Reflections on the Revolution in France
What happens when you cut off heads instead of credit.


Kevin D. Williamson

Andrew Dickson White (1832–1918) was a great American all-rounder: LL.D., Ph.D., D.C.L., co-founder of Cornell University, president of the American Historical Association, ambassador to Russia and Germany. He had a number of curious obsessions, as testified to by the many volumes in his extensive personal library on three not entirely unrelated subjects: the Reformation, witchcraft, and the monetary policy of revolutionary France — a trio of faith-based initiatives.

Witches and Lutherans today stand on equal footing, at least under the law (the law is a ass), since nobody much thinks that sort of thing is terribly important anymore, and in his own time Mr. White believed that his interest in the economics of the French revolution was a mere scholar’s indulgence: “I recall, as if it were yesterday, my feeling of regret at being obliged to bestow so much care and labor upon a subject to all appearances so utterly devoid of practical value,” he wrote, a sentiment that endured until the Greenback debates and the rise of the Free Silver movement in the United States.

Recognizing an episode of history threatening to repeat itself, Mr. White began to conduct public lectures on the subject of inflation. In 1876 he addressed a bipartisan panel of representatives and senators at the invitation of Rep. James A. Garfield (20 years later, Mr. White would still be referring to him as General Garfield), whose congressional speeches, read today, make Rep. Ron Paul sound like Alan Greenspan. Garfield was a sworn enemy of the Legal Tender Acts and the Greenback: another one of those 19th-century Republicans who are starting to look pretty good in retrospect.

Mr. White related the monitory French experience to whatever politicians and businessmen would listen, and later published his thoughts in Fiat Money Inflation in France: How It Came, What It Brought, and How It Ended, a book that I read not long ago on the sage advice of investor Victor Sperandeo, a.k.a. Trader Vic. Sperandeo recently gave a talk on the subject of contemporary inflation dangers at the Union League Club in New York, where Mr. White had delivered his own lecture 135 years earlier.

Some of Mr. White’s chronicle will sound familiar.

It was a new dawn, a day of hope and change, the ancien régime and the theocrats and the plutocracy having been supplanted by fresh new faces dedicated to Reason and promising to fundamentally change France. That turned out to be an expensive proposition, and the new government found itself in a bind: It was unwilling to cut spending or to raise taxes. The country, Mr. White writes, “found itself in deep financial embarrassment: There was a heavy debt and a serious deficit. . . . There was a general want of confidence in business circles; capital had shown its proverbial timidity by retiring out of sight as far as possible; throughout the land was stagnation.” A source of particular annoyance to the Jacobins and the rest of the Left was the fact that businesses and investors were sitting on a great deal of cash but refusing to spend or to invest, and many were sheltering their capital abroad.

The government decided upon a stimulus package — to flood the economy with fresh money in order to encourage new business through the magic of l’effet multiplicateur. The problem was that the Jacobins were, perforce, marginally less irresponsible than, say, the present government of the United States: They could not just go borrow the money. And they faced a real limitation: Their money was made out of gold, not good wishes. It was not a faith-based currency, or even a faith-and-credit-based currency.

But the revolutionary government had heard about paper money — had, in fact, seen in it action recently among its revolutionary comrades in the United States. So they decided to issue some paper currency — just the one time, to get some liquidity into the system and spur aggregate demand. But they did not have a Ben Bernanke to magic money into existence for them. And while they may have been raving radicals who would soon enough be sending a goodly portion of the nation to the guillotine, the idea of creating money based on nothing but confidence and a firm handshake did not occur to them — who could possibly take such a notion seriously?