Sacrificing His Core Supporters in a Race Against Defeat
THE world's first reaction to the military, political and moral collapse of France was stupefaction. This has been followed by all sorts of polemics and accusations. The time has not yet come when the historian, the economist and the sociologist can present documentary evidence revealing the precise intrinsic weaknesses that corroded the Third Republic and caused it to collapse. Meanwhile, partisans will continue their attempts to lay the entire responsibility on certain isolated factors. A favorite myth is that the French social legislation of 1936, and especially the introduction of the 40-hour week, played a determining rôle in crippling the productivity of French industry and in compromising the French war effort. From this the general moral is drawn that the maintenance or broadening of social gains is incompatible with intensified rearmament.
Undoubtedly the French economic structure was so anemic that when it entered the rearmament race it soon lost its breath. The low pitch of industrial production certainly had an important share in bringing about the surprising breakdown of France under the first shock of the Blitzkrieg. But are the causes of this condition to be traced to the impossibility of reconciling labor reforms with the necessities of production? Is the "Lesson of France" to be found in the Blum experiment? Must democracies fail in their fight against the dictators unless, even before the outbreak of hostilities, they put the same restraints on labor, and subject it to the same strain, as do their totalitarian adversaries?
Let us examine the record. In 1936, even before the elections which resulted first in industrial strife and then in M. Blum's bold social legislation, the French economy was suffering from progressive emaciation. Whereas other industrial countries had touched the bottom of the depression in 1932 and from that date had begun an almost uninterrupted rise, the upswings in French industrial production had been abortive. Laval's attempt to break through the crisis by severe deflationary measures had failed completely, with the result that in 1935 the index of production fell to its lowest figure since 1932. Compared to 1929 figures, the volume of industrial production had decreased in France by about 31 percent; in the United States by 24 percent; and in Germany by 6 percent. British production had actually increased by 6 percent. On the eve of the 1936 elections the Bulletin Quotidien, run by the Comité des Forges, summarized the economic and financial position in the years just past: "It was the worst period we have ever witnessed in time of peace."
It has been widely assumed that at the end of 1935 and the beginning of 1936 a general upswing was in process and that this was broken by the Blum Government's assumption of power in June 1936, and by the burden of its subsequent reforms. Actually, Hitler's show of force in March 1936, and the direct threat which it held for France, had been enough to bring about a new stagnation. The following table, based on the index numbers of production published by the Statistique Générale de la France (100 = 1928), gives some evidence of this development, especially in consumer goods industries. Obviously the improvement had already been interrupted three months before the industrial strife and the consequent social legislation could have had any influence.
|1936||Textiles||Leather||Building||General Index||of carloads|
From May to September 1936, the period of sit-down strikes and the first paid vacations for workers, a sharp decline in nearly all industrial activities took place. In September 1936 the devaluation of the franc inaugurated a marked upswing, which continued till April 1937. In the very period that the 40-hour week was being introduced all the indices of May 1936 were bettered. In the case of certain industries supplying consumer goods the rise was particularly marked. Exports were only slightly stimulated; while imports increased, especially of materials necessary for manufacturing. Short-time work disappeared almost completely. The number of workers on strike fell to about normal, to rise again after the failure of negotiations between the trade unions and the employer organizations.
The general improvement did not last. Although the Blum Government resigned in June 1937, a new stagnation pervaded the whole French economy. From the beginning of 1938 there was even a marked decline. Rearmament lost its stimulating effect, and business returned to a level lower than at the beginning of 1936. Here and there temporary improvements occurred. But on the whole the gap between the economic situation in France and that in other countries steadily widened. Between 1935 and March 1938 the general index of German production increased from 94.0 to 122.9 (1929 = 100). In the same period the Italian index rose from 93.8 to 105.1, the British from 105.8 to 123.1. Specifically, German coal production increased 14.3 percent from May 1936 to May 1937; French production decreased 11 percent. As for steel and cast iron, German production expanded steadily, while French production rose during the Blum experiment, only to fall again in 1938, the crucial year of Munich and the dismemberment of Czechoslovakia.
