Same song, second verse

Further readings from The Collapse of the Third Republic: An Inquiry into the Fall of France in 1940

The financial crisis of the mid-twenties had another profound effect on French public opinion which would further divide the citizenry and weaken the Republic.  The bankers, industrialists, and businessmen, and even the more thriving peasants and shopkeepers, came to believe, with a certainty that brooked no compromise, that the political “Left” was incapable of governing the country.  They believed that unless the conservatives dominated Parliament and government, France was lost.  Of couse, they could not see their own shortcomings, above all their selfishness, their reluctance to make a fair share of the sacrifices needed, and their blindness to the need in a modern industrial society of some measure of social security and a more equitable distribution of both wealth and the increasing tax burden.  In social welfare France in this period lagged behind all other nations in the West, and in wages and conditions of labor it was the worst of all. 

A few visionaries urged Poincare to take advantage of the vastly improved situation after 1926 to overhaul the old-fashioned, nineteenth-century structure of French society, modernizing the government and the economy, building new housing so urgently needed, rescuing agriculture from its unmechanized stagnation, encouraging responsible trade unionism and responsible collective bargaining of labor disputes, and instituting a bold program of social security.  In a country where the workers and peasants were just able to exist and a considerable section of the lower and middle bourgeoisie was being proletarianized by inflation and the devaluation of the franc, this would have strengthened the nation for the unseen but inevitable ordeals that lay ahead.

Poincare responded – but only feebly.  The Parliament was not ready for such a far-reaching regeneration.  Finally, on April 5, 1928, just in time for the elections, the Chamber and Senate approved a modest program of social insurance, limited mostly to the sick and the aged, with wage and salary earners contributing 5 percent of their pay, the employers an equal amount, and the state defraying the cost of the operation.  Characteristically, the Parliament provided a delay of twenty-two months in the implementation of the law.  Characteristically, too, the various employers’ associations, having lost their fight to prevent Parliament from enacting the modest social-security legislation, continued their well-financed campaign in the press and on billboards to render it ineffective and to get it repealed.

The Left had its blind spots too in these troubled years of the 1920s.  … like those on the Right they failed to recognize their own shortcomings.  They did not seem to comprehend their own responsibility for the financial mess of the government, which lay primarily in their indecision, in their inability to agree on – let alone enforce – any policy which might have put the government in the black and stopped the financial panic, the flight of capital abroad, and the disastrous fall of the franc. 

In this time the gulf between the Right and Left, between the possessors and the masses, between popular press and its readers, was further enlarged.  More and more, as the 1920s came to an end and the clouds threatening a world-wide depression appeared over New York, Frenchmen faced one another across widening chasm that made hearing over it more difficult and mutual understanding almost impossible.  Each side hardened in its belief that the other was unfit to govern the Republic.

History doesn't repeat, but it does rhyme.

In the context of current "discussions" in DC, I found this startling passage from “The Collapse of the Third Republic – An Inquiry intothe Fall of France in 1940”

Chapter II “Decline – Political and financial chaos, and the Poincaré recovery 1924-1930”

Year after year during the 1920s, whether the cabinet was conservative or radical, the borrowing and the advances continued until there came a time – several times – when the short-term loans could not be repaid when they fell due and the advances from the Bank of France were halted and the Treasury was literally empty.

It seemed obvious that taxes would have to be raised and some financial sacrifices made by those best able to afford them.  But this did not seem obvious to Parliament.  For five years after the war it declined to vote any substantial increase in taxes.  When the Finance Minister of the conservative Bloc National government in 1923 asked for six billion francs in new taxes, he was turned down.  At the beginning of 1924, the Treasury could not meet its short-term obligations and Parliament finally approved Poincaré’s demand for a rise of 20 percent in all taxes, direct and indirect.  This fell hardest on the poor, since indirect taxes on consumption account for nearly half the state revenues, and the income tax – full of glaring loopholes and scandalously evaded by all who could get by with it, the rich above all – for less than a quarter.  The selfishness of the moneyed class in avoiding any financial sacrifice to help put the country back on its feet later struck many French historians as shocking.  The possessors and the manipulators of most of the country’s wealth simply contrived to escape shouldering a fair share of the burden for the war and the reconstruction. 

They stubbornly and successfully opposed all efforts of Parliament and government to increase income taxes adequately and fairly or even to clean up the rotten tax structure which weighed so much more heavily on the poor than on the rich.  And in their fanatical regard for their capital and profits, which was matched only by their disregard for the salvation of the country, they spirited their capital abroad to such a massive extent as to make inevitable a fall of the currency, the bankruptcy of the Treasury, and a lack of capital at home to finance badly needed reconstruction and in particular to enable the farmers, the little businessmen, and the shopkeepers to get a new start in the difficult postwar world.  When in the spring of 1925 the Herriot government asked Parliament for a law to control the headlong flight of French capital abroad the measure was bitterly attacked in the capital’s leading afternoon newspaper, Le Temps, organ of the steel trust, Le Comité des Forges, as “rank socialism” which would destroy the capitalist system.  Parliament refused to approve the law, the massive movement of capital abroad continued without hindrance, and though the Treasury was again emptied and the franc fell further France was saved from this sort of “rank socialism”.

But the government was not saved from the necessity of finding money to carry on the affairs of state.  When the debate in the Chamber of Deputies on where to find it began in November 1924, a Socialist leader, Pierre Renaudel, made a suggestion that raised a howl of protest from conservatives in Parliament and the Press.  “You have to take the money from where it is,” he argued.  Indeed, one might ask, from where else?”  But the very idea of asking those who had the money to shoulder the main burden of increased taxation frightened them to death and there was a new exodus of capital to safer foreign havens.  “Above all else,” cried the influential Journal des Finances, “there must be a stop to this worrying of the possessors.”  Perhaps so, though the possessors seemed easily prone to worry.  The worries of the dispossessed were not mentioned, nor was the worrying of the government by hostile acts of the financial community, led by the Bank of France, which in the spring of 1925 launched an offensive against the “leftish” Herriot cabinet with the object of bringing it down and terminating the threat against its moneybags.

The flight of capital itself, in which the great financial houses took the lead, was, aside from the damage it did to the country, a form of blackmail against the government not to raise taxes and especially not to consider a tax on capital.  The banks resorted to other forms of blackmail.  They offered to lend the Treasury money for twenty-four hours in order to cover up the advances of the Bank of France above the legal limit in return for the government overlooking evasions of income tax and refraining from clamping on a control of the export of capital.  Suddenly, at the beginning of April 1925, as the final assault on the Herriot government began, the banks refused further loans, even for a day, so that the surpassing of the legal limit of advances from the Bank of France had to be published.  As a result the franc fell and further panic ensued.

Actually, during the conservative Poincaré regime prior to 1924 the Bank of France had often advanced to the Treasury more than the law allowed.  Moreover it had put at Poincaré’s disposal certain “secret funds” of the Bank, which were considerable.  Now, in April 1925, it denied to the Cartel government what it had been pleased to accord the more moderate Poincaré cabinet.  On April 1 and again on April 6 the Bank of France warned the government that the legal limit of its advances to the state – 41 billion francs – was about to be reached, that it would be illegal to advance more, and that the government would find itself without means to meet its obligations, even the payroll of its employees.  Secretly the Bank leaked the news to the press, most of which, including the large-circulation daily newspapers, had vociferously supported the financial powers in the offensive to bring down the Cartel government.  The influence of the French press, dominated by large business and financial interests, in undermining not only a popularly elected government but – more important – the Third Republic itself in these declining years was growing.