Today's Leaders Don't Even Know What Questions to Ask
At the Hotel Matignon, Paris, early in the morning of June 7, 1936, the 40-hour workweek was born. Delivered as these things usually are out from the depths of crisis and unrest, France’s Popular Front under Léon Blum had few palatable alternatives. The Accords de Matignon signed that day were hailed by workers’ groups and unions as the Magna Carta of French Labor representing progress for the first time in a modern industrial sense.
The idea behind it was a bit different than it might otherwise appear. France by 1934 was a complete disaster, riots, strikes and general unrest commonplace. The reason was simple enough, the Great Depression, which had thrown so many French workers into the depths of poverty via widespread unemployment.
America had the New Deal by which to try and do something about the industrial scale of the unemployed. FDR’s government attempted to follow Keynes’ pyramids in the desert dream. The vast pools of unused American labor would be tapped for government construction projects often of dubious worth and scheme. You might see quite a lot about the Hoover Dam and NYC’s Lincoln Tunnel, but you don’t ever hear anything about all the rest.
This wasn’t possible in France because the government had been under constant pressure, a victim of its own ineptitude contributing to the chaos. Various Prime Ministers would come and go (and come and go again), each attempting his own solution to the great economic problem. Stability simply isn’t an option when the very nature of proposed “solutions” is a contribution of further instability.
On February 6, 1934, anti-parliament demonstrations culminated in a full-scale street fight on the Place de la Concorde very near where the French National Assembly met. Fifteen were killed among the largely far-right rioters, which had the effect of raising alarms in the government as well as among those on the far-left fearing the arrival of the long-feared fascist coup.
Camille Chautemps had been forced to resign as Prime Minister only a little more than a week before, and Édouard Daladier who had been brought in to replace him quit on February 7. The way was left open for Gaston Doumergue, the former French President, to try his hand.
Doumergue would form a coalition government that purposefully excluded communists and socialists, for them confirming their fears. The left would further radicalize to scale back what they saw as fascist intrusions into the Third Republic. The right, under Doumergue, would focus much energy on the politics rather than economics.
Doumergue lasted only to November 1934, a span of just nine months. He had tried to reduce the salaries of civil servants as one means to balance the fiscal budget ravaged by depression. Though prices had fallen by about 15% on average, a 3% proposed reduction in the pay for government workers had added more unrest and mistrust to the explosive situation.
Pierre-Étienne Flandin came next, a former businessman, World War I veteran pilot, and self-described pragmatist. He had been Minister for Public Works under Doumergue which many thought might help repair the damage to public trust. At best, Flandin wanted to do little that would rock the boat, counting on worldwide economic recovery to save France from itself. Most experts at the end of 1934 had thought globally synchronized growth was more than a looming prospect.
It wasn’t, not really. On June 1, 1935, Flandin ran out of time waiting and was replaced by Fernand Bouisson who was replaced six days later by Pierre Laval. France’s economy hadn’t recovered in 1935 and indeed was falling backward. Laval’s proposed answer was more budget cuts and business concessions, authorized reductions to rents and even fixed payments some of which were extralegal and broke private contracts and state commitments.
On July 14, 1935, radicals, socialists, and communists alike all demonstrated throughout France. It was an unusual coalition of disparate groups from “both” sides of the political spectrum, cobbled together into what was initially called the Rassemblement Populaire. These populists would later take the name Front Populaire, or Popular Front in English.
France’s economy would revive somewhat in 1936 but it didn’t matter as it wasn’t meaningful. The numbers may have been slightly positive as they had been in 1933 and 1934, but no one had actually manufactured a meaningful economic recovery (or thought to leave the private sector to sort everything out). The general election of April and May 1936 was the Front Populaire’s opening; the three populist parties combined into a single election platform whose centerpiece was raising wages.
The extremes took France by storm on that issue alone. The populist coalition would win 57% of the vote and end up with (after some centrist candidates withdrew during runoffs) a two-thirds majority in the Chambre des députés. Léon Blum was given a chance as a reformer replacing Albert-Pierre Sarraut who had been brought back for four months after Laval had been forced to resign just before the election.
