By the 1780s, France and Britain had approximately the same debt after spending huge sums fighting over the American colonies.
One recovered and the other collapsed into revolution.
The difference was their systems of finance and taxation.
While the outstanding war debts may have been the same, the interest rates were not.
Bourbon France had to pay twice as much interest on its loans as did the British. And that made all the difference.
To begin with, the English system relied far more on indirect taxes and tariffs for its income.
The French system meanwhile focused on many direct taxes that ended up discouraging economic growth.
The result was that by the time of the French Revolution, England yielded more tax revenue despite having only 1/2 the population of France.
Britain and France were set apart most of all by their systems of credit.
England had relied on the world’s 1st national bank since 1694 to efficiently raise large long term loans. At the same time, new loans kept flowing and interest rates dropped because the English parliament had the power to consistently raise enough taxes. The stability of this system drew in a steady steam of further capital from Dutch investors.
The French crown on the other hand relied on a host of middle men—tax farmers, nobles, high ranked clergy, lenders, and merchants for loans, at high rates of interest.
Without a central source to consolidate its loans, the crown found itself struggling to raise money quickly, keep track of its loans, or pay interest.
Worse, in the French system of direct tax farming, it was more profitable to farm taxes and loan out advances than it was to start businesses and engage in productive industry.
The French system encouraged parasitic plunder while stifling real economic growth that would produce more wealth in the long run.
Wealth ended up being gradually drained from the economy even as the French national debt skyrocketed with each successive war…
Paraphrased and summarized from:
The Rise and Fall of the Great Powers
Paul Kennedy, 1987