EUROPEAN UNIVERSITY INSTITUTE
Florence
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FRENCH INTER-WAR MONETARY POLICY:
UNDERSTANDING THE GOLD BLOC
Charles Maddison
Pa r t I
Thesis approved and awarded the Degree of Doctor in Economics of the European University Institute, Florence, Italy, on 10 June 1994
Members of the Jury:
Prof. Alan Miiward. London School of Economics (President) Prof. Emil Claassen, Universities of Paris and Innsbruck (Supervisor)
Prof. Marcello De Cecco, Università di Roma Prof. Susan Strange, London School of Economics
EUROPEAN UNIVERSITY INSTITUTE
Florence
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EUROPEAN UNIVERSITY INSTITUTE
3 0001 0026 6100 9
FRENCH INTER-WAR MONETARY POLICY:
UNDERSTANDING THE GOLD BLOC
*0Charles Maddison l i b 944.0815 P a r t i - 8 MAD _
I
* *i Jfy&is approved and awarded the Degree of Doctor in Economics of the European University Institute, Florence, Italy, on 10 June 1994
Members of the Jury:
Prof. Alan Milward, London School of Economics (President) Prof. Emil Claassen, Universities of Paris and Innsbruck (Supervisor)
Prof. Marcello De Cecco, Università di Roma Prof. Susan Strange, London School of Economics
All rights reserved.
No part of this thesis may be reproduced in any form
without permission of the author.
© Charles Maddison
Printed in Italy in October 1997
European University Institute
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ACKNOWLEDGEMENTS
I would like to thank the following for assisting me in an academic, professional or personal capacity in completing this thesis: Dr. Carol Kidwell; Raymond Kidwell, Q.C.; Professor Angus Maddison; Professor Alan Milward; Professor Susan Strange; and Dr. Andreas Frijdal of the European University Institute. In addition, I would like to extend a special thanks to the archivists at: La Banque de France, in particular Mlle Maymard; Le M inistères des Finances; and Le M inistère des Relations Extérieurs; and the staff of the Chatham House Library (press cuttings), all of whom assisted me in my research.
"Notre devoir était de défendre le patrimoine des épargnants. La dévaluation est une faillite. On ne fa it faillite que s ’il n ’y a plus d ’espérance d’amélioration. Ce n ’était pas
le cas en 1934. "
L. GERMAIN-MARTIN (1936)
"La dévaluation en diminuant la valeur du franc, frappe tous ceux qui ont des revenus fixes, elle diminue les revenus réels des salariés, des rentiers, des petits commerçants et des paysans.
C’est une folie de prétendre que la dévaluation peut ramener la prospérité. Elle ne pourrait que précipiter notre pays dans une misère plus grande. "
TABLE OF CONTENTS
VOLUME 1 INTRODUCTION (p.l)
1 THE POLITICAL CONTEXT (p. 12)
I) The nature of the French polity (p. 13) ii) Inter-war French political parties (p. 17) iii) The Senate (p. 29)
iv) The electoral system (p. 32)
v) The historical course of the inter-war French polity (p.36) vi) The radicals and French politics (p.45)
vii) The new electoral system and domestic politics (p.50) viii) The 1932 elections, the Leagues, and crisis of the Radical
state (p.54)
ix) Constitutional reform proposals (p.57)
x) The rise and fall of the Popular Front (p.65) xi) Conclusion (p.71)
2 THE INTER-WAR MONETARY SYSTEM (p.75)
i) Introduction (p.75) ii) Bimetallism (p .lll)
iii) Credibility and co-operation as essential attributes of the gold standard (p. 114)
iv) An historical overview of inter-war monetary history (p. 124) v) Conclusion (p. 153)
3 FRENCH MONETARY POLICY UP TO THE 1933 WORLD ECONOMIC
CONFERENCE: A COMPARATIVE PERSPECTIVE (p. 160)
i) War finance (p. 160)
ii) Reparations, war debts, and post-war finance (p. 171) iii) British post-war stabilisation policy (p. 174)
iv) The French experience (p. 178) v) The UK’s return to gold (p. 185)
vi) The Cartel des Gauches’ financial debacle 1924-26 (p. 189) vii) The Poincaré stabilisation 1926*29 (p. 193)
vili) France and the Inter-W ar gold standard (p.203)
ix) Depression and breakdown of the gold exchange standard (p.209) x) Conclusion (p.219)
4 BUDGET DEFICITS AND FINANCIAL INSTABILITY (p.224)
i) Budget Deficits: The revenue side and economic activity (p.248)
5 THE NATURE OF FINANCIAL ORTHODOXY (p.259)
6 THE GOLD BLOC: A DEFENSIVE CURRENCY PACT (p.274)
i) The World Economic Conference (p.276) ii) The Gold Bloc (p.305)
ill) Negotiating a trade agreement within the Gold Bloc (p.313) iv) The Geneva meeting (p.328)
v) Preparing the Bruxelles meeting (p. 331)
vi) Lithuania’s membership of the Gold Bloc (p.364)
vii) The Bank of France, the Gold Bloc and eastern Europe (p.366) viii) The Gold Bloc in disarray (p.368)
ix) The Belgian devaluation (p.375)
x) Conclusion (p.397)
VOLUME 2
7 THE DEVALUATION CAMPAIGN (p.399)
i) Conclusion (p.434)
8 NEGOTIATING STABILISATION (1934-36) AND THE TRIPARTITE
i) The Tripartite agreement (p.463)
ii) The 24hr. Gold Guarantee agreement (p.473) iii) Italy's "re-alignment" (p.483)
iv) Conclusion (p.487)
MONETARY POLICY IN THE GOLD BLOC PERIOD (p.489) i) The devaluation debate in parliament (28/9*1/10/36) (p.521)
ii) The Tripartite agreement and currency experience (1936-39) (p.536) iii) Conclusion (p.544)
DID FRANCE DESTABILISE THE INTERNATIONAL MONETARY SYSTEM? THE MALDISTRIBUTION OF GOLD AND THE OPEN-MARKET POLICY CONTROVERSY (p.546)
i) Open-market policies (p.579)
CONCLUSIONS (p.600)
REFERENCES (p.608)
Primary Sources - Official Archives and Documents.
i) Banque de France - Délibérations du Conseil Général ii) Ministères des Finances - Archives Economiques et
Financières.
iii) Ministères des Relations Extérieurs - Archives Diplomatiques.
iv) Royal Institute of International Affairs.
v) Journal Officiels: Débats, Chambres des Députés et Sénat.
APPENDICES (p.634)
Table A-l: Indicators of Comparative Economic Performance, France, UK, USA (1913-39)
Table A-2: Competitiveness of French Exchange Rate with Sterling 1913-1938. Table A-3: Competitiveness of British Exchange Rate with the Dollar 1913-1938. Table A-4: Competitiveness of French Exchange Rate with the Dollar 1913-1938. Table A-5: Annual Average Bank of France Discount Rate
Table A-6: Trade Relations Between and Outside the Gold Bloc. Table A-7: (a): Balance of Trade of Belgo-Luxemburg Union.