Even after that election victory, however, France was gripped by strife. Within days there were strikes in Toulouse and Le Havre. Widespread walkouts and factory takeovers (workers would “sit in” facilities so as to prevent owners from locking out workers and taking on replacements) would spread throughout the month. Labor union officials wanted to ensure that electoral victory wasn’t for nothing.
It was the occupations that ended up most compelling. Workers weren’t interested in destruction or disorder for its own sake. This wasn’t revolutionary reign of terror. Indeed, nearly every facility commandeered remained in good operation where workers took great pains to ensure very little would be disturbed. When everything was over, they wanted to get back to work; to make sure that they could still work.
Their complaint was not against labor but the ongoing depression. They wanted to work but feared unemployment and reduced wages.
From late May to early June 1936, some 12,000 incidences of labor uprising were initiated covering 2 million perhaps as many as 3 million French workers. The result was the meeting at Prime Minister Léon Blum’s official residence the Hotel Matignon and the drastic reforms it produced.
The conversion to a forty-hour workweek (among other concessions, including two weeks of paid holidays) meant a rise in pay as well as an element of fairness. So long as there were so many unemployed, reformers believed, the work that was available might be better shared through shorter workweeks (but at the same wage). It meant disaster for employers.
Between December 1936 and May 1937, the Blum government imposed the labor restriction ruthlessly and with few exceptions. France’s economy fell backward once more, small positive numbers converted into sprawling negatives.
Blum, the friend of labor radicals, was deposed in June 1937 barely more than a year after his start. Facing little economic progress, he would offer to “pause” government expenditures and also further labor reforms as a last-ditch effort to sustain his status. Blum was followed by another go ‘round for Camille Chautemps, his third tenure. Chautemps would resign in March 1938 to be succeeded by…Léon Blum who wouldn’t even last a single month in his second turn at Prime Minister.
All were followed by Édouard Daladier in April 1938, his third, who had replaced Chautemps once before in January 1934. By then, though, Hitler was sweeping across Europe (politically) and the threat from Nazi Germany clear enough even to pacifists. France, equally obvious, was in no position economically therefore militarily to meet the threat.
In October 1938, less than a year before European outbreak of the coming conflict, France’s Senate in conjunction with the Chambre des députés conferred on Daladier’s government pleins pouvoirs;that is, the ability to issue non-legislated decrees with the full force of law. These were temporary emergency powers that had been granted several times before (the 1926 franc crisis, for one) during various dangers to the Third Republic.
For thirteen days, Daladier’s cabinet led largely by Paul Reynaud came back with 42 decree-laws drawn up from about 100 Orders-in-Council. Many were shocking and assaultive, even those eventually adopted. Reynaud would gain new taxes and cuts in government spending, the very things that led to the Front Populaire. He would also be granted an end to the forty-hour workweek.
The Daladier government would allow a 5-10% wage concession to offset going back to a forty-eight-hour workweek. In one radio address, Reynaud asked the French people, “Do you believe that . . . France can maintain her living standard, spend 25 billions [of francs] on armament, and have two days off every week, all at the same time?” At that very moment the Nazi’s were “working night and day to forge weapons.”
There were again labor strikes all over France in November 1938, culminating with one nationwide on November 30. No matter what the French government did during that decade, swinging back and forth between austerity, reform, and an argument devaluation versus deflation, the situation never shifted for the better. As Reynaud would say toward the end of Blum’s first term:
“This is unusual in the history of this legislature in the thirties. We used to change governments all the time but we never changed policy. Now we never change the government but we change policy all the time.”
What never changed was depression. France’s economic weakness was Germany’s opening into World War II. Getting economics wrong isn’t a matter of academics. Being unable to solve and get past prolonged stagnation is devastating to the very fabric of a nation. Divisions, which are always present in human affairs, suddenly became insurmountable chasms and the stubborn instability that only reinforces these simultaneous social and economic pressures.