Premier Blum's hope that it would be possible "to breathe a new breath of life into a suffocating economic and social organism" solely by increasing the purchasing power of the masses was not fulfilled. An indication had once more been given that raising the level of money wages is not in itself sufficient to stimulate recovery. The production of consumer goods shrank again as soon as the rise in prices wiped out the increase in purchasing power which the wage earners had obtained after the mass strikes of June 1936. At the same time, the social classes with a fixed income -- rentiers and pensioners, and even the civil servants -- saw their real income decline from the very beginning of the Blum experiment. The merely temporary increase in the purchasing power of one section of the population failed entirely to provide the expected "whiplash." [i]
It is curious to note that during the parliamentary career of the 1936 social laws no one foresaw the "disastrous" effects about which there was to be so much complaint later. Even the French Senate, guardian not only of the Constitution but also of financial interests and economic privilege, approved the projected laws by a large majority. Neither the vacations with pay nor the collective agreements which cleared the way for wage increases met with any opposition. The 40-hour law was approved by a vote of 176 to 80. "Lessening the hours of work is the inevitable result of technological progress. Technological unemployment must be cushioned by lessening the hours of work. Furthermore . . . the 40-hour week seems to be one of the essential conditions for social peace." Such was the conclusion of a Senate committee. It appears that the senators judged the effects of the experiment more realistically at the beginning than they did later.
Any attempt to determine the exact amount of the increase in labor cost caused by the new legislation is handicapped by the universally admitted defectiveness of French statistics and economic documentation. The Government which came into power in 1936, although it established a Ministry of National Economy and proceeded to undertake social reforms on a large scale, did not make any effective change in this respect. However, the detailed information provided by M. Détoeuf, the director of a Parisian concern producing electrical equipment,[ii] is so similar to that given to the writer by trades union leaders, and it coincides so closely with official statistical averages that we seem reasonably safe in making certain deductions from it. In this particular concern, the cost of the work hour (in terms of wages) increased 72 percent between the beginning of the experiment and October 1937, shortly before the promulgation of a decree allowing exceptions to the 40-hour law. This figure includes the increases resulting from collective bargaining and subsequent arbitration proceedings as well as those due to the paid vacations and the 40-hour week. For the salaries of white collar employees, the rise of labor costs was only 60 percent.
In subsequent discussions there often has been confusion between this increase in the cost of the work hour and the increase in total net costs.[iii] In the industry chosen as an example, which seems to be representative of many others, wages constituted 25 percent and salaries 15 percent of the total net costs. Therefore the direct incidence on production costs of all the benefits which French wage earners won under the Blum experiment is not higher than 27 percent.[iv] Of this, only 8 percent was caused by the 40-hour week.
Considering on the other hand the increase in the price of raw materials, executive salaries and general expenses, M. Détoeuf indicates that the total increase in net costs in his concern, and in similar concerns, was about 50 percent. In this period, the average rise in labor costs per work hour was apparently about the same as in M. Détoeuf's enterprise. Figures published by the Statistique Générale de la France indicate an increase for male workers of between 57 and 64 percent.[v] During the same period, the official index for wholesale prices for industrial products increased by 61 percent. This indicates that the basic industries did not bear the burden of the social reforms about which their proprietors complained so bitterly. Actually, the net profits announced by representative enterprises for 1935-36 and 1936-37 show (according to figures published in the very conservative L'Activité Economique of April 30, 1938) an increase of 112 percent for the chemical industry, 78 percent for metallurgy and commerce, 39 percent for foodstuffs and 23 percent for mining. The net profits of 122 undertakings in various branches rose by an average of 36 percent. These figures, largely for big business -- and in France big business was defense business -- certainly do not support the assertion that the Popular Front paralyzed production by suppressing or limiting profits.