(b): French Balance of Trade. (c): Italian Balance of Trade. (d): Dutch Balance of Trade. (e): Polish Balance of Trade. (f): Swiss Balance of Trade.
Table A-8: Exports of Gold Bloc States from 1929-33 to One Another and the World at Large.
Table A-9: The Behaviour of M2 over the Inter-War Years.
Table A-10: Heads of Government, Finance and Budget Ministers, and Governors of the Bank of France (1919-39).
Table A -ll: Presidents of the Republic.
Table A-12: Composition of the Five-Inter War Chambers of Deputies.
Document A-l: "British declaration of policy at the London conference," speech delivered by Chancellor of the Exchequer 14th July 1933.
Document A-2: "Projet de déclaration commune des gouvernements des pays dont les monnaies sont au régime de l pétalon or et des pays dont les monnaies ne sont pas à ce r é g im e 30th June 1933.
Document A-3: "Déclaration des Etats fidèles au régime de Vétalon or," 3rd July 1933.
Document A-4: "Official statement relative to President Roosevelt’s message to the Conference," 5th July 1933.
Document A-5: "Accord de coopération technique entre les banques centrales des pays du bloc-or," 8th July 1933.
Document A-6: "Règlement technique mis en application pour la Banque Néerlandaise et la Banque d ’Italie ” 22nd July 1933.
Document A-7: "Protocole signé par les représentants des Etats adhérents au Bloc o r ” 20th October 1934.
Document A-8: "Projet de note aux gouvernements américain et britannique," 8th September 1936.
Document A-9: "French Triparatite declaration," 25th September 1936.
Document A-10: "Agreement regulating 24hr. gold guarantee arrangements between British, US, and French monetary authorities," 14th October 1936.
Document A -ll: "Extension of 24hr. gold guarantee arrangements to Belgian, Dutch and Swiss monetary authorities," 23rd November 1936.
Document A-12: "US Treasury statement proposing clearing (netting) of gold balances held under ear-mark between central banks party to 24hr. gold guarantee arrangements," 26th January 1937.
Document A-13: "Note sur Vopen market policy," 23rd May 1933.
Document A-14: "Moyen d ’action sur le marché monétaire donné à la Banque de France par la Convention du 23 juin 1928," 22nd September 1933.
INTRODUCTION
This thesis explores the nature and objectives of French monetary, exchange rate and economic policy in the 1930s. Until Eichengreen’s (1985 & 1992) and Mouré’s (1991) work, the conventional wisdom was that French policy was, misguided (q.v., Hawtrey) or characterised by financial ignorance (q.v., Kemp, 1972). This judgement came readily to British analysts who felt that the French were too slow to abandon the old orthodoxy which their own country had discarded five years earlier (the British and many others having abandoned gold in 1931, whereas the French and the Gold Bloc only in 1936). As a result the French were forced to deflate in the 1930s, whilst the British reflated.
These once traditional views take inadequate account of important differences between French and British experience and policy in the 1920s (when sterling was overvalued and the franc undervalued), and they take no account of differences in political structures and institutions which placed different constraints on France (and some other Gold Bloc countries) than on the UK.
I feel that if we are to understand why France did not devalue earlier, it is essential to investigate closely what the political, institutional, and attitudinal constraints were in France.
My thesis therefore involved investigation and assessment of French policy options as they were perceived at the time. This is done by a study of the archives of the Ministère des Finances and the Banque de France, and French diplomatic correspondence, before and after the 1933 World Economic Conference, in the archives of the Ministère des Relations Extérieurs. I also examine the views of different political groupings by exploring the record of parliamentary debates and the newspaper clipping files at the Royal Institute of International Affairs at Chatham House, as well as those held at the Banque de France.
My thesis which explores the sociology of policy-making therefore makes a much more detailed analysis of the inter-play of opinion and policy-making than Eichengreen and Mouré have done, though I share their revisionist assessment of the quality of French policy.
It is a central tenet of this thesis that French inter-war currency experience cannot be understood in vacuo, and that a holistic political and economic approach is essential to grasp the interaction of historical circumstance, ideology, and politics which made for the
particular course which policy took. Foreign policy illusions and the domestic political imperative of financing post-war reconstruction expenditure through borrowing, as a German liability, explains the substantial post-war deficits. The resulting experience of inflation, currency depreciation, and the sacrifices made by the rentiers with the Poincaré stabilisation acted as constant referent to policy-makers and analysts.
Why did the French political establishment fail to resolve the fiscal crisis of the state any sooner? To understand this it is necessary to analyze the nature of the French polity from an institutional perspective in terms of the relations between presidency, executive and the legislative, viz., the Chamber of Deputies and the Senate. It is also necessary to apprehend the nature of parties and fluid political groups which acted within these mediating structures. The role of the radicals is crucial to understanding the difficulties of building a solid majority around a defined set of policies. These difficulties were compounded by the inability of the executive to request a premature dissolution of the Chamber of Deputies or referendum. From 1926 onwards, the method increasingly used to broker a parliamentary impasse was the grant of decree-making powers. These temporary delegations of parliamentary authority would no sooner be reclaimed. Attempts at constitutional reform ran against the vested interests of the radicals, in particular, who, as the necessary ingredient of any coalition either of the right or left, stood to lose most.
Why the French obsession with the gold standard and did it conform to the reality of the gold standard in the pre-1914 world? French policy-makers held to a text-book 19th century analysis of the gold standard and its neutral automaticity. This seems to have derived more from innate Uberai economic predilections than sound historical analysis of the workings of the gold standard. The interpretation of the self-equilibrating nature of the pre war gold standard is essential to understanding the dominant French analysis of the cause of the depression and therefore prescriptive policy action.
Most French policy-makers argued that the causes of the depression lay in the failure to find a new economic equilibrium in the immediate post-war period. Adjustment was disrupted by inflationary credit policy on the part of the US Federal Reserve System and the Bank of England. The depression constituted the necessary cathartic process towards reaching a new equilibrium, and intervention could only delay this process. France rejected the accusation that it deliberately acquired gold and destabilised the international monetary system in 1928-32. Instead it blamed the US and UK for running too loose a monetary
policy. The Bank of France would stand ready to discount any sound commercial bills, but would not be drawn into any artificial expedients which smacked of managed money, such as open-market policies. Similarly in the depression years, the Bank and the French policy making establishment rejected the use of open-market policies to stimulate activity on the grounds that this would constitute an unwarranted intrusion in the market place.
We will show that the case against devaluation derived from a well articulated economic and political model. We will demonstrate that the French political establishment was not opposed to devaluation by 1935, but was insistent that this should occur within the framework of a tripartite currency agreement. Such an agreement should preferably incorporate a commitment to return to the gold standard.
Whilst the US was willing to discuss this the British government was adamantly opposed to any fixed exchange rate commitment, particularly in 1935 which was an election year. This proved a major stumbling bloc along with the rather desultory fashion in which the US administration approached the question. It was only when the Popular Front government faced a persistent drain of reserves that a Tripartite Agreement was reached with the British and US governments. This lent a veneer of international co-operation to France’s devaluation.
