When evaluating the French economy in the 1930’s what quickly becomes evident is the plethora of writings available on the subject and consequently the challenge facing anybody looking to disentangle the numerous interpretations offered as to how the French economy performed and also why it performed as it did. Writings focussing on the causes of the economic performance of the French economy in the 1930’s generally fall into two broad camps.
The first camp, which is favoured amongst economists, argues the performance of the economy was inextricably linked to the economic policies that the government chose to adopt. The second camp, which historians are more likely to ally themselves with, sees the performance of the economy being caused by a more deep seated problem in France, that of the countries structural weaknesses which can be traced back long before the 1930’s.
It shall therefore firstly be necessary to examine France’s economic policies in the interwar years to ascertain if these policies had a bearing on the performance of the economy in the 1930’s, before moving on to evaluate other possible factors for France’s economic performance. These factors range from her demographic problems, the problems of agriculture and confidence of the bourgeoisie to the worldwide economic depression. Finally, after an attempt to unravel these intricate factors, a conclusion will be made.
Any writings specifically relating to French economic policy in the 1930’s usually centres on the French reluctance to devalue the franc Poincare until the Popular Front government of 1936. Historians and economists alike have been heavy handed in condemning the French governments obsessive desire to cling to orthodox monetary policies, despite the necessity for a monetary re-alignment and it is agreed that French tenacity in defending the franc Poincare of 1928 was the most striking error of French economic policy during the great depression.
English speaking economists still assert that French policy after the economic stabilisation of 1928, broke the monetary solidarity which English speaking countries had tried to restore after the war. 2 Politicians in France wrongly believed that as the depression had originated abroad and because devaluation in Britain in 1931 and the U. S in 1933 was due to factors not relating to France (for Britain the draining of gold reserves, followed by America’s banking crisis that started on Wall Street), no initiatives on the part of the French government were needed. 3
The consequence of the delay in devaluation was that France’s exports, on which she had so heavily relied in the 1920’s to boost her economy, were priced out of the international market, and resulted in, as Charles Rist a economic commentator during the inter war years wrote, ‘the gap between the internal and external purchasing power of the French franc’ growing wider and wider.
The detrimental effect this had on the performance of the economy is evident when looking at the delay in France’s economic recovery in the 1930’s in comparison to her economically developed counterparts, Britain, Germany and the U. S. who started to show signs of recovery in 1933/34. Thus although the depression arrived in France later, when it arrived it hit her harder and lasted longer. 5 The short-sightedness of economic policy by failing to devalue earlier is corroborated by John Maynard Keynes, the British economist, who wrote that ‘Both in official and academic circles in France it is hardly an exaggeration to say that economic science is non-existent. French thought on these matters is two generations out of date. ‘6
However, stating that French economic policymakers were simply ill-informed and uneducated in the field of economics, as J. M. Keynes suggested and Claude B. Fohlen’s study has shown does not stand up when considering that French policymakers were still aware of the concept and implications of devaluation and had actual case studies to observe its successfulness in the form of their English and American counterparts. 7 The policy of deflation that the government chose to adopt instead of devaluation was also a failure.
Price deflation produced stagnation as economic activity contracted while at the same time protectionist measures on behalf of French agriculture rendered the deflationary efforts ineffective. 8 Furthermore, deflation served to handicap the recovery of exports and tourism which had created a buoyant economy in the previous decade and made necessary through tariffs and quotas, further efforts to insulate France from the world economy; this acted as a brake on the growth of economic activity in France. 9
It is ironic, given the great lengths to which the French government chose to pursue a policy of deflation, that it was only due to a failure to carry out the policy effectively that France did not suffer a complete economic breakdown. 10 When it became abundantly clear that deflation did not have the stabilizing effects that had been hoped, devaluation was grudgingly adopted by the newly elected Popular Front government under Leon Blum in September 1936. But even in 1936 the devaluation policy was flawed because Blum, as well as lowering the value of the franc by 29%, forbade private transactions in gold.
The mistake in policy was to prevent the return of gold which the devaluation itself should have produced, and the trend of “capital flight” in which people in France holding money invested it abroad, was not adequately reversed. This prevented confidence in the franc being restored. The result of a lack of confidence in the franc and in the economy meant that all sections of society, including, importantly, businesses and entrepreneurs, were overly cautious in taking risks or making investments with their money.