It is generally agreed, among others by the official Inquiry into Production,[vi] that French industry had chronic defects which raised costs to a much higher level than in other countries with comparable economies. Insufficient rationalization and inadequate scientific organization of work, lack of standardization and incompetent commercial methods, combined to make French industry and commerce especially sluggish under "depression" conditions. The same factors impeded effective competition on the world market, despite the price advantage created by the Blum devaluation.
While the Popular Front reforms were in full bloom there still was hope that "the increase of the social burden resulting from the new legislation will compel thousands of producers to compare the conditions of their production with those of foreign countries and to recognize that structural defects are responsible for their excessive net costs and for their constantly diminishing exports."[vii] Subsequent developments banished this hope. Indeed, the contrary occurred. Several important branches of industry announced that, in view of the increase in net costs, they were simply going to discontinue re-tooling and even normal maintenance. Such was the lack of vigor and resilience of French industry that the coal-mine operators, for example, deplored the rising dynamism of the electrical industry. They had "adjusted" themselves to the economic slump and resented attempts to expand activity.
Timidity was also a general characteristic of the last years of the Third Republic. It arose both from the fear of external aggression and from a feeling of political and social instability. In November 1938, when the Blum experiment had been long since liquidated, Paul Reynaud reported to the President as follows: "The creative spirit and the taste for risk have all but disappeared. Let us not fear to say it: this is the basic evil, for it adds a normal abdication, as it were, to our economic depression."
Another "basic evil," no more due to the social legislation of 1936 than were lack of industrial organization and insufficient consumption, was the defectiveness of the French system of credit. At the very beginning of the Popular Front Government, in June 1936, the combined opposition of the Senate and the Communist group in the Chamber of Deputies defeated the plan to nationalize the Bank of France, advocated by an inter-ministerial commission as the first step in a reform of the whole credit system. The Government thereupon abandoned the idea of placing control of the banking system in the hands of the Bank of Issue, and also refrained from amending its statutes to include regulations concerning discount and credit. Regulations of that sort are common form in other countries. As a result, the Bank of Issue remained without influence in the distribution of credit among the various functions of the economic organism. No change was made in the unsatisfactory requirements for medium and longterm credit. The so-called "Spinasse" loans, introduced by the Government in August 1936, helped smaller enterprises to meet the new conditions but did not provide a solution for the credit problem. Only 13,000 such loans were granted during the first year of the Blum experiment. Apart from these facilities, it was almost impossible to obtain credit except at prohibitive interest rates, 9 to 12 percent.
France had a weekly deficit of more than a billion francs. Her public expenditures were more than one-half of the national income, compared with 27.5 percent in the United States and 32 percent in England. The banks provided credit for the treasury and very little else. In 1935 the total bond issues of private corporations amounted to only 12 percent of Government issues; in 1936 the figure was 7 percent; in 1937, 18 percent; in 1938, 13 percent. The Blum Government neither developed new sources of revenue nor did it dare to move toward a more effective collection of taxes. France remained the classic country of tax-evasion.
The fear of being accused of "etatism" embarrassed the Government also in the matter of the export of capital. The country was steadily being impoverished. Some 38,250 millions of "Poincaré francs" were exported from 1935 to 1937. In addition, French bank deposits in foreign currencies mounted in March 1938 to at least 3,452 millions. Both these types of capital export impeded investment and made a normal functioning of the national economy next to impossible. The resulting shortage of credit was primarily responsible for the difficulty which French enterprises -- particularly the small and medium-sized ones -- experienced in efforts to absorb the costs of social reforms. Only the big corporations could compete for public orders, because they alone could afford the long delays in government payments. Thus while whole business streets in Swiss towns were owned by Frenchmen, French defense production and the French middle classes suffered from the dearth of capital.
"You are afraid," said a great French industrialist in an attempt to dissuade his colleagues from their practices. "Your actions, individually reasonable, are collectively stupid. Tomorrow it will be too late."
