British and French Finance During the Napoleonic Wars

Michael D. Bordo, Eugene N. White

NBER Working Paper No. 3517 (Also Reprint No. r1676)
Issued in November 1990
NBER Program(s):Economics of Aging, Monetary Economics

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.

download in pdf format
   (391 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w3517

Published: "A Tale of Two Currencies: British and French Finance During the Napoleonic Wars." Journal of Economic History, Vol. 51, No. 2, pp. 303-316, (June 1991).

Users who downloaded this paper also downloaded* these:
O'Rourke w11344 The Worldwide Economic Impact of the Revolutionary and Napoleonic Wars
Acemoglu, Cantoni, Johnson, and Robinson w14831 The Consequences of Radical Reform: The French Revolution
Barro w2005 Government Spending, Interest Rates, Prices, and Budget Deficits in the United Kingdom, 1701-1918
White w7438 The Costs and Consequences of the Napoleonic Reparations
Benjamin and Kochin War, Prices, and Interest Rates: A Martial Solution to Gibson's Paradox
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us