Agricultural production
Despite the failures of monetary policy, production increased fairly rapidly between 1945 and 1949. This recovery did not occur without difficulties, particularly in agriculture. The progress of agricultural production was slower than that of industrial production, which reached the level of 1938 in 1947, although it should be noted that 1938 itself had been a year of recession. Farmers encountered problems related to shortages of fertilizers and agricultural machinery. Moreover, the ease with which products could be sold did not encourage farmers to modernize their production methods. Agricultural policy was not free of errors. The fixed price of wheat encouraged production to shift toward fodder crops and secondary cereals whose prices were not regulated. The government’s constant inability to control the meat distribution network allowed prices of animal products to remain relatively high. As a result, farmers “transformed” plant products into animal products, which meant a significant loss of calories, estimated between 40 and 90 percent depending on the case, a situation that harmed the majority of consumers during this period of scarcity.
The government also adopted the unfortunate policy of encouraging beet cultivation, as had been done before the war. Instead of developing sugar production that could have absorbed the beet harvest, the beets were distilled and the alcohol obtained was entirely purchased by the State. By April 1949, the stocks of the Alcohol Monopoly reached nearly four million hectoliters, while sugar rationing was not abolished until December of the same year. Overall, agricultural and supply policies between 1945 and 1949 were considered a failure. Poorly informed about economic realities and pressured by public opinion, the government demonstrated inconsistency and weakness.
The report of the Institut National de la Statistique et des Études Économiques concerning this period offered a particularly severe assessment:
“Between the first measures allowing freedom of sale (summer of 1945) and the suppression of the Ministry of Supplies (end of 1949), four and a half years passed during which a wide variety of measures were adopted: free sales at controlled prices, dual-sector systems, controls imposed at the wholesale level but not at retail, and sometimes the opposite, priority purchases, the creation of pilot warehouses, and other arrangements. It might perhaps have been preferable to end more rapidly with methods abusively described as dirigiste, but in reality opportunistic and often inconsistent. In any case, in the absence of monetary contraction, the premature abandonment of rationing and price controls was responsible for the increase in prices paid by consumers and, consequently, for the rise in wages and the deterioration of the currency.
It should be noted, by way of comparison, that the British did not see the last vestiges of rationing disappear until July 1954. Their retail prices had a coefficient of 2 compared with prewar levels, whereas ours reached a coefficient of 25.”
Industrial production
Industrial production had declined during the war years and by 1944 had reached only 55 percent of its 1938 level, which itself had been about 25 percent below the level of 1929. With the end of the war in Europe, the resumption of imports of raw materials and capital goods made possible a relatively rapid increase in industrial output. The capacity to import largely determined the pace of industrial expansion.
Numerous bottlenecks had to be overcome, and the main achievement of the first Plan de Modernisation et d’Équipement — known as the Monnet Plan — was to address this problem. At the initiative of Jean Monnet, appointed Commissioner-General of the Plan in January 1946, the government decided to direct scarce resources toward key sectors that governed the general activity of the nation: coal, electric power, cement, steel, agricultural machinery, and transport.
In this way, industries producing capital goods progressed more rapidly than those producing consumer goods. However, controls were not always effective, and inflation often favored, through its impact on incomes, the diversion of scarce resources toward activities of limited importance for the reconstruction of the country’s economic potential.
The broad outlines of the balance sheet of France’s economic reconstruction may be summarized as follows. On the positive side stood the beginning of growth and development; on the negative side, the rise in prices and inflation that governments proved unable to control. By 1949, the gross national product exceeded the level of 1938 by about 10 percent. Industrial production had increased by more than 20 percent, while agricultural production remained approximately 5 percent below its prewar level.
It should also be noted that the share of gross investment in the national product rose significantly, increasing from 12 percent in 1938 to 19 percent in 1949. The volume of exports increased by 18 percent, while imports remained unchanged. The rise of investment and exports constituted a sign of favorable economic evolution.