Deflation Made Simple (Part III)
A falsely vilified phenomenon (Entry 178)
Once in the direct service of the king, Jean-Baptiste Colbert entered into the king’s Conseil d’En-Haut (High Council) where he acquired increasing responsibility. The Conseil d’En-Haut was a privileged group of ministers who met next to the royal chamber of Louis XIV’s residence at the Château de Versailles outside of Paris. Prior to moving to Versailles in 1682 on a permanent basis, the king had lived with the Queen Regent in Paris at the Palais de Louvres and later at the Palais des Tuileries that Catherine de’ Medici had built in 1564 as her private residence.
Colbert’s success was his prioritization of investment over consumption. As Louis XIV grew older his appetite for luxury increased, and it was a constant struggle for Colbert to reign in the king’s appetite.
Colbert understood that in order to tax, there must be something to tax, and that taxing producers excessively was counterproductive to maximizing the monarchy’s tax base. Accordingly, he concluded that the best way to increase tax revenue was to increase production. To this end Colbert diverted the monarchy’s revenue from expenditure on luxury items to expenditure on economic investments in the areas of industry, commerce, and agriculture.
No, Colbert was not a champion of the free market, but at least he understood that current consumption must be sacrificed today, if an increase in future consumption, and therefore increased tax revenue, is to be achieved tomorrow.
By increasing the tax base and therefore the monarchy’s tax revenue he could satisfy the king’s desire for ever increasing purchasing power.
In order to increase production at home Jean-Baptiste championed local French industry by limiting the number of imports and attracting foreign artisans from other European economies to strengthen French competitiveness on the global stage. In this latter regard artisans from the United Provinces and Italy were made especially welcome.
In an effort to promote French exports he created state-sponsored, overseas commercial companies modeled after the VOC of the United Provinces. These included the creation of La Compagnie des Indes orientales et occidentales (The East and West Indies Company) in 1664, and between 1669 and 1675 he created Les compagnies du nord, du Levant, et du Sénégal (Company of the North, Company of the Levant, and the Company of Senegal). The Levant refers to land surrounding the Eastern Mediterranean Sea.
In liberty, or not at all,
Roddy A. Stegemann, First Hill, Seattle 98104