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British and French Finance During the Napoleonic Wars


  • Michael D. Bordo
  • Eugene N. White


The Napoleonic Wars offer an experiment unique in the history of wartime finance. While Britain was forced off the gold standard and endured a sustained inflation, France remained on a bimetallic standard for the war's duration. For wars of comparable length and intensity in the nineteenth and twentieth centuries, Napoleonic war finance stands out. This apparent paradox may be explained by drawing upon the literatures on tax smoothing, time consistency, and credibility in macroeconomics. We argue that these contrasting war finance regimes were the consequence of each nation's credibility as a debtor. Given its long record of fiscal probity, coupled with its open budgetary process in Parliament, Great Britain could continue to borrow a substantial fraction of its war expenditures at what were relatively low interest rates. British tax rates did not vary much over most of the eighteenth century as peacetime surpluses offset wartime deficits to payoff the accumulated war debts. In addition, because of its longstanding record of maintaining specie convertibility, Britain had access to the inflation tax although in practice it was not a major source of wartime finance. France, on the other hand, had squandered her reputation in the last decade of the ancient regime and the Revolution. Her dependency on taxation did not reflect any superior fiscal virtues but rather the opposite. Borrowing would have been exceedingly costly and the public very skeptical of the Empire's fidelity. Moreover, the recent experience of assignat hyperinflation ruled out the inflation tax as a source of revenue. Inherited credibility resolves this paradoxical pairing of fiscal regimes.

Suggested Citation

  • Michael D. Bordo & Eugene N. White, 1990. "British and French Finance During the Napoleonic Wars," NBER Working Papers 3517, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3517
    Note: AG ME

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    References listed on IDEAS

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    Cited by:

    1. Flandreau, Marc & Sussman, Nathan, 2004. "Old Sins: Exchange Rate Clauses and European Foreign Lending in the 19th Century," CEPR Discussion Papers 4248, C.E.P.R. Discussion Papers.
    2. Bordo, Michael D & Redish, Angela, 1993. "Maximizing Seignorage Revenue during Temporary Suspensions of Convertibility: A Note," Oxford Economic Papers, Oxford University Press, vol. 45(1), pages 157-168, January.
    3. Mauricio Drelichman & Hans-Joachim Voth, 2008. "Debt Sustainability in Historical Perspective: The Role of Fiscal Repression," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 657-667, 04-05.
    4. Michael Bordo & Robert N McCauley, 2017. "Triffin: dilemma or myth?," BIS Working Papers 684, Bank for International Settlements.
    5. Newby, Elisa, 2012. "The suspension of the gold standard as sustainable monetary policy," Journal of Economic Dynamics and Control, Elsevier, vol. 36(10), pages 1498-1519.
    6. Garber, Peter M., 1991. "Alexander Hamilton's market-based debt reduction plan," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 35(1), pages 79-104, January.
    7. Hall, George J., 2004. "Exchange rates and casualties during the first world war," Journal of Monetary Economics, Elsevier, vol. 51(8), pages 1711-1742, November.
    8. Grubb, Farley, 2010. "Testing for the Economic Impact of the U.S. Constitution: Purchasing Power Parity Across the Colonies versus Across the States, 1748–1811," The Journal of Economic History, Cambridge University Press, vol. 70(01), pages 118-145, March.
    9. Sophia Lazaretou, 2005. "Greek Monetary Economics in Retrospect: The Adventures of the Drachma," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 34(3), pages 331-370, November.
    10. Eugene White, 2001. "France's Slow Transition from Privatized to Government-Administered Tax Collection: Tax Farming in the Eighteenth Century," Departmental Working Papers 200116, Rutgers University, Department of Economics.
    11. Bordo, Michael D. & Jonung, Lars, 2000. "A Return to the Convertibility Principle? Monetary And Fiscal Regimes in Historical Perspective," SSE/EFI Working Paper Series in Economics and Finance 415, Stockholm School of Economics.
    12. Bordo, Michael D. & Rockoff, Hugh, 1996. "The Gold Standard as a “Good Housekeeping Seal of Approval”," The Journal of Economic History, Cambridge University Press, vol. 56(02), pages 389-428, June.
    13. Michael D. Bordo & Finn E. Kydland, 1990. "The Gold Standard as a Rule," NBER Working Papers 3367, National Bureau of Economic Research, Inc.
    14. repec:cup:apsrev:v:106:y:2012:i:04:p:787-809_00 is not listed on IDEAS
    15. Mikael Priks, 2005. "Optimal Rent Extraction in Pre-Industrial England and France – Default Risk and Monitoring Costs," CESifo Working Paper Series 1464, CESifo Group Munich.
    16. Broz, J. Lawrence & Grossman, Richard S., 2004. "Paying for privilege: the political economy of Bank of England charters, 1694-1844," Explorations in Economic History, Elsevier, vol. 41(1), pages 48-72, January.
    17. Slantchev, Branislav L., 2012. "Borrowed Power: Debt Finance and the Resort to Arms," American Political Science Review, Cambridge University Press, vol. 106(04), pages 787-809, November.
    18. Moore, Lyndon & Kaluzny, Jakub, 2005. "Regime change and debt default: the case of Russia, Austro-Hungary, and the Ottoman empire following World War One," Explorations in Economic History, Elsevier, vol. 42(2), pages 237-258, April.
    19. Sophia Lazaretou, 2004. "The Drachma, Foreign Creditors and the International Monetary System: Tales of a Currency during the 19th and the Early 20th Century," Working Papers 16, Bank of Greece.

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