Why did the Popular Front government fail to devalue on coming to office and, or, introduce exchange controls? To understand this it is important to realise that the Popular Front was a heterogeneous coalition of radicals, socialists and communists. The communists were virulently opposed to devaluation, arguing that it was a method of reducing real wages, the radicals were none too keen either, and would certainly have opposed exchange controls. Perrot’s (1955) assessment was that no party advocating devaluation could have won the election.
Why this aversion to devaluation? Devaluation was considered a moral and contractual default, and the experience of the 1920s suggested that devaluation and inflation went hand-in-hand.
This thesis will demonstrate that French policy-makers were far from financially ignorant and that policy rested on a coherent liberal political and economic paradigm. Its economic basis rested on what is now known as supply-side economics and the new classical macro-economics. We will see that devaluation was rejected on the grounds that it would lead to imported inflation and compensatory wage demands in the private and public sectors.
Whilst devaluation might bring a temporary fillip to economic activity it was argued that any competitive advantage would soon be eroded by wage-push inflation and public sector demands would further burden the budget. When it became evident to policy-makers that devaluation was inevitable France continued to press for a general stabilisation agreement preferably with a commitment to ultimately return to gold. This thesis shows that this was necessary for domestic political reasons, both because of the success of the previous campaign against devaluation and the need for a political cloak to disguise a policy volte face, but also internationally to avoid retaliation. French policy-makers sincerely feared that sterling, which was under a managed float, might be allowed to weaken and that the US might devalue the dollar from the prevailing 59% of its former gold parity to 50%, as Roosevelt was empowered to do. Lastly questions of credibility were not absent from the desire to reach an international agreement, rather than take a unilateral course and risk being buffeted by "speculative" currency flows as in the 1920s.
Our thesis also demonstrates that when British policy-makers such Hawtrey encouraged France to engage in open-market operations following the de facto stabilisation of the franc in 1926 they had failed to understand the political reasons for which the Bank’s statutes specifically precluded open-market policies. In effect the Bank’s statutes aimed at making monetary policy independent of government and to prevent a recurrence of the budgetary monetisation which had characterised much of the period to 1926. We will see that this past experience also explains why the Bank rejected open-market operations to offset the effects of depression in the 1930s. The second factor which informed the Bank’s quietist attitude was that it firmly adhered to the "banking principles" that is, it was prepared to discount all sound commercial bills presented to its discount window. That these were not presented in sufficient quantities was not the Bank’s fault but resulted from the world depression which had been caused by an increase in production during the war, collapse of agricultural prices, and the post-war credit bubble fuelled by the gold exchange standard. To the French policy-making establishment the gold exchange standard and open-market operations were coterminous both were inflationary and faulted the price mechanism. Depression was part of a natural Darwinian process which had to run its course until a new equilibrium was found. These views were particularly espoused by Clément Moret, Governor of the Bank from 1930-35.
undermining governments of the left and centre this accusation is probably not founded, rather the Bank saw as its main function the defense of the gold franc.
The Bank and the majority of the French political establishment felt that if the gold franc were abandoned governments would follow the path of least resistance and monetise the deficit. Once this avenue was opened further devaluations would offer governments the prospect of enjoying the profits realised on the revalued gold reserves of the Bank. There would be no end to the financial rout. In the event the financially orthodox were proved right.
In the circumstances why couldn’t France have devalued as the UK had done? The answer is straightforward, financial crisis masked a deep political cleavage which would have prevented a political coalition from reaching a necessary consensus on accompanying fiscal measures. That political cleavage was made worse by the perverse policies forced on French governments as a result of the increasing over-valuation of the franc does not detract from this judgment.
It is our judgment that French monetary and economic policy was characterised by failure in the 1930s. This applies in particular to the Gold Bloc whose importance should not be over-emphasised. France clearly wished to maintain this gold currency bloc to increase diplomatic pressure for an eventual return to gold. French policy-makers remained convinced that British agreement to such an accord could eventually be obtained. We will show that this was a serious misjudgment. As far as relations with the US are concerned both France and the UK would rightly continue to mistrust US policy initiatives after the London World Economic Conference. Failure was also apparent in France’s policy of deflation and when Laval’s experiment was abandoned the Popular Front's policy of "pouvoir d'achat" was also found wanting. This reflationary attempt failed before its inconsistent objectives encapsulated in the electoral pledge imposed by the nature of the Popular Front coalition of, "ni déflation, ni dévaluation".
Our answer to the entreaty that France should have engaged in open-market policies during the later 1920s to reduce the gold avalanche (q.v., Hawtrey) a policy which Eichengreen (1985) has identified as the only one which could have had a significant impact in reducing France’s demand for gold, is that it was misconceived and would have compromised the independence of the Bank. Had the Bank engaged in such activities in the 1930s in circumstances when the budget deficit continued to widen despite, and because of,
efforts at deflation, open-market operations would have undermined the credibility of the Bank and made it harder for government to fund deficits. In the circumstances such action might well have forced the authorities to rely on the issue of Treasury bills with the risks of monetisation that this would involve. Therefore the Bank was probably correct in rejecting open-market policies. As to devaluation as a solution to the depression of the 1930s, when it came it did undoubtedly bring relief but the last bulwark guarding against financial instability had been removed. The recurrent political crisis which masked as a monetary one would remain unresolved. Reform of the state might have provided a solution, but even then it is an important tenet of our thesis that the degree of cleavage was such that even political reform might not have provided an answer in the short-term. Given the inter-action between monetary and political factors it may be that a simple suspension of the gold standard would have been the best solution, at least it would have protected the gold reserves.
Finally, this thesis should put paid to the view that French monetary policy was characterised by financial ignorance. On theoretical grounds this was not the case and contemporary British policy prescriptions advocating variously open-market operations and devaluation failed to take account of political factors and historical antecedents.
Chapter One, "The Political Context," provides an analytic overview of the French polity and the sources of political instability, which were the ultimate cause of France’s continuous post-war budget deficits and concomitant fiscal crisis till the Poincaré stabilisation. The 1930s would see a renewal of political instability which weakened the franc. This climaxed in 1935, when governments had increasingly to monetise the budget deficit by means of indirect advances from the Bank of France, leaving the Popular Front to inherit an extremely unfavourable financial situation.
This chapter gives a broad insight into inter-war monetary and economic history, which cannot be divorced from the political and economic matrix from which it issued. In this context, it is important to realise that it was not only the electoral system but the very nature of the historical and cultural political divide which accounted for political instability. The ambiguous position of the centre groupings and parties of radical persuasion, caught between an espousal of the republican heritage and social values to the left, whilst largely endorsing fiscal orthodoxy, meant that any alliance with the socialists would always prove tenuous. A far left coalition with the communists proved more elusive given the reluctance of the communists to condone the bourgeois system, such an alliance would have alienated
many within the radical party. It was only with the rise of fascism and the leagues in France, and the imprimatur of Moscow, that the communists agreed to join in the Popular Front created in 1935.