The decay of the French economy can be explained without even mentioning the 40-hour week.
In 1935 and 1936 a shortening of the working week was looked to by large masses of wage-earners as the touchstone of every good -- prosperity, leisure, abolition of unemployment. French public opinion was somewhat surprised, however, that in most industries the reduction of the working hours led to a total stoppage for two consecutive days every week. The Government itself was at first opposed to this practice. But the trade unions and employer organizations desired, for different reasons, an eight-hour five-day week.
In order to simplify enforcement most of the government decrees prohibited working more than one shift. This system in general permitted supplementary help to be employed only in so far as there was extra space available in the plants. The meagre statistics available reveal not only that most industries limited the work of men to 40 hours but that they worked the machinery only 40 hours also instead of hiring additional workers. In December 1937 at a time when the 40-hour week was at its apogee, 16.9 percent of the workers worked less than 40 hours. In enterprises which, for various reasons, were not subject to the 40-hour law, only 1.53 percent worked as much as 48 hours; and 51.31 percent worked 40 hours or less despite the absence of any legal limit. Six months later, when certain decrees had already begun to make exceptions, only 0.1 percent of the workers were employed for more than 40 hours and 21.8 percent for less. In April 1939, when a decree practically restored the 45-hour week, a competent official of the Statistique Générale wrote that the measure was taken at a time when the fall in orders seemed not to make it necessary.[viii]
The Inquiry into Production (after severely censuring French methods of industrial organization and the lack of credit) set itself to discover whether or not the 40-hour week caused a shortage of skilled labor. While it stated that in general no such shortage existed, the report added, however, that in some industries, especially mining, difficulties had been experienced in procuring the necessary skilled workers. This was certainly not a direct consequence of the 40-hour legislation, because after the work hours had been shortened no supplementary help was taken from the labor market. In December 1937, when the Inquiry published its conclusions, there were still nearly 338,000 unemployed persons on relief, and these statistics cover only a part of the unemployed. Official estimates have put the actual number at least 1.7 times higher. We therefore can fairly assume that the total number of unemployed, at the moment the 40-hour week was fully applied, was near 575,000, that is to say, 5 percent of the total working population. At the same time, the public placement offices for all France advertised only 3,800 offers of work which were not taken up. In the case of mining, chemicals, engineering and metal works, the only branches of industry where highly skilled workers might have been needed, a total of only 477 offers of work could not be met.
True, such data may not present a complete picture of the situation, for employers often refrained from using the public placement offices, considering them another instance of state intervention and an attempt to encroach upon their rights. But then it is not possible to assert that the labor market was exhausted. The attitude of many French industrialists in this period is revealed in the remark of an observer sympathetic to the employers: "Often heads of enterprises have hesitated to hire new workers that they were not certain of being free to dismiss in case their business slowed up." [ix] This means, in less obscure language, that for political reasons and from fear of union control employers failed to increase production even when they could have done so and when sufficient labor was available.
Even if an increase in production had produced a critical shortage of highly skilled and specialized workers, vocational training and the development of apprentices could have provided the necessary labor reserves. But since the World War both had been neglected. Nobody in France had an exact picture of the existing reserves, and the facilities for technical training were inadequate. The Conseil National Economique in its 1937 inquiry into unemployment pleaded for more precise information. "We found that the search for skilled and trained unemployed workers is not sufficiently systematic. . . . Investigations for the retraining of the unemployed have been conducted only in the Paris area and even there solely in the engineering industry. . . . Unfortunately it is impossible, for the time being, to estimate the number of skilled workers or of those workers who could readily be retrained and whose reëmployment may be realized by the full application of the 40-hour week."
In other words, essential prerequisites to any successful attempt to reduce the working week were lacking in France. But this cannot be taken as demonstrating the inherent danger of any effort anywhere to shorten working hours.
