France and the Nazi Threat: The Collapse of French Diplomacy 1932-1939 (37 page)

The Americans were worried. Was this not “a challenge to the Anglo-Saxon countries” a way of “forcing Great Britain back to the gold standard”? That, at least, was the reaction of the press because official circles
“do not seem to take the matter very seriously.”
²⁶
Canada reacted the same way.
²⁷

No one among the members shared the optimism of the French. Initially the Italians would have preferred that the meeting not be held,
²⁸
and they had to be solicited to send a single, very unofficial, delegate. But the Belgian reaction was the most serious. Belgium had been reticent from the start, even though the meeting was to take place in Brussels. There was a strong movement in the country against the backers of the gold-bloc and in favor of devaluation. “Stubborn pride of the smaller nations,” wrote the commercial councilor Bouchet, adding, “In spite of the efforts of a few supporters, a unanimous Belgian feeling accused France of the worst misdeeds in commercial relations… It is no secret here that the active elements in the country favor devaluation.” Belgium was still hesitating between the gold-bloc and the sterling-bloc.
²⁹
The Brussels conference, rather than quieting its worries, once again made it feel France’s overbearing influence.
³⁰

How and why a new Belgian government led by Paul Van Zeeland was formed in March 1935 and the reasons behind its devaluation of the Belgian franc are beyond the confines of this subject. Undoubtedly the Belgian decision put France in an uncomfortable position. The main point was that in the course of one year, between February 1935 and February 1936, the index of industrial manufacturing increased by 23 percent in Belgium and 11 percent in France; unemployment was reduced by 24 percent in Belgium and 3 percent in France. Why did the Flandin government—which fell on May 30 after a large depletion in gold (5 billion between May 24 and 31)—and the Laval government that followed both persist in keeping and even increasing deflation?

When the new Laval government requested full powers it passed a bill on June 8, 1935, that read as follows in its single paragraph:

“In order to avoid a devaluation of the currency, the Senate and the Chamber of Deputies authorize the government…, etc.” On June 7 Pierre Laval set up a commission, consisting of Jacques Rueff, C.J. Gignoux, and Raoul Dautry, to propose actions to “avoid the devaluation of the currency.”
³¹

There was a very stubborn attitude on the right. The crisis at the end of May wound up focusing on a violent campaign against a government where Paul Reynaud would be in charge of finance and decide a devaluation. He spoke again very bravely on May 30. The problem, he said, was both “technical” and “political.” On the technical level it was not the time
to devaluate: “I want no part of a devaluation enacted in a moment of panic.” But the political aspect was filled with strong feelings: “Those who portray devaluation to the good people of this country as a scarecrow are acting badly against the national interest.”
³²

Paul Reynaud now had some followers: Raymond Patenôtre, Marcel Déat and, in some ways, Léon Blum. Among the top officials, Wilfrid Baumgartner, head of the
Mouvement général des fonds
, shared most of Paul Reynaud’s ideas.
³³
Emmanuel Mönick, the financial attaché in London, was credited with converting Léon Blum.
³⁴
Jacques Rueff, who had studied British unemployment and had been involved in the 1928 stabilization, was also convinced that the policy of deflation was absurd and, due to the high parity of the currency, it was necessary to devaluate. He did what he could to attract Laval’s attention but was unable to convince him. In his autobiography he writes about the “tragedy of the gold-bloc.”
³⁵

It would take the Popular Front to enact what was unavoidable, and until then the disputes about other issues were concentrated on devaluation. Yet in April 1935 French prices were 21 percent higher than the British (they had been 22 percent lower in 1929).
³⁶
Paul Reynaud published a pamphlet entitled
Jeunesse, quelle France veux-tu?
*
in June 1936. He did not expect to be reelected in 1936 and this was his political “last will and testament.” Actually, despite the opposition of part of the right, he was voted in with a 27-vote lead over the communist candidate.

The monetary issue was very significant with respect to French behavior in foreign policy. What is striking to the historian is to see the small contribution by the top officials—neither Barthou nor Laval prior to May 1935, nor Léger—at the Quai d’Orsay in the matter. The initiative to strengthen the gold-bloc came from Lucien Lamoureux, the minister of commerce and industry. Two men at foreign affairs were following the issue very closely: Robert Coulondre, one of the two deputy directors at political and commercial affairs (the other, René Massigli, was too busy with problems of disarmament, the League of Nations and Ethiopia), and the deputy director of commercial affairs, Renon de La Baume.

It was a “normal” situation at a time when the mind-set that was later termed “technocratic” did not exist at all. Of the two main leaders in favor of devaluation, only Paul Reynaud could fit a description that remained anachronistic. The other leader, Raymond Putenôtre, was essentially a businessman.
³⁷
In studying the period that immediately followed at
the beginning of the Popular Front,
³⁸
René Girault correctly states that “the usual divisions between economic history, foreign affairs, internal political history actually succeeded in separating the analysis of facts that were closely related to one another.”
³⁹
But this is not only the fault of the historians. It also originates with the politicians; the division also exists within the activities of those responsible and the documents prove it. Only a few unusually gifted men, such as Paul Reynaud, Léon Blum, and perhaps also Georges Bonnet, were aware that no effective foreign policy was possible if one was economically the prisoner of the crisis and, therefore, economic and foreign policy were intimately connected. Other politicians and the general public,
even more so
, felt that monetary issues were a matter of internal politics between 1933 and 1936, unrelated to foreign issues. The economic incompetence of the French leaders drew them to this differentiation and a desire to solve monetary issues “emotionally.” Paul Reynaud, who saw this as a technical issue, did not have the human touch; his raspy, high-pitched voice was not exciting. People did not like him that much even though he was right.