Alliances between the centre-right and radicals were also prone to instability, as the radicals for reasons of electoral expediency and a firmly held republican tradition did not wish to distance themselves too much from the left.
Chapter Two, "The Inter-War Monetary System," is introductory in nature. It aims to demonstrate that the pre-war gold standard, which was to constitute a constant referent for French policy-makers, was far removed from the text-book model. The latter in its crudest form represented the gold standard as though it were a pure specie standard, with little or no role for financial intermediaries. A better understanding of the gold standard’s managed, partly discretionary nature, or at least of its socio-political underpinnings, could well have saved France from the costs which a rigid adherence to financial orthodoxy imposed. An important point to make in this context is the downward rigidity of wages (relative to the fall in prices) which characterised the inter-war world. This meant that adjustment towards some form of equilibrium, rather than being smooth, consisted of destabilising quantity shifts, e.g., unemployment. Falling economic activity reduced government revenue, and attempts at balancing the budget had perverse and self-reinforcing macro-economic effects. The ensuing fall in prices raised real interest rates and indebtedness, exacerbating difficulties of economic adjustment. The inflexibility of the nominal wage-price framework was in part due to the more prominent role played by parties self consciously representative of working class interests in parliament, after the First World War.
Chapter Three, "French Monetary Policy Up to the 1933 World Economic Conference: A Comparative Perspective," examines war finance and its legacy of debt over hang, particularly of short-term unfunded debt, and the post-war habit of carrying some 50% of government expenditure off-budget. A comparative section on British war and post-war finance demonstrates that French budgets were less sound than British. This is followed by an examination of France’s post-war foreign policy illusions and domestic political imperatives which determined that reconstruction expenditure would be carried-off budget under the heading of "recoverable expenses" to be serviced by reparations payments. The Ruhr fiasco marked the end of this illusion, which had been the premise of early post-war budgets. Financial crisis continued until the Poincaré stabilisation in 1926. This chapter will
take us through to the onset of depression and deflation.
Understanding earlier post-war French monetary experience up to the Poincaré stabilisation is crucial to comprehending the subsequent reluctance to devalue. Currency depreciation had become synonymous with inflation and it was felt that the rentiers could not be asked to make any further sacrifices.
Chapter Four, "Budget Deficits and Financial Instability," is thematic and takes a closer look at inter-war budgets, identifies the main source of deficits, and the political and economic difficulties that meeting these budgetary short-falls presented in the 1920s, in terms of building a consensus around the appropriate fiscal measures to adopt. In the 1930s difficulties were compounded by a deflationary macro-economic environment imposed by the fixed gold parity and exchange dumping as sterling and later the dollar were devalued.
Chapter Five, "The Nature of Financial Orthodoxy," is also thematic and demonstrates that the orthodox financial view was part of a well-articulated philosophical (viz.,methodological individualism), ethical (the sanctity of contract) and economic model (Manchester liberalism) which finds its contemporary resonance in Thatcherism and supply- side economics. The reluctance to embrace devaluation was a reflection of these beliefs as well as a theoretical understanding that devaluation would lead to imported inflation, and the post-war French experience which attributed inflation to a depreciating exchange.
Chapter Six, "The Gold Bloc: A Defensive Currency Pact," is divided into various specific sub-headings. The first examines the negotiations to secure a currency stabilisation agreement before and during the World Economic Conference, held in London in June-July 1933,- though as yet stabilisation had not become an explicit euphemism for an internationally agreed French devaluation. This section traces the reasons for which the Conference failed, resulting, as it did, in the formation of the Gold Bloc.
The second section examines the Gold Bloc and the monetary agreement which underlay it.
The third section analyses the attempt to give the Bloc concrete economic form by means of a trade agreement. The next two sections reveal the extent to which the most favoured nation clause (MFN) and fear of retaliation acted as impediments to trade liberalisation within the Bloc. They also point to the difficulty of a process of economic liberalisation in a depressed economic environment in which producer groups become more vocal and politically effective.
The last section deals with the discussions held ahead of Belgian Prime Minister Theunis’s arrival in Paris in March 1935, to announce the forthcoming Belgian devaluation and the last-ditch and half-hearted measures considered by French policy-makers to stave this off. After the Belgian devaluation the Gold Bloc only proved a holding operation, though Laval would make one last spirited attempt at deflation by decree.
Chapter Seven, "The Devaluation Campaign," is thematic and examines the devaluation campaign. This began in earnest in the media, in 1934, when Reynaud gave the legislature a stark choice in a parliamentary debate, between a well prepared and deliberate devaluation, with an appropriate fiscal package, or being forced into devaluation by a run on the currency with all the attendant dangers.
Chapter Eight, "Negotiating Stabilisation (1934-36) and the Tripartite Agreement," chronicles official, secret, attempts to secure a stabilisation agreement from 1935-onwards. Chapters Seven and Eight reveal a significant contrast between the public media campaign largely opposed to devaluation with the strong support of most of the French political class, which remained to the end supportive of deflation and the fixed exchange rate regime and confident of its viability, and internal policy documents which demonstrate clearly that officials were aware very early-on that unless the UK or the US effectively joined the Gold Bloc it would not last. After the Belgian devaluation it was realised that it would be only a matter of time before a French devaluation. This chapter will examine various official démarches aimed at securing either, or both, US or UK agreement to a currency stabilisation package, which was understood to comprise a Gold Bloc devaluation. As the title of the chapter suggests it is divided into two distinct sub-headings.
Chapter Nine, "Monetary Policy in the Gold Bloc Period," examines French monetary policy in the period 1933-36. The emphasis is particularly on the period 1935-36 which was marked by an increasing financial crisis caused by the departure of Belgium from the Gold Bloc, increasing budget deficits, and the difficulties of funding borrowing with the twin prospects of devaluation and a Popular Front electoral victory.
By 1935 centre-right governments were resorting to "avances occultes,” i.e., indirect advances from the Bank of France, and borrowing by para-statal organisations (reducing direct calls on the government budget) to compensate the worsening fiscal position. Indirect advances might take the form of agreeing to rediscount commercial bills held by banks which would use the proceeds to buy government securities, or pledge to rediscount any Treasury
bills that banks and para-statals might hold in portfolio. The government’s fiscal position was undermined by falling revenue, due to deflation, the need to re-arm, and the difficulty in further reducing budgetary expenditure. Government had to increasingly relax the rules on Treasury paper »discountable at the Bank of France. Again the incoming left-wing administration, as in 1924, inherited a rapidly deteriorating fiscal and monetary situation.
