France and the Nazi Threat: The Collapse of French Diplomacy 1932-1939 (38 page)

4. It was only in 1938 and mostly after Munich that France appears to discover the links between power and trade. Was it because of Georges Bonnet, who had been finance minister before going to the Quai d’Orsay? Or was it the progress of German policy in Central Europe that dovetailed with its increasing commercial influence? In any case there were some attempts to take action.
⁴³
But it was very late. The minister to Prague, Lacroix, paraphrased a Czech daily on December 28, 1938, when he wrote the revealing statement: “The collapse of the French system didn’t start with the events in September. It originates with the fact that
France has greatly neglected the economic side of the struggle for influence.
”
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[Emphasis added.]

3.

L
INGERING
E
CONOMIC
I
MPERIALISM

The period we are examining still does not have detailed works similar to those for the years that preceded 1914.
⁴⁵
However, every indication is that the power of French finance abroad had sharply declined after the First World War. In 1905 Prime Minister Rouvier, a banker was thinking of replacing the traditional policy of conquests and alliances with a more discreet economic hegemony that would bear greater fruits and be more exacting. It was the time when Russia in its immensity was “France’s Far West” and when there existed bastions of French investment capital in Eastern Europe, the Ottoman Empire, and Latin America. In 1914 it was estimated at 45 billion gold francs, of which 41 were invested abroad and far behind (only 4 billion) in the colonies.
⁴⁶

The war destroyed that kind of power, second only to Great Britain. In various ways she used up part of the capital invested overseas and greatly increased France’s foreign debt. Pre-war loans to defeated countries, namely the Ottoman Empire and Austria-Hungary, were not repaid or only partially. The massive loan of 13 to 15 billion made to Russia or invested into Russian companies was wiped out by the Bolshevik refusal to honor the tsarist debt and the nationalization of the Soviet economy.

For the banks the 1914 moratorium, the prohibition stated in the law of April 3, 1918, extended for ten more years to finance loans to foreign states, greatly reduced the playing field. Until 1925 they were hampered by some large industries, such as Schneider of Le Creusot, which created their own banking instruments. The instability of foreign exchange, up to the introduction of the Poincaré franc in 1928, encouraged floating capital speculation not external investments. According to the historical accounts by the technicians of the time, Alfred Pose and Achille Dauphin-Meunier,
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they again were very prosperous from 1925 to 1929. Then after that, the crisis and the collapse of stock market values and the shrinking of the economy placed them in a difficult situation.

Naturally, in the 1920s, in particular, serious efforts were made to rebuild, especially among the allied countries in Eastern Europe. But as Georges Soutou, the author of one of the best studies on these attempts wrote, which it was only a “poor man’s imperialism.”
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We may add that statistical models allowing for comparisons are difficult to set. To transform “current francs” into “constant francs” (gold-franc or the Poincaré franc equal one-quarter and one-half of the gold franc) is a thankless task.

We may say at the outset that the few calculations of French government investments and loans outside metropolitan France (foreign countries + the Empire) differed widely.

Based on a study by the
Royal Institute of International Affairs
published in 1937 in the
Statistical Yearbook of the League of Nations
and a very detailed study of Eastern Europe by Czechoslovak historian Alice Teichova,
⁴⁹
the total reaches 72 billion Poincaré francs or
16 billion gold francs of 1930
and 60 billion Poincaré francs or
13.3 billion gold francs in 1933
because of repatriation and falling stock values due to the world economic crisis. She estimates foreign investments to be 60 percent overseas and 40 percent in the Empire or, very roughly, 9.6 billion gold francs abroad and 6.4 billion in the Empire in 1930.

Chronologically speaking, out of the 72 billion (or 16 billion gold francs), 35 billion (or 7.9 billion gold-francs) were residuals of the prewar investments;
⁵⁰
5 (about 1 billion gold francs) were made up of colonial borrowing and, in the second place, foreign borrowing that took place between 1919 and 1928; 10 (about 2 billion gold francs) came from long-term foreign investments between 1919 and 1928; 22 billion (or 5 billion gold francs) included long-term investments in the Empire or overseas between 1928 and 1933.

