, terror, and inflation during the French Revolution, financial issues helped to drive France and the United States to diplomatic divorce and then to a footing of outright war by century's end. Furthermore the arduous process of calculating, negotiating, and repaying the debt inspired nationalist hostilities and exploded the myth of Atlantic political solidarity between what Americans called the sister republics. Far from the spirit of enduring alliance promised by the Treaty of Amity and Commerce, Franco-American relations were increasingly driven by mercantile doctrines, economic nationalism, and statist colonial rivalries by century's end.1 |
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Before the financial crisis, advocates of doux commerce trade theory—commercial prosperity that, as Montesquieu argued, was the prerequisite to universal peace and the progress of civilizations—had heralded the vast market opportunities opened by Franco-American relations.2 But consciousness of the American debt and an enduring fiscal crisis in France merged into a powerful critical synthesis whose seduction gained by its historically specific references. First the American wars had ruined the ancien régime economy, and then treacherous commercial policies in the Americas led to the enrichment of Great Britain at the (literal) expense of France. Emerging from a baroque course of action to compel the repayment of the debt was an image of an Amérique redevable, an America that was morally and economically indebted to France. |
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At the origin of the crisis was a French deficit consciousness that became particularly acute after March 2, 1787, when the controller general of finance, Charles Alexandre de Calonne, published a report on the desperate state of national finances. The staggering French public debt was about four billion livres. The annual deficit was estimated at 100 million livres. In 1787, with a debt to Gross National Product ratio of more than 80 percent, the margin of maneuver for the reformist crown was quite small. Calonne's reform project suggested a bold compromise: exchange solvency for the crown for the establishment of new representative institutions. He proposed taxing the privileged landed elites who had previously been exempted from taxation and giving them greater advisory powers within provincial assemblies.3 |
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As a corollary issue, the French perception of the American debt changed profoundly. Though the United States had been due to begin paying its 7-million-dollar accumulated debt in September 1786, the deadline passed without mention in the correspondence of the French diplomatic corps until after Calonne's report. Such scant attention to the United States' debt, on both sides of the Atlantic, reflected the simple fact that the American federal budget was almost nonexistent.4 |
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