The second section of this chapter looks at the devaluation debate in parliament between 28/9-1/10/36. This sheds a great deal of light on the reasons for which previous governments had failed to devalue, namely the need for an explicit international exchange rate agreement, backed by a commitment to return to gold. Opposition parties in both chambers, and even some radicals who nominally supported the government, spoke-out against the lack of accompanying fiscal measures and the fact that rather than retrench, the government was increasing expenditure. Others were critical of measures to tax gains realised on gold and foreign exchange, arguing that this would reduce any capital inflow following devaluation. Many of these critics were vindicated by the subsequent turn of events and serial devaluations, which marked the rake’s progress of the franc in the later 1930s, though, by then it was too late as government expenditure was swamped by the budgetary exigencies of re-armament expenditure.
Chapter Ten, "Did France Destabilise the International Monetary System: The Maldistribution of Gold and the Open-Market Policy Controversy,” examines the case put by the British, in particular, that France contributed to destabilising the international monetary system during the early inter-war years and that the maldistribution of gold was evidence of this (see Hawtrey). This British view does not fully take into account French domestic legislation and currency experience. I also examine the related argument that France could have offset the world deflationary effects of gold inflows during the period 1928-32, which effectively sterilised a significant proportion of world liquidity, through open-market operations (see Eichengreen, 1985). I also analyze the related proto-Keynesian argument that the Bank of France could have offset the deflationary effects of gold outflows through open-market operations during the latter-half of the 1930s.
The arguments on both sides will highlight the differences in interpretation between French analysts and their British and American counterparts on the causes of the depression and appropriate policy action. The French argued that the causes of the depression lay in real factors, viz., over-production, and an artificial credit bubble which was partly
responsible for over-production and delayed adjustment to equilibrium conditions. Therefore, a return to normalcy would require a deflation of prices and production until a market clearing equilibrium could be found. The British view was that over-production had depressed prices and that the deflation of prices had depressed output and demand, this was compounded by downwardly inflexible nominal wages. British economists, however, had learned the political and social costs of deflating the nominal price level. Better to restore equilibrium by devaluing and allowing wholesale prices to rise, thereby restoring equilibrium between retail and wholesale prices (see Hawtrey). These analyses led to radically different policy prescriptions, viz., the advocacy of continued deflation by the French and reflation by British economists.
The differences between the British and French on the use of open-market policies illustrate a failure to understand, on both sides, the very different historical characteristics of British and French capital markets in particular, i.e., the British being credit driven and the French monetary system essentially based on cash transactions (see Bouvier) and characterised by a historically high rate of domestic savings. The interests of small savers played a significant political role in the policy of the radicals and radical-socialist party in parliament. French policy-makers had an abhorrence of anything smacking of managed money (monnaie dirigée), such as open-market operations. Essentially the French political and economic class was firmly wedded to a real bills doctrine which paradoxically, given the British nineteenth century debate, stemmed from strongly held orthodox financial beliefs.
Our study makes French currency experience, much castigated by British commentators at the time, more understandable. Chapter Three illustrates clearly that British and French monetary policy were in a sense mirror-images. Britain choosing to adopt a fixed and over-valued exchange rate commitment in the early post-war years for a set of philosophical, ethical and economic reasons, not dissimilar from those which explained French policy-makers’ stance during the latter-half of the 1930s. In both cases the costs imposed by a fixed exchange rate regime were a set of perverse macro-economic policies which discredited the very political and economic system which they aimed to maintain, and at considerable social and economic cost. The lessons of the past are no less applicable today.
CHAPTER 1
THE POLITICAL CONTEXT
"U résulte donc par cet exposé qu'il n'y a pas de trésors qui suffisent à un gouvernement déréglé, que le salut d'un Etat n'est attaché qu'à la sagesse de le conduire, et pareillement sa prospérité, son bonheur, la durée de sa gloire et de sa prépondérance sur les autres.
This chapter analyses the most salient features of the inter-war political system. It will not delve in much depth into the specific features of any single government coalition, but rather draw with a broad brush the underlying features of the inter-war French polity.
The nature of the political institutions and, crucially, the balance of political forces were a significant determinant of the recurrent financial crises of the period.2 The budget deficit which was so often monetised, was but a proximate cause of inflation and financial crisis. The ultimate cause was the inability to construct a strong enough coalition of interest groups to address the fundamental issue, namely the fiscal crisis of the state, and to build a consensus around measures to remedy it.3 This is why a political and economic approach
1 Due de Saint-Simon, Mémoires, 1714-15, Tome XI, p.243 (Ramsay ed., 1978). Saint-Simon on having been offered, les finances by the Regent, Duc d'Orléans, refused and penned this reflection on the state of France’s finances. These appear particularly apt to the state of France throughout the inter-war years. Her huge gold hoard in many ways served to mask the underlying monetary instability which it faced in the 1930s.
Jèze attributed speculation, i.e., foreign exchange crisis, to the disorder in the public finances. The ultimate determinant of this being the political system which resulted in a recurrent fiscal deadlock. Quoting Jèze in reference to the gathering exchange crisis of 1935, but which could just as well apply to the period up to the Poincaré stabilisation, "Mais la spéculation n'est qu’un effet du désordre financier, lequel a été amené
par le régime politique. " in, Journal des Finances. 31 May 1935, from Bank of France archive, file: Politique
Monétaire 1935 (presse), 7ième E69.
2 see Germain-Martin who attributed the instability of the radical governments from 1932-34 to the inability to secure the passage of a fiscal package through parliament.
3 Quoting Eichengreen (Golden Fetters, p.300), "in France, Belgium, Italy, and Poland, and in the Centra] European countries...inflation had been symptomatic of the inability to achieve a consensus on the level of public spending and the distribution of taxes. It had been the market's way of reconciling incompatible claims. But inflation had redistributed income from creditors to debtors, polarizing society into competing factions dominated by the propertied and working classes. Failure to resolve the distributional conflict and control inflation had allowed political instability and financial turmoil to persist for nearly a decade. Compromise over the distribution of income and the burden of taxation had been achieved only at the end of a long, debilitating process." Though this extract appears to encapsulate France’s pre-stabilisation inflationary experience our only criticism of Eichengreen’s analysis rests on his reference to inflation as being the mechanism by which the
is essential to understand the inter-war French monetary experience. As, indeed, is a knowledge of financial orthodoxy essential to comprehend government economic policy.4 In the same vein the question of French devaluation during the period 1935-1936 cannot be divorced from the international context as well as the balance of political forces and opinion domestically.1
THE NATURE OF THE FRENCH POLITY:
The constitution of the Third Republic provided for a bicameral legislature and a President elected for seven years by a joint assembly of both the Senate and Chamber of Deputies meeting in a National Assembly (Assemblée Nationale) at Versailles, the President being elected by an absolute majority. The Senate was elected indirectly by colleges composed of regional, local and parliamentary constituency representatives.6 The senatorial mandate was nine years, with a third of the Senate re-elected every three years. Senators had to be over forty. The lower house, the Chamber of Deputies, was elected for four years. Bills could be introduced in both houses, but finance bills had to originate in the Chamber of Deputies. In theory the lower house was pre-eminent,7 but the Senate gradually increased its power. This would later lead to institutional deadlock, though in some respects this was more apparent than real, as the Chamber might support a government knowing full well that it would fall before the Senate. This allowed parties within the Chamber, which still nominally supported the government, to avoid blame whilst preparing a political realignment.
