The causes of the French Revolution .
Like the American Revolution, the French Revolution had its immediate origins in the financial difficulties of the government. The efforts of Louis XV's ministers to raise taxes had been thwarted by the high courts, led by the Parlement of Paris, which was strengthened in its opposition by widespread popular support. When renewed efforts to reform the tax system met a similar fate in 1776, the government was forced to finance all of its enormous expenditures during the American war with borrowed money. As a result, the national debt and the annual budget deficit soared. By the 1780s, fully 50 percent of France's annual budget, went for ever increasing interest payments on the ever-increasing debt. Another 25 percent went to maintain the military, while 6 percent was absorbed by the costly and extravagant king and his court at Versailles. Less than 20 percent of the entire national budget was available for the productive functions of the state, such as transportation and general administration. This was an impossible financial situation.
By the 1780s, the French debt was being held by an army of aristocratic and bourgeois creditors, and the French monarchy had become too weak for such a drastic and unpopular action. Nor could the king and his ministers, unlike modern governments, print money and create inflation to cover their deficits. Unlike England and Holland, which had far larger national debts relative to their populations, France had no central bank, no paper currency, and no means of creating credit. Therefore, when a depressed economy and a lack of public confidence made it increasingly difficult for the government to obtain new gold loans in 1786, it had no alternative but to try increasing taxes. And since France's tax system was unfair and out-of-date, increased revenues were possible only through fundamental reforms. Such reforms created a lot of social and political demands.