Carroll Quigley - Tragedy and Hope - A History of the World in Our Time

At the same time, the Lille-Lyons Axis strengthened itself. The French chemical industry, already largely monopolized by Établissements Kuhlmann, was forced into a single corporation (Société Francolor) controlled by the Lille-Lyons Axis and I. G. Farben. The light-metals industry, already largely monopolized by Alais, Froges, et Camargue, was centralized almost completely in this firm. The artificial textile industry, already largely monopolized by the Gillet clique, was centralized under a single corporation, France-Rayonne, under joint Gillet-German control. The automobile industry was subjected to a single control—the Comité d’organization d’automobiles—and set up a joint manufacturing company—Société generate francaise de construction d’automobiles. The whole system was controlled by a small group in Lyons centering about the Gillet family and represented on the political scene chiefly by Pierre Laval.

The struggles between these three great economic power blocs in France are rather difficult for Americans to understand because they were not reflected in price competition in the market where Americans would normally expect economic competition to appear. In the field of price policies, the three blocs generally cooperated. They also cooperated in their attitudes toward labor, although to a lesser degree. Their rivalries appeared in the fields of economic and political power as struggles to control sources of raw materials, supplies of credit and capital, and the instruments of government. Price competition, which to an American always has seemed to be the first, and even the only, method of economic rivalry, has, in Europe, generally been regarded as the last possible method of economic rivalry, a method so mutually destructive as to be tacitly avoided by both sides. In fact, in France, as in most European countries, competing economic groups saw nothing inconsistent in joining together to use the power of the state to enforce joint policies of such groups toward prices and labor.

The French defeat in 1940 shattered the stalemate between the economic power blocs which had paralyzed France in the 1930’s and done so much to make the defeat possible. The two older blocs were disrupted under the German occupation and the Vichy regime, the Paribas bloc by the anti-Semitic laws and the Union-Comité bloc because its holdings were desirable to the Germans and their French collaborators. The Lille-Lyons Axis, led by the associates of the Banque Worms and the Banque de l’lndochine, sought to take over most of the French economy as the willing collaborators of the Germans and their old associate, Pierre Laval, and were fairly successful in doing so, but the economic confusions of the occupation and the burden of the German occupation costs made it impossible to win any significant benefits from their position. Moreover, as collaborators with the Nazis the Lille-Lyons Axis could not expect to survive a German defeat, and did not do so.

The three prewar blocs have played no significant role in France since 1945, although some of the personnel of Paribas have done so, notably Rene Mayer, active head of the Rothschild family interests who was minister of finance in the early postwar government. Later, in 1962, De Gaulle made the director of the Rothschild bank, George Pompidou, prime minister. The rather prominent role played by bankers such as these did not prevent France from following the pattern of new economic procedures which we have observed in other countries. The process was delayed by the political paralysis arising from the French parliamentary system, especially the instability of Cabinets arising from the multiplicity of parties. The military crisis in Indochina, followed by the protracted and frustrating civil war in Algeria, prevented France from establishing any satisfactory economic system until 1958.

The only achievement of the earlier period was, however, a very great one—the French role in establishing the European Common Market, which was decisive. This was established by the Treaty of Rome of 1957, with six members (France, West Germany, Belgium, the Netherlands, Italy, and Luxembourg). It planned to remove the internal customs barriers among its members by stages over at least a dozen years, while adopting a common external tariff against outsiders. In this way a mass market would be provided which would allow mass production with lower costs. France was unable to contribute much to this new market until its political instability was ended by the establishment of the Fifth Republic, on a more authoritarian pattern, in 1958 (constitution of October 4th). In December of that year, the franc was devalued and a program of fiscal austerity was inaugurated. At once economic activity began to rise. The rate of growth of industrial production reached 6.3 percent in 1961 and almost 8.5 percent in 1962. The gold reserves doubled within two years of the devaluation.

The resulting prosperity, called an “economic miracle” in the 1962 Report of the twenty-nation Organization for Economic Cooperation and Development (the successor organization to the Marshall Plan), was unevenly spread in that farmers and government employees obtained less than a fair share of it, and it was accompanied by an undesirable inflation of the cost of living (with 1953 as 100) to 103 in 1956, up to 138 in 1961, and to 144 in 1962. However, it brought France and the other Common Market countries to an unprecedented level of prosperity which was in striking contrast to the drab conditions in the unfortunate countries within the Iron Curtain. The British, who had formed a European Free Trade Association of the “Outer Seven” (Austria, Denmark, Norway, Portugal, Sweden, Switzerland) to seek free trade among members but no common external tariff against others, sought to lift its rather lethargic economy by joining the Common Market in 1962, but was rebuffed by De Gaulle, who required as a price that Britain renounce its efforts, going back over decades, to establish a special relationship with the United States.

The United States of America

The United States, which presents the most extreme example of financial capitalism, reached monopoly capitalism only in a partial and distorted fashion and for a very brief period, and has reached the following stage of the pluralist economy only in an unselfconscious and tentative way.

From the beginning, the United States had a shortage of labor in the face of an unprecedented richness of resources. As a result, it sought labor-saving devices and high output per man-day of work, even in agriculture. This means that the amount of capital equipment per man was unusually high throughout American history, even in the earliest period, and this undoubtedly presented a problem in an undeveloped country where private savings were, for many generations, scarce. The accumulation of such savings for investment in labor-saving mechanisms brought an opportunity to financial capitalism at an early date. Accordingly, the United States had financial capitalism over a longer period and in a more extreme form than any other country. Moreover, the size of the country made the problem of transportation so acute that the capital necessary for the early canals, railroads, and iron industry was large and had to be found from sources other than local private persons. Much of it came from government subsidies or from foreign investors. It was observable as early as 1850 and had overseas connections which were still in existence in the 1930’s.

By the 1880’s the techniques of financial capitalism were well developed in New York and northern New Jersey, and reached levels of corruption which were never approached in any European country. This corruption sought to cheat the ordinary investor by flotations and manipulations of securities for the benefit of “insiders.” Success in this was its own justification, and the practitioners of these dishonesties were as socially acceptable as their wealth entitled them to be, without any animadversions on how that wealth had been obtained. Corrupt techniques, associated with the names of Daniel Drew or Jay Gould in the wildest days of railroad financial juggling, were also practiced by Morgan and others who became respectable from longer sustained success which allowed them to build up established firms.