We have heard much about the "calamitous" influence of the 40-hour week on French defense production. Yet from the first moment when it began to be applied, all the decrees emphasized that any number of supplementary hours could be authorized for defense work. At the end of 1937, the Report of the Inquiry into Production stated that the workers had agreed to accept whatever exceptions were necessary in the interests of defense production, asking only for guarantees against abuses.
One might have expected that the 40-hour legislation, badly handled though it was, would at least have increased labor productivity by diminishing overwork and fatigue. In fact, the contrary happened. In the mining industries, for instance, the average productivity per worker declined 8.5 percent between the beginning of 1936 and the end of 1937; and later the decrease became even sharper. Although figures are not available for other industries, personal studies by the writer indicate that the falling off was fairly general. In some branches of the machine industry coöperation between employers and the trade unions seem to have raised productivity. But there have been reliable reports which revealed a marked lowering of productivity in the aeronautical, construction and textile industries. But it is important to observe that these declines were felt long before the Blum reforms were enacted. The psychological discouragement of the workers in the years of deflation and the insufficient replacement of obsolete machinery were taking their toll in French production.
After 1936, retooling was undertaken on too small a scale. Nor was compensation found in a new spirit among the workers. In general, the French labor movement failed to recognize that a rise in individual output was the necessary complement of the legal reduction of the working hours. The schism in the movement had been solved on the surface by the reunification of the reformist and Communist wings. But the leadership was afraid of incurring the hostility of the newly acquired radical members and hence avoided making any appeal for intensified work. It is probably true, too, that the rising Communist influence in some areas aggravated the tendency towards decreased productivity. Certain "colonized" unions adopted the "slow down," or outright soldiering. Strikes for political motives became more frequent. There was a prolonged "strike atmosphere" in industrial centers, and this tended to decrease productivity.
All this having been said, the fact remains that to attribute the decrease in labor productivity solely to the influence of one political party would be to underestimate the complexity of the problem. A decrease almost always occurs in periods of social and political conflict. Perhaps it is a symptom of our times. But the Blum Government, which wished to keep its activities strictly within the framework of the traditional French economic structure, was obliged to overcome these difficulties or to fail. It failed.
It was not the social policy of Blum's New Deal but the inadequacy of its economic measures which contributed most to its failure. The Popular Front was deliberately reluctant to touch the fundamental structure of French economy. It proposed a series of half reforms instead of a single program of real reform. It evoked vague hopes for "a better future for all," but did not indicate a clear and broad path towards the realization of that future. Hence the confusions, not to say contradictions, of its program. Its social policy tended toward high wages and low retail prices. Its economic policy aimed at an increase in profits and abundant capital. The social policy pointed toward increased leisure for the workers; the economic policy could have become successful only by an increase in labor productivity.
It might not have been impossible to find a common denominator for these objectives. In 1936, however, the difficulty of finding a solution was greatly increased by the desperate condition in which France found herself after years of futile deflation and repeated postponements of devaluation. The Popular Front Government, whose every act was gropingly empirical, neglected first to state and then to achieve its principal aims, and contented itself with futile efforts to reconcile the apparently irreconcilable. Léon Blum and his ministers limited themselves to appealing for expressions of confidence in their program -- for the workers to increase productivity and not to trouble the social peace, for the employers to invest and to produce. The workers answered the appeal by the sit-down strikes and other actions which decreased productivity. Capital answered by flight, by its own form of "sit-down," and by other varieties of financial desertion.
In turbulent periods, when individual and group fears predominate, not even democracy can limit itself to persuasion alone. Millions of Frenchmen thought that the Popular Front would enable them to avert a fruitless revolution and would, at the same time, lay the foundation for a new national integration. But the French political system and the French organization of economy were both so outdated that the Government could have attained those aims only by a sweeping reform of the political and economic structure of the country. Such a policy would not necessarily have required a change in system: a thorough alteration of credit and banking, the enforcement of new methods of industrial organization, some important administrative changes, and eventually some rather simple revisions of the prerogatives of the Senate, could have provided the basis for a renaissance of the French Republic.
