Posted by Renaud Duplay
In 1774, Anne-Robert-Jacques Turgot, Baron de Laune, was appointed Minister of Finance by Louis XVI, and immediately resolved to set out his principles of good financial governance in a letter to the king. This letter is still considered a hallowed text in the French Ministry of Finance and its continuing relevance to fiscal policy is striking.
Turgot proposes a set of fiscal objectives and rules. “No bankruptcy, no tax increase, no new indebtedness. In peacetime, the Crown should only borrow for the purpose of amortizing existing debt, or buying back old debts at a more favorable rate.” Thus, the government should in normal times not run a deficit. This rule would, however, accommodate exceptional circumstances—such as war—. It was the closest thing to a structural balance rule an eighteenth-century gentleman could have thought of. In normal times, debt and the cost of indebtedness would decline.
- “Your Majesty, Rebuild that Fiscal Buffer” – Some Fiscal Policy Advice from the Eighteenth Century&uri=http%3A%2F%2Fblog-pfm.imf.org%2Fpfmblog%2F2015%2F07%2Fyour-majesty-rebuild-that-fiscal-buffer-some-fiscal-policy-advice-from-the-eighteenth-century.html" class="first">Email this
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