When Louis XVI ascended the throne in 1774, he inherited a debt of four billion livres. The annual revenue of his government was around 500 million livres. Careful housekeeping would have helped him pay off the debts over a few years, but the king chose to do something else. For the next five years, France spent most of its revenue supporting the Americans in the American Revolutionary War. Remember the French allies that we spoke about in the previous pages?
To cover the expenses, the government increased the borrowing. As a result, the interest on the loans increased. This left the government with very little to spend and they had to take more loans. This cycle continued: by 1788, more than half of France’s revenue was used to pay interest.
The situation worsened and nobody was ready to lend anymore. In other words, Louis XVI’s government was bankrupt. The government was still not ready to cut down the expenditure or do something to increase the revenue. The only solution they found was heavy taxation of the commoners and this triggered a revolution.
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