2.

O
VERVIEW OF
F
RENCH
F
OREIGN
T
RADE

It was a French tradition for foreign trade to show a large deficit. This was directly traceable to the atmosphere generally influenced by Malthusianism that turned into protectionism—especially in agriculture—by the pittance earnings kind of thinking that encouraged companies to invest as little as possible, to use outdated machinery to the very end and save money on sending commercial agents abroad. Such a mentality can only be turned around when things get desperate. But that was not the case for France prior to 1914 because the huge trade deficit was more than covered by invisible exports and, in particular, by the revenues of capital invested overseas.

In the 1920s something odd took place that neither the leadership nor public opinion quite understood. In 1924, 1925, 1926, and 1927 exports had been higher than imports. This took place because of the low exchange rate of the franc and not due to the budgetary discipline of Poincaré. The linking of the franc to the gold standard, on the contrary, brought back the trade deficit slowly at first, then more severely.

In the 1930s the deficit grew to gigantic proportions. A simple chart will show this
⁴⁰
(values are in millions of Poincaré francs):

GENERAL TRADE (INCLUDING EXPORTS)

There was monetary stability up to September 1936. One can see a steady decrease in global trade and a still high but decreasing deficit. After 1936 the consequences of various devaluations were felt but price increases and problems of production affected imports even more and they grew slightly in volume. Exports returned in 1937 to their 1930 levels, then fell in the 1938 recession.
⁴¹

This would not be that serious if the invisible revenues had remained positive. But it was only marginally the case that was translated into the following revenues
⁴²
(in millions of Poincaré francs):

1931—3,012

1932—4,815

1933—2,950

1934—1,250

1935—700

1936—2,803

1937—3,995

1938—120

Our aim, following this general overview of the situation, is not a detailed analysis but to see how these events affected foreign policy.

Obviously, a detailed study should be undertaken based upon the reports of the commercial attachés, consuls, ministries of commerce and finance, etc. As long as that kind of research is missing, we must limit ourselves to making assumptions. We shall offer the following.

1. Foreign trade, the main component of the country’s “international life,” appears to be a secondary feature in foreign affairs during the 1930s.
The entire tradition made it such. Before 1914 trade was a private activity. It took four years of war to set up “interventionism,” completely unknown until then. After the armistice the French government, influenced by Clémentel and Jean Monnet, wanted to keep the international bureaus created during the war. The Americans moved quickly to set things right. The almost total freedom imposed by the world’s number one economic power had certainly played a role in the crisis. Since 1931 and, most of all, after the failure of the London conference in 1933, the failure of any currency and trade cooperation among countries led to isolated actions at the national level by increasing customs duties, setting up prohibitions, quotas, sometimes even exchange controls, and what it forced others to do: compensations, clearing, and barter.

The French state, which floundered amid unstable governments and Malthusian economists, was trying as best it could to adjust to the new circumstances.

But foreign affairs did not feel concerned. Traditionally the diplomats provided a lot of information on foreign economies—Corbin, François-Poncet, Coulondre, and Léon Noël sent in many reports on these issues. The commercial attachés who reported to the ministry of commerce with copies to the Quai d’Orsay were negotiating piecemeal, on a daily basis, modifications and even entire commercial agreements. They helped French exporters but didn’t take the initiative.

This role belonged to private organizations such as the chambers of commerce. The state continued to play a minor role.

2. The division between monetary issues—as we have seen—and “higher policy” also existed in commercial matters. Obviously, when a minister of foreign affairs traveled abroad, he took a few experts along and did not forget in the course of long discussions to bring up some issues regarding exchange and trade; but beyond trading in arms and munitions it only represented a smaller part of the conversations.

In other words, the idea that a close connection existed between prosperous foreign trade and power was rarely expressed or even felt. An increase in exports was considered as one device, among many others, to solve the crisis by giving a bit more work to the French people, not as part of a broader strategy. The Empire was therefore expected to make up for the failings of foreign countries.

3. The tradition of
financial
action—loans, capital investments (which we will examine in the next paragraph)—and
commercial
initiatives more or less independent from one another had been reduced somewhat from
the pre-war period. Yet in those countries where France had a top-ranking position economically, others—Germany, England, the United States—were overtaking it from the commercial point of view. This was true of Czechoslovakia (France was the second largest investor), Romania (France was second with only 6.1 percent of Romanian imports and 8 percent of exports, way behind Germany and England in 1937) and even with Poland (France was the first investor easily overtaken in trade by Germany, the United States, and England.) Those three countries where France still had large investments were not on the list of its ten largest suppliers; only Czechoslovakia was in tenth place in the list of its first ten clients. France was selling ten times less there than in Belgium.