The institutional instability was greatly exacerbated by the decline of presidential power. In theory, the president could dissolve the Chamber of Deputies, with the approval
market reconciled competing interests over the relative distribution of costs relating to any given post-war financial settlement (later enshrined in the level of stabilisation against gold - see Eichengreen), it was emphatically not a market driven process but rather reflected the lack of a political consensus on the issue as a result of which government adopted the least cost method, viz., issuing short-dated Treasury bills and printing money.
4 see chapter 5 of this thesis. 5 see chapter 8 of this thesis. * see Mayeur.
of the Senate, and thus open the way for a new parliamentary majority, or a renewed electoral mandate in favour of a specific political agenda. However, this authority was only used once on May 16th 1877 by President Mac-Mahon. The ensuing elections disavowed him and dissolution fell into desuetude, and attempts to re-assert presidential authority under MiUerand (1920-24) led to his resignation. It was also frequently the case that the presidency, in the inter-war years, would go to a lesser known political personality rather than a forceful character, - neither Cldmenceau, nor Briand secured the office. Siegfried (1956) made the point that a president who presided rather than governed, as in the US, was preferred.' However, Siegfried (1956) pointed out that the President was more powerful than the British sovereign as weak party discipline and the existence of relatively independent and politically prominent figures gave the head of state greater autonomy to choose among political personalities to form a government. Nevertheless, the supremacy of the Chamber (rather than two organised parties within parliament, as in the UK) was an essential characteristic of the Third Republic.9
The de facto abandonment of the power of dissolution meant that the inter-war polity was characterised by fixed term parliaments with no mechanism for the executive to appeal directly for a mandate outside the normal cycle of elections. The fact that the Chamber could not be dissolved increased the willingness of parliamentary groups to bring down governments, safe in the knowledge that such action would not result in an early dissolution and electoral losses. The Chamber of Deputies and particularly the radicals, who, standing in the middle of the political spectrum, constituted an essential ingredient of any governing coalition, were jealous of their power and blocked any constitutional reforms which might have strengthened the executive.
It should be noted that the constitution of the Third Republic was Orleanist in nature, i.eM it embraced the division of powers and the role of President was tailor-made for a constitutional monarch. In fact had it not been for the intransigence of the Comte de Chambord and divisions between the monarchists France might well have had a constitutional monarchy.
* Quoting Siegfried (1956), *un président qui préside et non pas, à l'américaine, un président qui
gouverne.m (p.36).
* Quoting Siegfried (1956), "Le régime de la ille République s ’exprime essentiellement dans la suprématie
incontestée du Parlement, et tout d ’abord de la Chambre des députés. ' (p.39).
The original conservative conception of the constitution is betrayed by the role of the Senate. It provided for a solid 25 % minority bloc of 75 life members who were elected by the Chamber.10 The Senate itself would vote to fill any vacancies falling due amongst the life membership of the Senate. However, the system of life senators was abolished by constitutional amendment in 1884, though those still alive could retain their office. Life members were supposed to give the Senate a conservative bias, but owing to divisions between the monarchists, and the monarchists and bonapartists, this did not occur. The last life members disappeared by 1920.11 The conservative bias was intended to be reinforced by the over-representation of the provinces in the Senate. Reb£rioux refers to the Senate (in 1913) as the, ’Conseil des communes de France.012 However, this was where the radicals found their support and in practice the Senate was dominated by radicals during the inter-war years. Nevertheless, the radicals in the Senate were characterised by adherence to financial orthodoxy.
Originally the radicals had opposed the Senate and wished to abolish it, but when it became apparent that it worked in their favour this proposal was forgotten.13 The socialists were also opposed to the Senate as a dilution of popular sovereignty. Blum even suggested that should he form a government and find himself defeated in the Senate, and yet still enjoying a majority in the Chamber, he might refuse to resign. At one stage during the devaluation crisis of 1936 there were rumours that he might not back off some of the compensatory measures incorporated in his devaluation bill which were rejected by the Senate, in the process known as "la navette" whereby legislation had to be approved in similar form in both chambers. This did not occur, as Blum modified the bill, and later when his request for decree-making powers in the financial field were rejected by the Senate, in 1937, he resigned. However, by that stage it was clear that whilst he might still enjoy a nominal majority in the Chamber, it was but tenuous.14
Goguel (1937) underlined the orthodox views of the Senate, which preferred to reduce
10 see J.-M.Mayeur (1984). 11 see Corcos (1932).
12 Bee ReWrioux (1975) p. 192.
° see Bourgin (1928). 14 see Mayeur (1984).
expenditure in order to balance the budget without raising taxes, especially not income tax with its inquisitorial assessment. The Senate also favoured taxing agricultural land lightly, on estimated income. Goguel exonerated the Senate from the charge that it systematically brought down governments of the left. However, his analysis is too uncritical. The Senate contributed to blocking constitutional reform, e.g., Laval’s proposed reforms which met the combined opposition of the radicals and socialists in the Senate,13 and only agreed to delegating decree-making financial powers to the most financially orthodox governments, e.g., Doumergue in 1934 and Laval in 1935. The increased conflict, during the inter-war years, between the Senate and the Chamber of Deputies can undoubtedly be ascribed to the fact that the Chamber was increasingly to the left of the Senate and to the very orthodox fiscal stance adopted by the Senate. Aside from the specific instance of Laval’s proposed electoral reform, in February 1932, the Senate was directly instrumental in the fall of governments of the left whose requests in the financial field were denied, viz., Herriot’s first Cartel government (15/6/24-10/4/25), Blum’s first (6/6/36-22/6/37) and second (17/3- 18/4/38) Popular Front governments. Though it is true that, in all three cases, the governments were effectively moribund.
The Senate had gradually increased its political weight and first overthrew a government in 1896 when Leon Bourgeois’ government fell on the issue of a proposed income tax.
One should also note that along with the increased authority of the Senate there was a decline in the influence of the presidency both of which made for increased institutional deadlock. The fact that the executive could not ask for a dissolution of the Chamber if it lost a vote before the Senate, or in the case of an inability to form a stable government, contributed to the instability of the French inter-war polity. Siegfried (1956) argued that the nature of the Third Republic was determined by the outcome of the struggle between the presidency and parliament which had left the Chamber of Deputies pre-eminent. Middleton (1932) argued that parliaments became effectively fixed term.16 And that this accounted for
u Mayeur (1984) p.293. “ see Middleton (1932).
the fissiparous tendencies and infinite flexibility of parliamentary groups,17 particularly those gravitating towards the centre of the political spectrum, e.g., the radicals and the smaller gauche radicale.
INTER-WAR FRENCH POLITICAL PARTIES:
At the centre of the political spectrum stood the radicals who were divided into different tendencies. However, their common denominator was the republican lay state and a progressive social bent, and idealism in foreign relations. Amongst these groups the radical- socialists can most properly considered a party, whilst the gauche-radicale was a looser formation embracing more individualist personalities.
