The position of France differed considerably from that of Britain. France was much less dependent on foreign trade, and was therefore largely shel-tered from the immediate effects of the depression, and able to operate from a position of strength, taking the lead in the Gold Bloc. As it devel-oped, French economic policy had three main strands. First, France kept its currency on the gold standard, giving it a very high exchange rate when Britain and the USA devalued in 1931 and 1933 respectively. This was almost a psychological necessity, because adherence to the gold standard had become ‘an article of faith in French political life’, but it created seri-ous difficulties for French exports, which had to contend with a severe price disadvantage in many markets, as well as the tariffs with which most countries protected their own producers.5Failure of exports led to prob-lems in paying for imports; though this was not so grave for France as for some other countries because of the balance of the French economy – the country remained, for example, largely self-sufficient in food. The problem of imports was met by the second element in French policy: the imposition of quotas on imports, and a system of imperial preference more far-reaching and effective than the British equivalent. In July and August 1931 import quotas were introduced arbitrarily on nearly all agricultural products, followed later by quotas on industrial products which were usu-ally negotiated with the countries concerned. French colonies were exempt from these quotas, and also had considerable tariff advantages over for-eign countries. The third aspect of economic policy was deflation at home – the attempts to meet the problem of the price of French exports by reduc-ing domestic costs. In fact, the wholesale price index fell by about a quarter between 1931 and 1935 (from 462 to 347: 1914 = 100); though this was more the result of low commodity prices throughout the world than of direct government policy. At the same time wages were reduced by about 12 per cent; and government expenditure was also cut.6
The worst effects of the depression struck France later than other coun-tries. Agricultural production kept up, but income fell, with serious results for the domestic market. Industrial output showed two low points, in 1932 and 1935, with only a modest upturn in between. Foreign trade suffered drastically, with both exports and imports down by more than half in 1935 from the levels of 1930.7 The number of registered unemployed never reached substantial figures compared with Britain or Germany – the maximum was about 500,000 in February 1935. The official figures were misleadingly low, partly because large numbers of foreign workers were
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dispensed with, and partly because many townspeople who were out of work did not register, but simply went to live with relatives in the country-side. Conscription for the army also kept the figures lower than those in Britain. But even when all allowances were made, unemployment did not appear to be at crisis level.
The internal political effects of the depression, however, were more severe in France than in Britain. Under the Third Republic, governments had never been stable or long-lived – before 1914, their average life had been about a year. In the 1930s, this span shortened drastically, and a period of chronic ministerial instability set in, as a direct result of France’s economic problems. Government revenue fell with the decline in foreign trade and domestic prices; yet governments were committed to balancing their budgets. They were therefore compelled to reduce expenditure, which meant holding down the service estimates, and also attacking civil service pay, pensions, and payments to ex-servicemen. In practice, measured against the movement of prices, these reductions did not damage spending power; but in psychological terms this made no difference. Payments made, for example, to the severely disabled from the First World War were reduced in cash terms; and the outcry may easily be imagined. The result was that successive Ministers of Finance proposed reductions in govern-ment expenditure, only to have them rejected in the National Assembly;
and governments were repeatedly brought down on their financial meas-ures. There were three changes of government in 1932, four in 1933, two in 1934, and two in 1935 – a total of eleven in four years. It appeared that the political system of the Third Republic, which had passed the stern test of war with flying colours, was breaking down under the less dramatic but more divisive strains of economic difficulty.
The combination of economic stagnation and political paralysis pro-duced in France a marked movement towards political extremes. The fas-cist and conservative Right flourished in the middle 1930s. Their numbers were uncertain, but they thrust themselves into the public eye and showed their strength on the streets in the riots of 6 February 1934. On the Left, the Communist Party revived in 1935 and 1936, partly through the effects of the depression, and partly through the attraction of Popular Front slogans. On both Right and Left, opposition grew against the existing regime, which seemed unable to grapple with the country’s problems.
The worst point in France’s difficulties – the lowest level of foreign trade, the highest in unemployment, the resort to economic government by decree – came in 1935, at the time when the British economy was beginning to recover, and in Germany the Nazis were well established and
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producing a striking improvement in the German economy. At that stage, France made her own bid for change and improvement – the Popular Front. The Popular Front’s programme was more social than economic in content – the forty-hour week without reductions in wages and holidays with pay were two important items. The government intended to end deflation, keep up expenditure on pensions and payments to ex-servicemen, and increase revenue by tackling tax evasion; they also hoped that extra purchasing power from higher wages would stimulate demand. They were pledged not to devalue the franc. In economic terms this programme failed entirely. Industrial production remained stagnant. Wages rose in money terms, but fell in purchasing power: in the two years from April 1936 to April 1938, the retail price index rose by 46 per cent.8The wave of left-wing euphoria that accompanied the Popular Front victory – strikes, occu-pation of factories, demonstrations – alarmed investors and produced a flight of capital abroad, which in turn put pressure on the franc. This com-pelled the government to devalue on 26 September 1936. The devaluation was accompanied by a joint statement by the French, British, and United States governments, expressing their desire to minimise the disturbance to exchange rates caused by the French action – in less veiled language, Britain and the USA agreed not to retaliate by devaluations of their own currencies.
The effects of the French devaluation were short-lived, because rising pro-duction costs soon cancelled them out. In general, the stagnation of the French economy continued, and no recovery was visible until the end of 1938. At the same time, the extreme fear of the Left aroused by the Popular Front victory embittered still further the political divisions within France.
These economic conditions and policies had various consequences for foreign policy. As with Britain, there was a conflict between economic and foreign policy in central and eastern Europe. France had a network of alliances with Poland, Czechoslovakia, Yugoslavia, and Rumania; and it was in her interests to strengthen these alliances by economic links. From 1934 onwards, the French Foreign Office was aware of the growth of German economic influence, and urged commercial concessions to combat it. But the preference given to imports from the French colonies (especially cereals) allowed little room for manoeuvre; and in any case the tendency of French commercial policy was to reduce imports. In December 1936 France agreed to make a purchase of wheat from Yugoslavia at a lower tariff rate than usual; but the Ministry of Agriculture insisted that this must not become a precedent. Another important influence of economics on foreign policy lay in the dependence on Britain and the USA, which was marked, in however veiled a manner, by the three-power statement on
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French devaluation. The independence of the early 1930s, when France was leader of the Gold Bloc and in a stronger economic position than Britain, was over. Devaluation would offer no advantages if the British and Americans retaliated by lowering their own exchange rates; and two further devaluations in 1937 and 1938 emphasised the degree of French dependence on Anglo-American co-operation.