Great Depression in France
The Great Depression affected France from about 1931 through the remainder of the decade. The crisis affected France a bit later than other countries, hitting around 1931. While the 1920s grew at the very strong rate of 4.43% per year, the 1930s rate fell to only 0.63%. The depression was relatively mild: unemployment peaked under 5%, the fall in production was at most 20% below the 1929 output; there was no banking crisis. The depression had some effects on the local economy, which can partly explain the 6 February 1934 crisis and even more the formation of the Popular Front, led by SFIO socialist leader Léon Blum, who won the election of 1936.
Economic crisis of the 1920s
Like the United Kingdom, France had initially struggled to recover from the devastation of World War I, trying without much success to recover war reparations from Germany. Unlike Britain, though, France had a more self-sufficient economy. In 1929, France seemed an island of prosperity, for three reasons. First, it was a country traditionally wary of trusts and big companies. The economy of France was above all founded in small and medium-sized businesses not financed by shares. Unlike the Anglosphere and particularly Americans, the French invested little on the stock exchange and put their confidence into gold, which in the crisis of 1929 was a currency of refuge. Gold had played the same role in the first world war, which explained French attachment to it. Finally, France had had a positive balance of payments for some years thanks[neutrality is disputed] mainly to invisible exports such as tourism. French investments abroad were numerous.
The German reparations decided by the Treaty of Versailles in 1919 brought in large amounts of money which served principally to repay war loans to the United States. Reparations payments ended in 1923. In January of that year, Germany defaulted on its payments and the French president, Raymond Poincaré, invoked a clause of the Versailles Treaty and sent troops to occupy the Ruhr valley in the hope of enforcing payment. Germany responded by flooding the area with inflated money, ruining its currency and denying France any hope of full reparations. Poincaré accepted an agreement mediated by the United States in which it received smaller payments, but Poincaré's government fell soon afterward.
While the United States experienced a sharp rise in unemployment, France had almost none. Much of that was due to a simple lack of manpower; at the end of the war, France had 1,322,000 dead and three million wounded. One in four of the dead was younger than 24. That in turn lowered the birth rate, so that by 1938 France still had only half the number of 19-to-21 year-olds it would have had had the war not happened. But whatever the causes of full employment, confidence in the government was high. The French economy was stronger than those of its neighbours, notably because of the solidarity of the franc. The introduction of the US economic model, inspired particularly by Ford, ended suddenly and, with it, the modernisation of French businesses. Everything seemed to favour the French; production didn't weaken before 1930, particularly in primary materials, and the country was the world's leading producer of iron in 1930. France felt confident in its systems and proud of its vertu budgétaire, in other words the balancing of the budget, which France had managed more or less for nearly a decade.
In 1927, France gained from the world crisis in becoming the world's largest holder of gold, its reserves growing from 18 billion francs in 1927 to 80 billion in 1930.
Problems of financial policy
There was a further contrast in the way France and Anglo-Saxon nations viewed their economies. The Anglo-Saxon model encouraged growth of the money stock; in France, the Depression was seen as a necessary evil, to "purge" the excess liquidity in the world economy and to push over-indebted companies into failure.
Successive governments maintained restrictive policies into 1934 and interest rates were kept high to maintain the attractiveness of the franc. The absence of contra-cyclical policies kept the state budget in balance.
In 1934-35, the Pierre-Étienne Flandin government allowed a less restrictive policy allowing short-term indebtedness. The Banque de France lost 15 per cent of its reserves and the government was replaced by one led by Pierre Laval, who installed a provisionally deflationist policy before himself accepting a public deficit. The franc ran into a new crisis.
Laval tried in 1935 to reduce salaries in an effort to lessen unemployment. He ran into the resistance of unions in the public sector.
The inability of French production to take off was in contrast to the experience of the United Kingdom, which had devalued in 1931. Devaluation was something France didn't want and it happened only in 1936.
The Depression strikes
- "The winter I spent on the streets - the winter of '32-33 - was no milder nor harder than any other winter; the winter cold is like labour pains - whether it lasts for a longer or shorter period of time there is always the same amount of pain. That particular winter, it snowed and it froze; thousands of young men, forced out of their jobs by the crisis, struggled on to their last penny, to the end of their tether then, in despair, abandoned the fight...
- On street benches and at métro entrances, groups of exhausted and starving young men would be trying not to die. I don't know how many never came round. I can only say what I saw. In the rue Madame one day I saw a child drop a sweet which someone trod on, then the man behind bent down and picked it up, wiped it and ate it."
From depression to war
The distress of the population had political consequences. A riot on 6 February 1934 led to the fall of the government and a nation which had traditionally leaned to the right elected the socialist Popular Front government in 1936.
The Popular Front, an alliance of Socialists and Radicals with support outside the government of the Communists, was led by Léon Blum. The Popular Front introduced many measures such as the 40-hour working week and holidays with pay, but Blum felt handicapped in introducing more than limited changes to the economy because of his dependence on the more right-wing Radicals. This did little to placate a population anxious for change and a wave of strikes broke involving two million workers  Factories were occupied and membership of the Communist party rose to 300,000 in 1937.
On the night of 7–8 June 1936, employers and unions signed the Matignon Agreements by which they raised wages by 7 to 15 percent to increase workers' buying power, to stimulate the economy and to bring an end to the strikes. Blum brought in measures to control cereal prices, to insist that the Banque de France place the national interest above that of the shareholders, and nationalised the armaments industry. That upset the Left, which saw too much legislation, and did nothing to please the Right, which believed that state involvement in a capitalist economy would bring about disaster.
The Radicals would not accept currency controls and the result of the unrest was that capital fled abroad. That weakened the economy and employers tried to minimise the results of the Matignon agreement, which created more social tension and in turn a further flight of capital.
Devaluation of the franc by 30 per cent became inevitable, despite government assurances that it would not happen. In January 1937, Blum went further and announced "a pause" to social reforms. The Senate refused to give him emergency powers to cope with the recession and he resigned on 20 June 1937 and the first Popular Front began to fall apart. A second had even less success.
The President, Lebrun, called on the Radical leader Édouard Daladier to form a new government without the Socialists. Daladier relied on liberal economics to rescue, or at any rate keep afloat the economy on a worldwide sea of financial difficulties. Employers and police acted harshly against strikers and determined to root out "troublemakers". In 1938 the Senate gave Daladier the emergency powers that Blum had been denied and the government favoured employers over workers in industrial disputes, particularly in companies which had come close to coming under the control of their workers.
Under Daladier, economic conditions slightly improved, to a backdrop of growing, increasingly vocal communist and fascist movements. These gains, however, were due as much as anything to the growth of the armaments industry. On 3 September 1939, following the illegal attack against its Polish ally by Germany, France declared war on Germany.
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