The radical-socialist party was a parliamentary party which rejected revolution and did not pretend to dogma, except when it came to the lay republic. It did not set predetermined bounds to reform. In political practice it proved eminently pragmatic. The great divide separating it from the new parties of the left was over the issue of individualism and private property, it still remained a progressive 19th century liberal party as opposed to the newer parties of the left which adhered to a collectivist ethos.1* The radicals were yet further removed from the elitist communists who largely considered the parliamentary process a sham. Of course the socialist parties would have argued that it was an illusion to think that "progress" and private property would be ultimately compatible. The radicals supported private ownership, but wanted to see profit-sharing and worker participation.19 The radicals considered themselves the heirs to the Jacobin tradition and the radical-socialist party defined itself as: "le parti est populaire, laïque, national et social."20
Hie radical tradition rested on individualism and those same (negative) political rights proclaimed in the Déclaration des Droits de l ’homme, and rejected economic privilege (cf., the abolition of corporations (guilds) at the Revolution and the "loi le Chapelier ") it
17 Quoting Middleton (1932), "In a Chamber bound to continue in existence until its mandate expires die mere liability to ministerial crises calls for elasticity in the distribution of Parliamentary forces. It militates against the notion of a two-party system and favours the formation of groups.* pp. 104-105.
" see Corcos (1927). '* see Bourgin (1928) p. 137. * see Corcos (1927) p.79.
conformed to what had been a progressive, essentially "bourgeois" agenda. However, with time and the advent of the collectivist socialist parties, which advocated positive rights (particularly in the economic field) the economic agenda of the radicals increasingly became identified with the right, whose own economic beliefs no longer represented agrarian interests but those of cosmopolitan capital, and liberal economics provided the ideological vehicle to promote these. In the political sphere, though, there remained a link between the two tendencies of the left, viz., radicals and socialists. Both considered themselves progressive modern parties, viz., secular. The fundamental irreconcilable contradiction between the socialists and radicals was that the liberal economic policies of the radicals found root in their underlying individualist political heritage. This set very clear bounds to the degree of co operation which could exist between radicals and socialists, whilst any alliance between radicals and communist collectivism and revolutionary ideology would not be acceptable to most of radical persuasion.
A common feature of the radicals and communists was their shared internationalism. With the former this rested in the belief in the absolute verity of their individualist political ethics. These were considered intrinsic to man, hence their desire to find these enshrined in an international organisation and applied collectively among the nations (which had in the past served as the vehicle for the expression of these liberal political rights at a national level against despotism and the arbitrary), this explains their support for the League system. The communists similarly rested their internationalism on the assumption, as an absolute, of a collective international identity of interests between the working classes of all nations. These interests being represented and promoted by the first socialist state, viz., the USSR. For the communists Moscow was Geneva. One should note that both radicals and communists made claim to absolutist ethical principles, reflecting the transposition from the religious to the social sphere of monotheistic hubris.
The radicals supported the existing constituency-based majority electoral system. On fiscal issues they favoured direct over indirect taxation, and progressivity in its imposition, and capital taxation to help remedy the fiscal crisis of the state (a decision taken at the radical congress of 1925 held in Nice), though the party was divided over the latter issue, with Caillaux being one of the foremost opponents. The radicals were against monopolies and
elements favoured an économie dirigée and "planisme. “21 As a foreign policy extension of their domestic policy support for the lay state (which was more akin to an ideological imperative or dogma) the radicals were in favour of severing diplomatic relations with the Vatican (which they did under the Cartel government). In the wider international context they favoured mediation through the League of Nations and a policy of reconciliation with Germany. The party was not well-disciplined though, and was split between left and right- wing tendencies, the left being close to the socialists.
The radicals were divided into the parti républicain radical et radical socialiste and the smaller radical groups such as the gauche radicale. In the 1924-28 parliament the gauche radicale, with 41 seats, constituted a crucial swing group.22 In fact the gauche radicale were represented in all governments from 14/6/24 till 4/6/36. It was a small party with no more than 40 or 50 deputies. Amongst its more prominent members were L.Germain- Martin, L.Loucheur and Laurent-Eynac.23
The most prominent members of the radical-socialist party were E.Herriot, E.Daladier, A.Sarraut and M.Sarraut (the Sarraut brothers controlled the radical newspaper La Dépêche de Toulouse). Franklin-Bouillon, Jammy Schmidt, G.Bonnet, A. de Monzie, E.Clémentel, J.Caillaux and C.Chautemps. It was characteristic of the radicals that they should command such domestic and social ministries as, the Interior, Education (Instruction Publique) and Agriculture.24 The radicals typically controlled these ministries because of the power of patronage and political influence that went with them.25 The Minister of the Interior appointed the prefects, whilst the Ministry of Education (Instruction Publique) was considered the ideological arm of the radical (secular) state.26 The paradox is that the radicals having been instrumental in the separation of the Church and State had now bound
21 see Jackson (1985). a Mayeur (1984) p.277.
a Olé-Laprunne (1962) pp.205-206. 24 Olé-Laprunne (1962).
25 see Tardieu; and D.Halevy. * see Halévy (1934).
the state and the educational establishment together27 as the essential corner-stone of the lay state (some might say its ministry of propaganda) leaving open the contention that their motives were just as self-interested as the role which the Catholic Church had been charged with exercising before.21 This of course opens the intractable and value laden question as to whether the lay state, and more particularly dogmatic secularism (as often practised in France, even to this day), is a form of cultural hegemony or a fundamental and absolute tenet of an "open-society." The radicals defended secular education on the grounds that it was the basis of freedom of conscience, the cornerstone of "reason.”29
The radicals can best be defined as a progressive humanist party. It rested its political ethics on the meliorative possibilities of man and was essentially individualistic. It claimed no enemies to its left, but as the Alliance Démocratique pointed out its underlying philosophy was antithetical to the collectivist ethos which animated the socialists (SFIO) and the communists (SFIC). D.Halévy (1934) argued that the radicals constituted the ante chamber which would usher in the socialists.
The radical-socialists rejected the rhetoric and practice of class conflict and considered themselves, in their very essence a parliamentary party. The following quotation from the 1907 programme of Nancy, which is generally considered to be their fundamental charter, demonstrates the distance between them and the Marxist parties: "...il se refuse à établir, même théoriquement, entre les citoyens, des classes en lutte les unes contre les autres. Parti d'action sociale parlementaire, il réprouve toute manifestation violente que ne justifierait pas une atteinte grave à la Constitution républicaine et aux volontés de la Nation. m3°
The Senate was dominated by conservative radicals,31 grouped within the fauche démocratique. Its most prominent members were Caillaux and Malvy, both of whom had been charged and found guilty of dealing with the enemy during the war and reprieved by
37 we Thibaudet (1927).
* Tardieu (1936) inveighing against the new dogma quoted Emile Combes, "A la fo i qu ’enseigne l'Eglise,
une autre fo i a été substituée. ' p.89.