Even the forty-hour workweek by the end of the thirties had been transformed from an aid to the unemployed (spreading out available work) into a political brand over which to fight. Economic arguments against it no matter how obvious (France’s economy actually rebounded in 1939 after the 42 decrees, alas too late) no longer held any sway. Positions became entrenched as a matter of raw emotions. When things don’t work, devolution into every-man-for-himself is par for the course.
In 1930, France’s Gross Domestic Product amounted to about 440 billion francs (constant 1938 francs) of output. By 1938, GDP was about 400 billion though up from a low around 370 billion. Like politicians everywhere, especially FDR, those in France chose always to highlight and over-emphasize “up from the low” rather than any comparison to the pre-depression peak or more appropriate the trend that would’ve continued if not for the Crash in between.
Real economic growth is non-linear, a point proved by France’s political and social instability of the thirties.
The French, thankfully, are in nowhere near as bad a shape today in absolute terms. However, the same pattern emerges from the same sort of deficiency; the scale is different though the underlying form is frighteningly the same.
According to Eurostat, Europe’s statistical agency, real GDP in Q3 2018 was for France €552 billion (seasonally-adjusted quarterly rate, in 2010 €’s). By the count of every major news organization, backed by central bankers and Economists, the economy there is booming and has been for several years. It hasn’t experienced a negative quarter in more than two years and output has expanded by more than 13% since the end of the Great “Recession.”
It is on that basis that Emmanuel Macron’s government chose to institute this gasoline tax. Why not try for what he calls social progress (linked to climate change) when things are going so well? A tax increase coming during an economic boom would make some people unhappy, certainly, a minor discomfort they’ll easily prioritize as they get back to being boomingly busy.
Macron is now no more popular than his historically unpopular predecessor François Hollande. Rumors are that on Monday a “no confidence” vote will be held within France’s deeply divided Parliament. The socialists and communists are leading the rebellion again.
The country has been gripped by the worst rioting and political violence in the last half century, somehow baffling many observers. Like scenes from the thirties, several people have been killed and despite the government backing down on the gasoline tax there are no signs this will abate. The French are very angry again.
If there is a difference between the thirties and today it’s only that back then the depth of contraction left no doubt as to the depression. In the 21st century, prolonged stagnation often takes the form of those interspersed positive periods confusing the politicians of the Third Republic. GDP is growing but it isn’t indicative of meaningful growth.
Real GDP in France during Q3 2018 wasn’t even 9% more than real GDP during Q1 2008 despite the passage of ten and a half years. An entire decade (plus) without total expansion reaching double digits qualifies for the definitions of stagnation and depression. Had the Great “Recession” been an actual recession, France’s real GDP last quarter would’ve been instead around €650 billion. There’s an unknowable amount of anger and resentment in the €100 billion that didn’t happen (and that’s only for the one quarter out of more than forty now).
Fifteen percent shrunk is for any economy an unimaginable level of destruction and social pressure. It can become unmanageable when everyday workers keep hearing how good things are only to see for themselves how that isn’t true. Throw a gasoline tax on top and it becomes a raging boil.
At least in the thirties there were politicians who knew there was a problem, even if they could never identify the right solution. Today, they won’t even admit there is one let alone try to figure how big.
Instability is as much perception as it is statistics. In that way, there are again these disturbing similarities. During the Great Depression, there were no GDP reports or estimates on industrial production followed widely by the public; the French, as Americans, Brits, or anyone else, knew the score by their own eyes.
Over the last ten years, though there are now many deep and often decent statistics they’ve been so bastardized and intentionally misinterpreted the people of any nation are as often kept so in the dark about the real state of economic affairs.
And now the world moving toward 2019 is set to face yet another “unexpected” downturn. In many places, possibly France, this isn’t a future concern. Why so much violence and resentment today? The next downswing may have already begun there.
We’ve seen throughout history what happens when authorities don’t have any answers. The end result, after enough time, is gross, unpredictable instability. Unlike the thirties, though, today’s pitiful class of officials don’t even know what the questions are. Workers always suffer either way.
Four generations ago, that was just the beginning. Is anyone paying attention? A Fed “pause” isn’t even a start.
