Louis XIV’s death allowed the French to breathe somewhat more freely, but the regime of the new king, Louis XV, who ruled from 1715 to 1774, confronted serious problems. Louis XV was only five years old when he succeeded Louis XIV, and France once again faced a regency government. To gain approval from the Parlement of Paris for full authority as regent, Philippe II, duc d’Orléans restored the parlement’s right to protest royal edicts before registering them. Although this right was soon restricted, the parlements would continue to oppose many royal edicts, especially those dealing with Jansenism and taxes.
The most critical and urgent issue facing the new regime was the impending bankruptcy of the state. After trying more modest expedients to add revenue, the duc d’Orléans backed the riskier proposals of a Scottish financial wizard, John Law. With royal permission, Law founded a private bank, the Banque Générale, in 1716. Two years later, it was transformed into a state institution, the Banque Royale. Law also established a speculative commercial company to invest in French colonies. This company, the Compagnie de l’Occident, was later joined with the bank and other royal concessions, which together became known as the System. Law expanded the money supply by issuing ever-increasing amounts of paper money through the bank.
This measure, he hoped, would reduce the cost of government borrowing and stimulate the economy. But the bank issued too many new bank notes in an effort to sustain share prices in the Company with cheap credit, and confidence in the profitability of the Company declined. The System collapsed in 1720. This failure made it more difficult to establish another state bank later on, which the French government badly needed to obtain cheap credit.
It also gave critics grounds for charging that the regime was becoming a despotism, because Law had used many high-handed, coercive measures to promote his bank. In fact, however, Law’s System probably gave the economy a much-needed jolt by freeing investors of debt and prompting new commercial investment, but these benefits were not recognized at the time.
In the aftermath of Law’s failure, the regime dealt with its fiscal problems through partial bankruptcy, whereby the government renounced part of what it owed to its creditors. Louis came of age in 1723, officially ending the regency. But he was only 13 and continued to rely on the duc d’Orléans, who died a few months after Louis’s 13th birthday. Orléans was followed by the duc de Bourbon, who was dismissed in 1726 and succeeded by Louis’s old tutor, André Hercule de Fleury, a cardinal who served as virtual prime minister until 1743. "France" © Emmanuel BUCHOT, Encarta, Wikipedia.
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