When it became clear that the bold aspirations of the Popular Front were not to be guaranteed by a realistic economic policy, and that the gains which had been won were doomed to be lost again, the supporters of the program scattered in discouragement. Thereafter the struggle among groups and classes, far from diminishing, became more sharp. The notion of revenge for 1936 dominated industrial relations and political life up to the bitter end and even persisted after the Armistice. It accelerated the processes of decomposition and resulted finally in national surrender and suicide.
A few days after the fall of the Blum Ministry, Paul Reynaud, turning toward the overthrown Prime Minister, cried: "France can no longer afford to deceive herself. Democracy does not have the right always to fail. You know as well as I do that it is the Republic itself which is being challenged."
In the present hour when these two leaders of a defunct democracy are, at the orders of the conqueror, facing trial before a High Court, these words acquire dramatic significance. But the Popular Front's share in the failure of French democracy is quite different from the activities which have been investigated by the High Court at Riom or from that charged by advocates of the thesis that social gains cannot be maintained in periods of national emergency. The Blum Government, not excluding the Socialist ministers, was continually dominated by the fear of transgressing their pledge not to touch the structure of the French economic system. Afraid to bring about "socialism," they did not dare to change anything in the existing framework of "capitalism." To present a constructive plan of economic reform seemed to them impossible because they had been elected on the basis of an incoherent program composed mainly of slogans. Instead of guiding and educating public opinion to permit the adoption of necessary economic steps they confined themselves to a series of timid actions which made democracy absurd when it ought to have been approaching a climax of success.
Even the devaluation of the franc, which could have modified existing economic and social relations and created the prerequisites for a thorough reform, actually was not the motive power of the Government's policy but only the result. Measures against the flight of capital and tax-evasion were believed to be steps toward totalitarianism; price and cartel controls were labelled a menace to democracy.
Introduced under auspices such as these the new social legislation could not be maintained. So long as the problems of public finance and of the private capital market had not been solved, so long as industrial organization had not been improved, it was difficult to reconcile the rise in labor costs with the production necessities of small and medium-sized enterprises. So long as the necessary organs of control had not been created, so long as the hostile attitude of employers and high officials had not been overcome, it was not possible to guarantee the necessary flexibility to the wage-hour legislation. So long as the labor movement had not been educated to its new responsibilities it was impossible to increase productivity.
Had Blum's efforts "to obtain a certain amount of social progress and human equality within the republican form of Government" been accompanied by a sufficiently sweeping program to get France off an economic dead center, French democracy need not have failed. Indeed, it is not at all certain that Hitler would have dared send his troops against a regenerated France which had provided her peasants and workers with a "new order" worth defending. The failure of the Blum experiment proved once more how profound was the French decay. Its failure, not its achievements, encouraged Nazi Germany to risk aggression and helped give it the victory.
[i] Even such improvement as occurred may be attributable to the long-delayed monetary devaluation.
[ii]Cf. A. Détoeuf. Nouveaux Cahiers, April 15, 1937, p. 2-5.
[iii] The New York Times in its controversy about the "lesson of France" with Secretary of Labor Perkins falls into the same mistake (October 9, 1940).
[iv] We reach this figure by multiplying the share of net costs represented by wages (0.25) by the share of increase in work hour costs (0.72), and adding the result to the figure obtained by multiplying the share of net costs represented by salaries (0.15) by the share of increases in work hour costs (0.60).
[v] The figures given by the Bulletin of the Statistique Générale (v. 27, p. 237-264) have been corrected by adding the costs for paid vacations.
[vi]Journal Officiel, December 16, 1937.
[vii] P. Jéramec in Revue d'Economie Politique, 1937, p. 777.
[viii] A. Sauvy, Bulletin du Centre Polytechnique d'Etudes Economiques, May 1939.
[ix]L'Activité Economique, October 31, 1937.