Before its 1789 revolution, the French political system was called the “Ancien Regime”, which translates roughly as the “old order”. Most of us envision this period of French history as a time of grand palaces, political intrigue and glamorous nobility. However, the reality was somewhat uglier, with widespread corruption, economic oppression and disdainful arrogance. What is really shocking, though, are the parallels between France’s Ancien Regime and our own time, and why it means an investment revolution is inescapable.
Pre-Revolutionary France was embodied by the Estates General, an assembly of the three most important groups in the kingdom. This consultative body was summoned exclusively at the behest of the king, usually to approve new taxes, but occasionally to fundamentally alter established French law.
The First Estate was the church, ranging from the most exalted Parisian cardinal to the humblest of provincial priests. The Second Estate was the nobility, whose titles were either inherited or purchased. The third estate was the commoners, effectively everyone else in society – about 98% of the French population.
Although the Estates General was nominally democratic, it had one glaring flaw. Any two Estates could overrule the third via a simple majority. And that is exactly what happened. The clergy and nobility, although only about 2% of the total French population, possessed many advantages and prerogatives that the Third Estate lacked. Therefore, these two groups colluded via their representation in the Estates General to retain their privileges to the perpetual disadvantage of the commoners.
Commoners paid a dizzying array of complicated and onerous taxes in Pre-Revolution France. For example, member of the Third Estate had to pay the taille or property tax, the capitation or poll tax, the vingtieme or income tax, the gabelle or salt tax, the aides or excise tax and the timbre or stamp tax. Peasants even had to pay an in-kind tax called the corvee, which forced them to labor a certain amount of the year for their aristocratic landlords or local government. But the French clergy and nobility, in contrast, were exempt from almost all of these taxes.
As if these tax inequalities were not bad enough, the status of French nobility and the Church entitled them to collect taxes directly from commoners, oftentimes on behalf of the king. Corruption among tax collectors was rife and members of the First and Second Estates always kept a substantial chunk of these taxes for themselves.
Starting with the reign of Louis XIV – the Sun King – the French monarchy badly mismanaged the nation’s finances. This problem deteriorated to the point where the king actually openly sold titles of nobility to raise desperately needed funds. If you were a wealthy Frenchman in the 17th or 18th century, you simply bought yourself nobility and a fiefdom. These not only exempted you from most taxes and obligations that commoners had to bear, but were also inheritable, allowing your progeny to forever sidestep their civic responsibilities.
Unfortunately, I feel an investment revolution is inevitable because the modern world has successfully created a neo-feudal system similar to the French Ancien Regime. The tripartite division among the Ancien Regime’s Estates General is mirrored in today’s institutions. The mainstream media has effectively replaced the Church as the First Estate. This is ironic considering the mainstream media has long been pretentious enough to style itself the present-day Fourth Estate.
The mainstream media’s sense of self importance is without equal. They sit isolated in their echo chambers, disdainfully passing judgment on everyone around them, yet finding only themselves blameless. And, as the 2016 presidential election or Bexit has proven, they aren’t above trying to influence the outcome of immensely important world events. The mainstream media doesn’t simply report the news these days; they manufacture it like sausage.
The mantle of the nobility of the Second Estate has passed to the business and political elite of the world. Immensely wealthy, out of touch with reality and often hopelessly corrupt, these people make important decisions that impact the lives of millions on a daily basis. But regardless of how inept or poor those decisions may be, they never suffer any personal consequences. Being one of the few, chosen elite in today’s world means never having to say you’re sorry. Failed presidential candidate Hillary Clinton is the poster child for this class.
The Third Estate today looks much the same as it did in pre-revolutionary France. Everyone who isn’t a globetrotting tech titan, standing senator or editor for the New York Times falls into this category. In other words, the Third Estate is composed of the unwashed masses.
Our modern tax system is also just as lopsided as it was under the French monarchy. The modest income of average people is heavily taxed while the vast capital of business elites, often tax exempt, flits effortlessly around the globe. Large multi-national corporations are perhaps the worst offender here, using offshore holding companies by the dozen and engaging in complicated international tax avoidance schemes like the “Double Irish” or the “Dutch Sandwich”.
Much like the French nobility, modern-day wealthy individuals and families are able to dodge taxes via the use of corporate trusts, stock options and venture capital funds. Whoever has the most money and the most tax lawyers, wins. And that isn’t regular people. Any 18th century Frenchman would instantly recognize our modern-day methods of buying social status and power.
But amidst our present gilded age, there is a looming investment revolution for our self-appointed elites. The corruption and self-interest of the French clergy and nobility during Ancien Regime prevented the Estates General and the monarchy from ever reforming their political system. As a result, France’s problems festered until revolution finally descended, completely wiping out the privileges of the clergy and the nobles.
We are facing a similar circumstance today. Political and business elites collude with the mainstream media to protect their exorbitant privilege and wealth, all to the detriment of average people. They stash most of their wealth in stocks, bonds and other paper assets. Then they ensure monstrous profits by inflating global asset bubbles and legislating special tax breaks for themselves. This is all courtesy of their central bank collaborators and political friends.
And these globalist elites currently believe they are untouchable – that an investment revolution is impossible. They are the modern-day equivalent of Ancien Regime French aristocrats who bought their titles. But change is coming. Owning a few thousand shares of Google, Facebook or Amazon common stock might seem like a ticket to perpetual wealth today, but the view a decade from now will likely be very, very different. An investment revolution is brewing and most paper assets will be poison.
This is why I advocate the ownership of investment quality art and antiques. These discrete, tangible investments are not tied to the continuation of our hopelessly corrupt and ineffective economic policies. All those French titles of nobility are worth very little today, but a fine 18th century French painting, sculpture or silver tea set is still highly prized. When the long awaited investment revolution finally arrives, I know which assets I would rather own.
