Jacques Turgot (Baron de l'Aulne) was perhaps the leading
economist of 18th Century France. Turgot can be said to have formed a distinct school of his own and had exercised a deep influence upon Adam Smith, who was living in France in the 1760s and was on intimate terms with Turgot. Many of the concepts and ideas in Smith's Wealth of Nations are drawn directly from Turgot. Following letter was written to King Louis XVI when the latter asked him to control the finance of the empire. Turgot figured that if he could keep government spending in check and encourage private economic enterprise, tax revenues would rise and state finances would return to solvency.
1774 August 24
Louis XVI, King of France ,
Having just left Your Majesty's room, still full of the anxiety produced by the immensity of the burden you place upon me, overcome be the touching kindness with which you have deigned to encourage me, I hasten to convey to you my respectful gratitude and the absolute devotion of my whole life.
Your Majesty has been good enough to authorize me to put in writing the promise you have made to uphold me in the execution of those plans for economy that are at all times, and to-day more than ever, of an absolute necessity . ... At this moment, Sire, I confine myself to recalling to you these three phrases: No bankruptcy; No increase of imposition; No borrowing. No bankruptcy either avowed or disguised by arbitrary reduction (of interest on public stock). No increase of impositions; the reason for this lies in the plight of your subjects, and still more in Your Majesty's heart. No borrowing; because every loan always diminishes the unanticipated revenue and necessitates, in the long run, either bankruptcy or an increase in taxes. In time of peace it is perhaps permissible to borrow, but only in order to liquidate old debts, or to redeem other loans contracted on less advantageous terms.
There is only one way of fulfilling these three aims: that of reducing expenditure below receipts, and sufficiently below to ensure each year a saving of twenty millions (livres) with a view to the redemption of long-standing debts. Failing this, the first gunshot will drive the State to bankruptcy. It will be asked, “On what can we retrench?” and all officials, speaking for their own departments, will maintain that every particular item of expenditure is indispensable. They will be able to put forward very good reasons; but since the impossible cannot be achieved, all these must yield to the absolute necessity of economy.
It is, then, highly essential for Your Majesty to insist that the heads of all departments should act in concert with the Minister of Finance. It is imperative that he should discuss with them in the presence of Your Majesty the urgency of proposed expenses. Above all it is essential, Sire, that, as soon as you have decided what amount is strictly requisite for each department, you should forbid the officials concerned to order any new expenditure without first arranging with the Treasury the means of providing for it. Without this regulation each department will load itself with debts, which will always become Your Majesty's debts, and your Minister of Finances will be unable to answer for the discrepancy between income and expenditure. Your Majesty is aware that one of the greatest obstacles to economy is the multiplicity of demands by which you are constantly besieged, and which have unfortunately been sanctioned too indulgently by your predecessors.
It is necessary, Sire, to arm yourself against your kindness by a greater kind-heartedness, by considering whence comes this money which you are able to distribute to your courtiers, and by comparing the wretchedness of those from whom it is extracted (sometimes by the most rigorous methods) with the condition of those people who have the greatest call upon your liberality. There are certain favours which, it is thought, you can readily grant, because they do not immediately bear upon the Royal Treasury.
I venture to repeat here what you have already been kind enough to hear and approve. The affecting kindness with which you condescended to press my hands within your own, as if accepting my devotion, will never be effaced from my memory. It will sustain my courage. It has for all time welded my personal happiness with the interests, the glory, and the welfare of Your Majesty.
Anne Robert Jacques Turgot
economist of 18th Century France. Turgot can be said to have formed a distinct school of his own and had exercised a deep influence upon Adam Smith, who was living in France in the 1760s and was on intimate terms with Turgot. Many of the concepts and ideas in Smith's Wealth of Nations are drawn directly from Turgot. Following letter was written to King Louis XVI when the latter asked him to control the finance of the empire. Turgot figured that if he could keep government spending in check and encourage private economic enterprise, tax revenues would rise and state finances would return to solvency.1774 August 24
Louis XVI, King of France ,
Having just left Your Majesty's room, still full of the anxiety produced by the immensity of the burden you place upon me, overcome be the touching kindness with which you have deigned to encourage me, I hasten to convey to you my respectful gratitude and the absolute devotion of my whole life.
Your Majesty has been good enough to authorize me to put in writing the promise you have made to uphold me in the execution of those plans for economy that are at all times, and to-day more than ever, of an absolute necessity . ... At this moment, Sire, I confine myself to recalling to you these three phrases: No bankruptcy; No increase of imposition; No borrowing. No bankruptcy either avowed or disguised by arbitrary reduction (of interest on public stock). No increase of impositions; the reason for this lies in the plight of your subjects, and still more in Your Majesty's heart. No borrowing; because every loan always diminishes the unanticipated revenue and necessitates, in the long run, either bankruptcy or an increase in taxes. In time of peace it is perhaps permissible to borrow, but only in order to liquidate old debts, or to redeem other loans contracted on less advantageous terms.
There is only one way of fulfilling these three aims: that of reducing expenditure below receipts, and sufficiently below to ensure each year a saving of twenty millions (livres) with a view to the redemption of long-standing debts. Failing this, the first gunshot will drive the State to bankruptcy. It will be asked, “On what can we retrench?” and all officials, speaking for their own departments, will maintain that every particular item of expenditure is indispensable. They will be able to put forward very good reasons; but since the impossible cannot be achieved, all these must yield to the absolute necessity of economy.
It is, then, highly essential for Your Majesty to insist that the heads of all departments should act in concert with the Minister of Finance. It is imperative that he should discuss with them in the presence of Your Majesty the urgency of proposed expenses. Above all it is essential, Sire, that, as soon as you have decided what amount is strictly requisite for each department, you should forbid the officials concerned to order any new expenditure without first arranging with the Treasury the means of providing for it. Without this regulation each department will load itself with debts, which will always become Your Majesty's debts, and your Minister of Finances will be unable to answer for the discrepancy between income and expenditure. Your Majesty is aware that one of the greatest obstacles to economy is the multiplicity of demands by which you are constantly besieged, and which have unfortunately been sanctioned too indulgently by your predecessors.
It is necessary, Sire, to arm yourself against your kindness by a greater kind-heartedness, by considering whence comes this money which you are able to distribute to your courtiers, and by comparing the wretchedness of those from whom it is extracted (sometimes by the most rigorous methods) with the condition of those people who have the greatest call upon your liberality. There are certain favours which, it is thought, you can readily grant, because they do not immediately bear upon the Royal Treasury.
I venture to repeat here what you have already been kind enough to hear and approve. The affecting kindness with which you condescended to press my hands within your own, as if accepting my devotion, will never be effaced from my memory. It will sustain my courage. It has for all time welded my personal happiness with the interests, the glory, and the welfare of Your Majesty.
Anne Robert Jacques Turgot
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Source : IIPM Editorial, 2008
An IIPM and Professor Arindam Chaudhuri (Renowned Management Guru and Economist) Initiative
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