People were far more likely to save rather than spend and this hindered the performance of the economy even further by reinforcing stagnation. 11 The fore mentioned failures in economic policy had a direct bearing on the performance of the French economy in the 1930’s and consequently many of those responsible in France for directing economic policy in the 1930’s must be seen as culpable in contributing to the depth and length of the economic depression and creating the image of France as the ‘sick man of Europe’. 12
However, it would be unjust to condemn the whole of the 1930’s as a period when all French economic policy was a failure. The government of Edouard Daladier in March 1938 inaugurated an economic policy which was better defined in both its ends and its means and which in many ways foreshadowed post-war government planning. Between March and July 1938 measures were taken to increase production through the stimulation of private investment.
Furthermore, the 40 hour week was modified, expenditure on public works was reduced, measures were taken to stimulate the birth rate and a new impetus was introduced in housing. Francois Caron writes that ‘the recovery was spectacular. Between November and June 1938 production went up 15% and inflation halted. ’14 Although it must be noted that the “spectacular” recovery of the French economy was largely aided by France’s re-armament programme of 1938 and the subsequent stimulating effects this had on the economy, it is still important to underline that not every economic policy of the 1930’s was a failure and thus the performance of the economy was in a few instances, not the result of mistakes, but instead the result of constructive economic policy.
It was not solely economic policy that affected the performance of the French economy, France had several structural problems to contend with and this subsequently leads anyone assessing French economic performance in the 1930’s to refute the assertion that her performance was entirely the result of mistakes in economic policy. Firstly, France had a demographic make-up not ideally suited to the economic problems facing her in the 1930’s.
Virtual stagnation in population growth and the heavy losses of the younger male population during the first World War resulted in the immigration of some 2 million people, but this could not prevent the number of under-twenties falling from 34 per cent to 31 per cent in the period 1911 to 1936 and the proportion of over sixties rising from 12 to 14 per cent. An ageing and stagnant population acted as a restraint on the economy because of, for example, the higher number of pensions issued while the decline in numbers of young males reduced France’s industrial capacity. Secondly, the political inertia that gripped France played a negative role in the performance of the French economy.
The political system and the way in which politics was conducted in France were not well suited to making quick decisions and being able to coherently follow these policies through. S. B. Clough argues that a sense of antagonism had developed within French politics, complicated by the great number of political parties, the harsh and hostile partisan press, the necessity for coalition government, and consequent parliamentary inefficiency, resulting in the periodic inability of the state to perform its functions and amongst these state functions was, of course, economic policy. 16
It was therefore often difficult to impose any sort of coherent and widely accepted economic policy when cabinets came and went at alarming speed and the government was made up of figures from such contrasting political ideologies, representing such diverse interests due to the nature of a coalition government. The excessive weight of agriculture placed a serious burden on the performance of the economy. This is part of the history of French social development that can be traced back to 1789 when the peasantry victoriously fought to strengthen their hold on the land at the expense of the nobility.
This became a factor in creating social conservatism while at the same time constituting a barrier to the full penetration of capitalist relations into the agrarian sector17 When this agrarian sector experienced a fall in prices in the world market as a result of the depression and was accompanied by over-production, a heavy burden was placed on French farmers and the government had to heavily subsidise French agriculture to prevent its total collapse. This heavy commitment of resources to the agrarian sector affected the performance of the French economy by acting as a constraint on economic growth and keeping down per capita income. Closely related to the preservation of peasant agriculture was the prevalence of artisan and small-industry throughout France.
Undoubtedly artisan production and small-scale industry were constantly being undermined by the competition of large capital but nevertheless this sector conserved considerable weight and embodied the resistance of artisan and small-scale entrepreneurs to change. 19 David Landes argues that it was the prevalence of inefficiently small firms in France that was the most important factor in retarding economic growth. It is vital to see his work on the French economy as being of great significance because many subsequent historians have based their work on his evidence. 21 Although it is true that the prevalence of artisan and small-scale industry made it harder for France to embrace more modern capitalist methods, making several sectors of the French economy look archaic and back-ward and it did indeed hinder the performance of the economy; Landes’ interpretations on French industry have recently been challenged in a climate of revisionist thinking on many aspects of the French economy.