* see Coicos (1927).
* Quoted in Bourgin (1928) p. 137.
w Quoting Schlesinger (1974), ’Throughout the Republic, Radicals sat with independent moderates in die Senate’s largest group, the Gauche démocratique, which was generally sympathetic to conservative moderate rule.* p.490.
the Cartel government. It is interesting to note that the radicals who originally opposed the Senate became staunch guardians of the constitutional order which came to serve their interests so well. The radical senators were protective of the influence of the Senate and blocked Laval’s proposed constitutional reforms in 1932. The left were opposed to a strengthened executive after the experiences of 2nd December 1852 and the advent of the Second Empire. This dislike was reinforced by the events of May 1877 and the Boulanger crisis of the late 1880s, which added to the reluctance of the left to study reform proposals aimed at strengthening the executive.
To the centre-right of the political spectrum was the Alliance-Démocratique (its full name was the Alliance Républicaine Démocratique). Amongst its most prominent members were P.Reynaud, R.Poincaré, L.Barthou, C.Chaumet, R.Péret, H.Cnéron, P.Doumer, J.Barthélemy and P.-E.Flandin. The party was the leading force in the constitution of the Bloc National after the war. Most of its representatives in the Chamber of Deputies sat within the groups: Gauche Républicaine Démocratique, Gauche Indépendante, and, Républicains de Gauche.*1 In the Senate its members sat in the: Union Républicaine and some few within the Gauche Démocratique. In 1922 the Secretary General of the Alliance Démocratique defined his party as revolving round "laïcité et liberté économique," viz., laicism and economic liberalism.33
One should note, in this regard, that subjectivism (scepticism), arguably the defining principle of liberalism, goes hand-in-hand with political and economic liberalism and is at odds with the moral absolutism of the Church.34 Marxism with its emphasis on positivism and scientistic inevitabilism is in fact closer to a Thomist perspective than liberal teachings, though one should recall that liberalism as an "absolute,"35 which was the essence of the radical and republican world-view, is nothing but another "ism" (q.v. Michael Oakeshott). It is interesting to remark that Marxism is suffused with the intolerant dogma of monotheism,
x see Bourgin (1928) p.92.
M see Bourgin (1928).
M Here one should i desr distinction between Voltaire’s scepticism and Rousseau’s enlightened 'absolutist* reason which finds its essence in the hubris of monotheism, and full political expression in Stalinism.
51 Similarly >1» dogmatic characteristic of what is the dominant liberal political model arises from its pretence to rest on positive principles, rather than scepticism.
often compounded by the jesuitical fervour of the proselyte (Gore Vidal has tellingly dubbed Marxism a Christian heresy).34
The Alliance was conservative, but not reactionary and refused to entertain relations with monarchists and clerical reaction. It was fully committed to economic liberalism which it considered rested on the political liberalism announced in 1 7 8 9 The socialists on the other hand considered the political revolution of 1789 as a first step towards a process of economic liberalisation and emancipation based on a fundamental redrawing of property relations.3* In the fiscal field the Alliance Démocratique favoured retrenchment through reductions in expenditure and opposed a capital levy or tax. It supported the income tax, but was opposed to an inquisitorial assessment. The Alliance supported Poincaré’s foreign policy under the Bloc National39 and denounced the Locarno policy of conciliation.40
Among the more prominent members within the républicains de gauche, were F.Piétri and G.Leygues.41
To the right of the Alliance stood the Fédération Républicaine, its full name was: La Fédération Républicaine de la France. Amongst its most prominent members were: L.Marin (its president); G.Bonnefous (a vice-president); François-Marsal; de Lasteyrie; and François de Wendel. On economic issues the Fédération supported Manchester liberalism. It wanted the sanctity of private property (one of the fundamental, and often ignored, principles of the
* In this context it is worth quoting an extract from P.Wiles’s inaugural professorial lecture. 'What prevents people, other than the enlightened leadership, from recognising it is corruption, superstition, relics of the evil past. The march of right reason is inevitable, so freedom, being knowledge of right reason, is the acceptance of necessity. The totally enlightened society is thus unanimous. Differences of opinion indicate only imperfect enlightenment; they must be resolved not by majority rule or mere voting but by education or even purges. There are no "contradictions,* i.e., conflicts of interest, in the enlightened society. Every individual’s interest is, and is seen to be, reconciled by reason to the general will.'(Wiles, 1967, p. 17). In this neo- Calvinist world die recipients of revealed reason, the engineers of society, the high priests of secularism: the sociologists, Marxists, and teachers, act as moral and political guides; just as the economy is planned rationally by engineers. Gosplan is Rousseau’s ‘General Will",- the degenerescence of rationalism. Wiles is clearly imbued with Hayek and Oakeshott.
" see Bourgin (1928) p.95.
* That is an inevitabilist Hegelian progression from negative political rights, achieved in 1789, to the establish mmt of positive economic rights and entitlements, the beacon here being October 1917.
* see Bourgin (1928). * see Coicos (1927). 41 see Levine (1925).
1789 Declaration of the Rights of Man) to be protected by a supreme court. It also wanted to circumscribe parliamentary initiative in the field of expenditure. On political issues it supported extending the suffrage to women and an electoral system based on pure proportional representation and preferential voter selection of candidates appearing on electoral lists. It is interesting to note that it was the left (the radicals in the Senate) which blocked the extension of the suffrage to women (it was only granted after the Second World War). The radicals were opposed on the grounds that women would be more susceptible to twin pressure exercised by the clergy: from the pulpit, and in the confessional. Tardieu pointed to the paradox that the radicals, who had blocked the extension of the suffrage to women, were in fact acting in conformity with the attitude of the church!
The greater tolerance of the Fédération compared to the so-called progressive parties of the left was also apparent in its opposition to the monopoly of education being exercised by the state: école unique. This meant that the Fédération was at odds with the radicals over the defining principle of radicalism: the lay school as the essential building block of the "rationalist idealist" principles governing the republican state. The Fédération supported allowing priests and religious orders to teach. The Fédération was opposed to fiscal surcharges and advocated expenditure reductions, similarly it rejected forced conversion of the state debt. It opposed "political taxation" and "l’état escroc, ' what we would now dub the pocket money polity. Members of the Fédération Républicaine sat within the group: Union Républicaine Démocratique in the Chamber of Deputies, this group was also known as the "Groupe Marin."42 The Fédération Républicaine was opposed to Locarno and supported a maximalist policy with regard to the implementation of the Treaty of Versailles.
Between the radicals and the socialists stood the Républicains-Socialistes (the full party name was the: Parti Républicain-Socialiste et Socialiste Français). Its members were independent and held to the Jacobin patriotic tradition. They emphasised the indissoluble link between socialism and the republic.43 They therefore differed from the Marxist parties by rejecting their internationalism and the accompanying desire to overthrow the republic, though in the case of the SFIO its internationalism was limited, witness the split over the question of joining the Third International. In the case of the SFIO its avowed desire to
42 we Bourgin (1928). • we Corcos (1927).
