Effects of a Monarchy on the Economy

Written by jean miller
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Effects of a Monarchy on the Economy
With a gold interior and lavish decorating, Versailles exemplifies unchecked monarchy spending. (Photos.com/Photos.com/Getty Images)

In the past, monarchies have burdened citizens with numerous taxes that led to unchecked sovereign spending and corrupt ruling. Economies often suffered as a result -- as evidenced in France just before the French Revolution -- and citizens' faith in their rulers dwindled. Today, monarchies can positively influence their nations' economies, as evidenced in Britain by the royal family.

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Historically, monarchies throughout Europe imposed heavy taxes on working-class citizens. This translated to government revenue, but that revenue remained relatively low until the later portion of the 19th century. At that time, such countries as France, Norway and Italy began to impose an income tax similar to that already enacted by the United Kingdom. English taxation records before 1689 show that individual taxes were tediously calculated and levied to augment money from sources that included royal lands. Parliament usually enacted these taxes after hearing a request from the monarch. However, the monarchy itself also imposed some taxes, including feudal and prerogative levies. Taxation kinds and rates underwent many changes in Britain under different regimes. The Tudor subsidy, for example, was levied at a specific rate on a person's income from land or value of movable goods.

Personal Spending

Evidence of unchecked personal spending in French monarchies can be found with King Louis XVI. The national debt of this country was substantial following the Seven Years' War and American Revolution, largely because of the funding needed for vast armies. King Louis XVI also ordered the building of Versailles at this time, a palace furnished with interior decorations of gold. More than 7 per cent to 10 per cent of France's treasury went into Versailles at a time when money was nearly depleted. In addition, the king and his predecessors paid for large courts that required expensive entertainment and lavish lifestyles.

Stagnant Money Systems

During monarchy rule in Europe, economies were built upon commodity money, which normally consisted of silver or gold. These structures made it nearly impossible for a nation's money supply to increase. While attempts were made to introduce a flat currency, such as by the Bank of England and the Banque Royale of France, monarchies failed in all instances to establish flat currency systems. Only after 1918 did such systems become realities, and they were implemented under democracy rules.


During the Bourbon reign in France, corrupt governmental practices plagued rulers and stifled citizens. Sovereigns such as King Louis XVI relied on the advice of nobles and counsellors to oversee their lands. While this made it possible for the kings to rule the entire country, it also broke France into hundreds of small provinces. Nobles thus held a significant amount of power and wielded economic influence over their individual provinces. Royal officials often abused their power and imposed taxes, provided loans and collected interest that gave way to corruption. Rather than using the monies collected to improve general living conditions, nobles usually dipped into regional treasuries to support their own extravagant lifestyles (all information from Reference 3).

National Revenue

Today, nations such as the United Kingdom rely on the revenue generated by its monarchy. Although the British royal family is not a ruling monarchy, it draws tourists from around the globe who add an influx of money to the economy. According to Visit Britain, the tourism board of Britain, the monarchy generates nearly £533 million annually from those who visit royal attractions. These spots include Westminster Abbey and St. Paul Cathedral, where Prince Charles and Lady Diana married. The Tower of London is the top draw for tourists, with almost 2.5 million visitors per year.

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