Unfortunately these revisionist interpretations cannot be extensively elucidated within the scope of this essay but in short, it is now convincingly argued that economists and economic historians studying France in the late 1940’s and early 1950’s could only offer incomplete models of France’s economic performance. A large revisionist school of thought has emerged that argue in certain aspects the French economy in the inter-war years performed very well. These interpretations challenge the commonly held stereotype of a stagnant and retarded French economy in the 1930’s and suggest that the 1930’s was not a time of mistakes and failures but, given the circumstances of the depression, a period when the French economy, in certain aspects, performed as well as that of the British, German and American economies. 24
The most obvious point to state about factors affecting the economic performance in France in the 1930’s is the world economic depression. This has been touched upon throughout the evaluation of several other factors relating to France’s economic performance but it is necessary to underline, by stating the obvious, that it was a worldwide problem that affected the performance of many countries economies, not simply that of France’s.
Economic theory states that the boom created by the war and prolonged artificially throughout the 1920’s, had to give way to a cyclical downturn in order to restore equilibrium between supply and demand, therefore economic recovery would only be possible once equilibrium had been restored. 25 It follows then, considering economic theory, that the countries economic performance would still have been constrained within a depressed world economic climate of which France could have done very little to prevent regardless of economic policy or structural weaknesses.
Finally, it is critical to see the whole of the 1930’s in France as a period of acute panic and loss of confidence in the currency, the economy, the government and the country’s role in the world as a whole. This problem lies deep at the heart of all the problems facing France in the interwar years and was one of the most crucial factors in affecting the performance of the economy because of the paralysis it caused throughout France, even encompassing those whose job it was to run the country.
What emerged in Bourgeoisie France after the war was a sense of nostalgia and desire to return to the belle epoque of the stable and prosperous pre-war years, this bred uncertainty and created a sense of crisis when it soon became clear that the post-war world had changed, the stability of the franc germinal could no longer be taken for granted and France’s role in the world looked uncertain. 26 This feeling of insecurity was deeply ingrained on the Frenchman’s psyche and the consequential effect this had on all aspects of French life, and governance was of paramount importance. T. Kemp convincingly argues that although on the surface, the problem in France in the 1930’s assumed a monetary form; it was essentially a reflection of a deep-seated crisis of confidence. 27 Consequently it was this crisis which paralysed the decision making powers of businessmen and politicians and made them incapable of facing up to the depression, bringing with it its obvious economic implications. 28
Although T. Kemp’s interpretation of what lay at the fulcrum of Frances problems in the 1930’s stands up well after a consideration of all factors affecting economic performance, this interpretation is somewhat more difficult to prove, document or measure, than for example, a demographic deficit. This is because of the psychological nature of the problem, however, one can really sense when evaluating all aspects of French life in the 1930’s that this problem plagued France and played a pivotal role in affecting the performance of the French economy.
Furthermore, it was this crisis of confidence that bred many of the other factors that negatively affected France’s economic performance. In conclusion, the economic policies of the French governments in the 1930’s did have a bearing on the performance of the economy. A closer integration into the international markets and economies along with a quicker decision to devalue the franc could have promoted a better economic performance.
Although it is understandable the difficulties the French government faced in conducting the correct economic policy given the often inefficient nature of French politics and also the necessity to appease the electorate, this still does not retract from the fact that French economic policy was, on the whole, inadequate. However, France’s economic performance was far from being entirely the result of mistakes in economic policy as structural problems played an equally if not more significant role in France’s difficulties in grappling with the economic problems they faced.
These structural factors are somewhat harder to quantify but the implications they had on the French economy were far reaching and deep-seated, furthermore without these weaknesses, mistakes in economic policy may have been avoided or at worst better remedied. In any case the advent of the economic depression served to shore up these underlying structural problems and this created the crisis of confidence that engulfed all of France, finally it was within this negative framework that mistakes in economic policy were made with the consequent negative effect this had on the performance of the French economy.
January 9, 2018
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