Jacques Marseille
⁵¹
used a 1943 Vichy report to reach much higher numbers through a series of extrapolations (but were the Vichy figures correct? Wasn’t it expedient at the time to increase them?). The investigation centered on Indochina, Madagascar, AOF, AEF, and the smaller colonies. It didn’t include North Africa. In 1914 there was an investment of 1.176 billion francs in those territories. The Vichy report estimated at 120 billion of 1940 francs all public and private investments in the same territories equal to 8.7 billion gold francs. A first extrapolation that would add in North Africa reached 17.5 billion gold francs. Then Marseille estimated the Empire’s portion at 45 percent to reach a total investment of foreign plus Empire of 37 billion gold francs in 1940 almost as much as in 1914. Furthermore, Marseille also used the book by Varga and Mendelssohn,
Données complémentaires a l’impérialisme de Lénine
, based on the works of the Americans Moulton and Lewis estimating French investments in 1924 at 27 billion gold francs and in 1940 at 40 billion gold francs.

Finally, the OECE in its 1950 report estimated at 18.5 billion gold francs the 1939 French foreign investments but noted that this amount “generally did not” include the investments made by the home country into its overseas territories.

Here are, therefore, two extreme numbers—
16 billion in 1930, according to Mrs. Teichova, and 38 billion in 1940, according to Marseille
—that indicate the need for a much more comprehensive study of the issue. Mrs. Teichova writes of a loss of 2.7 billion between 1930 and 1933.

Clearly, after 1930 France made an effort in public investments overseas. Manuela Semidei has pointed out that from 1931 to 1934 four laws appropriated colonial loans of up to 5.7 billion Poincaré francs (about 1.2 billion gold francs). From 1929 to 1940 the total of these loans came to 15 billion or 3.2 billion gold francs. Private investments came no doubt on top of that number.

Nevertheless, if Mrs. Teichova’s estimates (which were certainly correct for Central and Eastern Europe) are undoubtedly below their real levels, they are still closer to reality than Marseille’s numbers, which are too optimistic. I will make the following assumptions:

1. The numbers offered by Moulton and Paslovsky, American experts who wanted France to repay its wartime debts, may have been artificially increased (just by adding in a number of French receivables that would actually never be paid or, at least, only by a small fraction).

2. In 1940 in the Empire, where no major industries existed except for mining, the increase in investments from 4 billion in 1914 to 17.5 billion in 1940 appears possible but very high.

3. I am more inclined to agree with the conclusions offered by J.-C. Debeir.
⁵²
For the period 1919–1930, “except for the two years immediately following the war where the liabilities resulting from the conflict were being reduced, foreign investment reached the levels comparable to the Belle Époque,” but two important and lasting changes that were closely connected appeared:

Short-term capital, which represented a small portion of exported capital, was now the largest;

The direction toward the least developed countries (Russia, Ottoman Empire…) changed after the war toward the great world financial centers (London, New York…) Therefore, long-term investments—the only ones of interest to us—were relatively small. After that they were mostly directed toward the Empire.

As a non-specialist I do not seek to pass judgment but to clearly show how little we know and hope for the works of future economic historians to fill the gap.

* * *

What were the motivations behind those investments? The profit motive was obviously the leading one. Significantly, France practically did not create any industries in the Empire—except for mining—and there was no attempt to benefit from low industrial wages overseas in underdeveloped countries. The Empire provided France with mining and tropical agricultural products; a kind of “autarchic” mindset prevailed throughout the crisis years, meaning that certain French needs were being satisfied within the Empire. The best examples were the rubber plantations in Indochina which provided all of France’s rubber needs in 1939.

