The growth of the state during the 1840s provoked fierce criticism of fiscal irresponsibility from the government’s opponents. Consequently, a series of spending cuts followed the overthrow of the July Monarchy in 1848, focusing most heavily on public works, which were to be delegated to the private sector to a greater degree than under the Orleanists. The expansion of public works continued apace in the 1850s, but with less government investment than in the 1840s. Indeed, the pressure for public amenities was made all the more intense by the advent of universal suffrage in 1848, which increased the need for the government to promote widespread prosperity. At the same time, the government continued to pursue the enhancement of French prestige abroad, participating in the Crimean War in 1854–6. Financing the war relied heavily on credit, prompting an overhaul of government borrowing as the state issued loans by public subscription, realising on a large scale what previous regimes had only envisioned and reshaping the way that the government contracted loans in subsequent years.

Napoleon took power in 1799, promising to end the instabilities of the previous decade. To some degree, he succeeded. The ancien régime indirect tax of l’octroi, abolished in 1790 and then reintroduced in 1798, was rapidly extended after 1799 and smoothed the introduction of new, national indirect taxes from 1804 onwards. To compensate for the limitations of public credit, which only recovered slowly from the collapse of the 1790s, the Napoleonic regime heavily plundered occupied territories. This, though, revealed the limitations of Napoleon’s renovation of the fiscal-military state. As David Bell has argued, the period 1792–1815 was characterised by ‘total war’; the escalating costs of men and material eventually overstretched the Napoleonic state, destroying its legitimacy and precipitating its collapse in 1813–14. Nevertheless, despite their failure to produce a sustainable fiscal-military state, the Revolutionary and Napoleonic regimes established the taxes that formed the basis for the post-revolutionary fiscal system.

This chapter complements previous ones by providing microeconomic foundations for the transition from the stagnation regime to the growth regime. These microeconomic foundations consist of a simple model of individuals choosing an education investment, subject to some budget constraints. It is shown that there exists a critical threshold for the stock of knowledge below which the individual does not invest in education, and above which the investment takes place. We then examine relations between individual decisions and the long-run dynamics of knowledge accumulation and economic development.

This book presents, in a simple and pedagogical way, Unified Growth Theory, its concepts, its workings, its specific mechanics. Developed over the last twenty years, Unified Growth Theory proposes to study, using a single model, the conditions of transition between various regimes, each regime being characterised by its own relationships between economic, demographic and technological variables.