EUR.MACRO: Costs and Consequences of the Napoleonic Reparations

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                ABSTRACTS IN ECONOMIC HISTORY
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Name: Eugene N. White
Email: WHITE@economics.Rutgers.EDU
Institution: Rutgers University

Co-author: none

Title: The Costs and Consequences of the Napoleonic Reparations

Internet Address of abstracted work: http://papers.nber.org/papers/W7438

By mail:
Eugene N. White
Department of Economics
Rutgers University
New Brunswick, NJ 08901

Language: English

Abstract:
Reparations are often part of the financial settlements that follow
war. Most economists are familiar with the German Reparations after
World War I, as they are often presented to demonstrate the folly of
attempting a huge forced international transfer or are cited as a
factor contributing to the Great Depression. But, reparations are
more common than usually supposed and have a long and varied history.
The reparations paid by the French after the Napoleonic wars and the
Franco-Prussian War were two of the largest successful coerced
transfers, contrasting other reparations cases and revealing how
major transfers were effected.

The post-1815 and post-1871 French reparations were unlike the
largely uncollected post-World War I German reparations. Not once,
but twice the French paid in full and ahead of time. In analyses of
the post-World War I German reparations, the French have often been
depicted as impossibly intransigent, demanding unpayable reparations
from their adversary. From a French viewpoint, France had not shirked
from meeting its earlier reparations obligations. The Germans might
protest that they could not pay because their country was exhausted
after a prolonged war, a great portion of territory had been lost,
and their new government was not firmly established. But, the French
could point to very similar conditions in both 1815 and 1871.

While the French reparations of the nineteenth century helped to
provide the basis for the French demands from the Germans, most
discussions of the post-Napoleonic reparations in the twentieth
century have been at best cursory. This paper examines five issues:
(1) Why were reparations selected as an instrument of the postwar
settlement and what were France's treaty obligations? I argue that
reparations were a key element Castlereagh and Metternich's plan to
establish a balance of power in Europe. They guaranteed that France
would undertake major domestic reforms and prevent any new Napoleonic
uprising before being readmitted to great power status. Reparations
covered the cost of Napoleon's Hundred Days, the occupation of 1815,
the smaller continuing occupation army, and indemnities to Allied
nationals. (2) What was the method of reparations payment? I show
that France did not follow an optimal policy of financing the full
sum by international loans, but used a more costly mix of immediate
tax and transfer, domestic borrowing and international loans. (3) How
does the burden of reparations compare with other episodes? The
financing of reparations for France in 1815, France in 1871, Germany
in 1923, and Germany, Italy and Japan after World War II differ
considerably, making comparison difficult. However, by all measures
the post-1815 reparations were the second largest after post-World
War I Germany, and the largest in terms of the share of debt service
to exports. (4) How were the French induced to pay reparations? The
incentives set by the Allies provided the necessary inducement,
making it considerably cheap to borrow the money and pay instead of
paying for the cost of a continuing occupation Army. (5) What were
the economic consequences of paying reparations? Costs of paying
reparations by raising taxes and borrowing are compared with the
actual costs on the French economy, using a real business cycle model.

Bibliography: White, Eugene N. "The Costs and Consequences of the
Napoleonic Reparations."
NBER Working Paper No. W7438 (December 1999).

Subject: D,H,I
Geographical Area: 4
Country/Region: FRANCE
Time Period: 7

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