The political motivation appears to have been much stronger. It was a time-honored French tradition. Had not the old Franco-Russian alliance been purchased with multiple loans? Mrs. Teichova forces the issue a bit when she writes:
⁵³

It’s an historical fact that the Quai d’Orsay had close ties to French high finance and that overseas capital investment was strongly influenced…not only motivated by profit but also by colonial interests and French political power policy. French capital investments acting in unison were directed toward Europe and above all Poland and the states of the Little Entente. Later in the 1930s new French investments were almost entirely aimed at the colonies.

Were the ties between the Quai d’Orsay and high finance as tight as Mrs. Teichova claims? Considerable research would certainly be required to clarify that issue. Clearly Paléologue, who was secretary general in 1920, was connected to Le Creusot; and Philippe Berthelot, who was his successor, had been compromised in 1921 because of his ties, through his brother, to the Banque Industrielle de Chine; and François-Poncet had worked for the Comité des Forges. It is also well known that once ambassadors retired, they tried to improve their positions by joining one or more boards of directors.
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However, the steps taken by financiers at the Quai d’Orsay, especially under Léger, seemed few and far between and the matters they discussed were often in the national interest.
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We should point out that in the highly contentious books about business circles published by Henry Coston or Albert Aymé-Martin and in the work by Emmanuel Beau de Loménie,
Les responsabilités des dynasties bourgeoises
,
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and even the doctoral dissertation by Jean-Noël Jeanneney,
François de Wendel
, the names of French diplomats Coulondre, Noël, Jules and Charles-Arsène Henry, Corbin, Thierry, Dampierre, Pila, Fleuriau, Herbette, Laroche, Charvériat, Bargeton, Rochat, Happenot, Naggiar, Massigli, Roger Cambon, and Margerie
never appeared a single time
if not in the context of their diplomatic duties. The name of Léger appeared in Jeanneney’s book because de Wendel hated that “heir to Briand,” that “red” at the Quai d’Orsay.
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The connections indeed existed socially, at times financially, in any case within the same social class. They were not very tight.

We will not make a detailed analysis of every investment. When it is only a sprinkling then clearly the part played by French capital in foreign
policy had to be nil.
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We will only examine the Eastern European “bastion.” France, contrary to the United States, had few in Germany (where some steel works owned a number of mines prior to 1914), nor in the defeated countries of Bulgaria and Hungary.
⁵⁹
Out of 5.6 billion reichmarks owed by German banks to foreign creditors as of March 31, 1931, the United States’ portion was 37.1 percent and that of England, 20.4 percent. France came after Switzerland and Holland with 6.5 percent.
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On the other hand, it had a strong position in Poland, Czechoslovakia, Romania, and Yugoslavia, and large interests in Austria.

In Poland, quite remarkably, many investments took place while it was still part of tsarist Russia. It was, in fact, the only kind of investment of that kind where France remained in first place ahead of the United States and Germany. In 1938 the estimated amount of French investments was 15 billion francs in banking (about equal to England) and most of all in industry. French companies were producing 6.5 million tons of coal, 400,000 tons of steel, 75,000 tons of zinc, 300,000 tons of basic oils, and 225,000 tons of refined oils. Two billion kilometric tons were also shipped on French lines.

The older French industries had appeared as early as 1878: in mining and steelworks, the
Société des Forges
and Huta-Bankowa, the
Société des Charbonnages
, and the mines at Sosnowiec; in the textile industry, the
Union Textile
had been set up by Motte from Roubaix, the
Czestochorienne
, the
Société pour l’industrie textile
, the
Société Zyrardew
that was owned by Marcel Boussac.

Most of these industries had been destroyed by the war and started with French capital once again. New investors came after the war, in the mines in Upper Silesia, in the oil regions in Boryslav and Polanka, in electricity, the chemical industry (branches of Air Liquide and Kuhlmann.) French capital partnered with the Polish state to create the
Société des mines fiscales
of the Polish state, the consortium of the port of Gdynia, and the Polish railroad company.
⁶¹