Chapter V Prices of Commodities in France during the War

CHAPTER V Prices of Commodities in France during the· War General index numbers, covering a wide range of com modities, have not so far as the writer can discover been worked out for Franc~ for the first two years of the war. Beginning with the third quarter of 1916 the Bulletin de la Statistique Gener;ale de la France has published a quarterly index number, with a base in the prices of 1901-1910, which it compares with Sauerbeck's English prices (the Statist's index number). There is also a~ index number for fifteen commodities, worked ..out by the same authority, beginning with the first quarter of 1911 and running down through the first quarter of 1915. Between the first quarter of 1915 and the third quarter of 1916, however, there appears to be a complete gap, so far as general wholesale price indexes are concerned. Fragmentary information can be found, however, dealing with special classes of commodities, and certain generalization regardi~g " cost of living." Much infor mation is contained in the French correspondence of the London Economist from time to time.

It may be well to make at this point a distinction between " general commodity prices" and" cost of living." The former is concerned with wholesale prices; the latter is concerned with retail prices and in addition such things· as house rents, which vitally affect the family budget. When we speak of "cost of living," moreover, we often have in mind a particular class of the population and most commonly the laborers. Furt~er, neither changes in H general prices" nor in "cost of living" are to be identified off hand with changes in "the' v~lue of ~oney." Changes in prices or in cost of living may grow out of changes in the value of money, but they may also grow out of changes in the values of goods. It may happen, moreover, that both causes are operative. The present chapter is chiefly a record of facts-not a theory of causes. 71 72 EFFECTS OF THE WAR ON MONEY, CREDIT AND BANKING The end of October, 1914, shows little rise in prices, except for certain commodities where there had developed an abnormal scarcity. Chief among these were coal and sugar, both of which came largely from territory occupied by the Germans. The coal supply of Belgium was of course shut off and the occupied terri tory supplied normally 26,000,000 metric tons, about two-thirds of the normal coal production of France.! Beet sugar again was concentrated in northern France and Belgium. Wine, especially cheap wine, was also short outside southern France because of transportation difficulties. These commodities rose in price.

But the general list stayed down. 'Metal prices even fell. Bar copper went down from 200 francs per 100 kilos to 145 francs; tin from 485 francs to 365 francs. Only lead remained steady. These prices are significant of great industrial depression. 2 Raw silk w~nt down 25 per cent in price. 3 The London Economist of December. 5 reports food prices still low.4 Beef fluctuates between 1.05 francs per half kilogramme against a May average of .92 franc. Mutton, 1.20 francs in May, was only from .85 franc to 1.05 francs in December. Wheat was slightly below its May price. Flour, however, was somewhat above its May aver age. The Economist of December 12 5 reports a sharp fall in sugar, following substantial importations. The government bought large quantities of sugar in New York, Cuba and the East Indies. Sugar from Germany and Austria came in via Holland and Italy released sugar to France. The high price of sugar brought its own cure promptly.

France was greatly. dependent on foreign sources for food and there was a general modification of the tariffs on necessary articles, despite protests from the protectionists. This helped the price situation. On March 23, 1915, the Economist reports that bread was cheaper in Paris than in London, because the French Government was selling flour below cost to the bakers,6 and on 1 Laughlin, Ope cit., pages 158-159. London Economist, October 31, 1914, page 803. 2 London Economist, November 7, 1914, page 842. a Ibid., November 14, page 921. 4 Ibid., page 997. G Ibid., page 1033. 8 Ibid., page 535.

FRANCE 73 April 24 it states that wine had become cheap again through the marketing of the excellent 1914 vintage. 1 Real estate prices were threatened seriously by the protracted rent moratorium. The price of wheat was giving occasion for concern in May of 1915, and government control of supplies and prices was being put through. 2 The Economist of September 4 3 reports a fairly sat isfactory harvest, largely gathered in, with, however, food prices generally higher, except for poultry, potatoes and fruit, which were normal in quantity and price. By the first quarter of 1915 it seems clear that no great rise in prices had occurred. The Service de Statistique Generale made investigations covering fifteen commodities, by quarters, from the first quarter of 1911 to the first quarter of 1915, inclusive. The index shows: • 1911 (first quarter) 1,015 1913 (first quarter) 1,018 1915 (first quarter) 1,105 In the Nord, the rise was somewhat greater, the figures being: 1911 (first quarter) ~ 1,057 1915 (first quarter) 1,159 Late in September, the government made admission that ex travagant prices had been paid on government contracts because of haste. 5 In October a law was passed putting control of the grain trade definitely in government hands, with maximum prices for grain.

6 The quantity and price of wine have been throughout the war a matter of great concern to the French. It is interesting to note that the tonnage of wine transported between November, 1914, and July, 1915, was 50 per cent greater than for the same months in the year preceding. 7 Coal, labor and raw materials were all high and scarce in the fall of 1915.8 The Economist gives a 1 London Economist, November 14, 1914, page 806. 2 Ibid., page 1122. • Ibid., page 368. , These figures are taken from the London Econonvist, April 15, 1916, page 712, and cover only the thirteen most important commodities of the fifteen studied by the Service de Statistique Generale. . 15 London Economist, October 2, 1915, page 508. S Ibid., October 23, 1915, page 620. ., Ibid., November 6, 1915, page 781. •Ibid., pages 736, 815.

74 EFFECTS OF THE WAR ON MONEY, CREDIT AND BANKING general estimate of the rise of cost of living in its issue of November 27 1 as about 30 per cent-50 per cent in some parts of France. By early January, 1916, the sugar situation was really acute.2 Official quotations of sugar were suppressed and the actual prices went high. Meat had become scarce at the butchers'. Butter, which had sold at 3.26 francs in October, 1913, sold at 4.35 in October, 1915. Cheese during the same period had doubled in price. The official figures for exports and· imports from January to May, 1916, show an adverse trade balance of 1,295,000 francs. These figures are based on 1914 prices. Imports, at 1914 prices, were 3,687,000, and exports 1,392,000. In connection with these figures, the Economist of July 29 8 remarks that the adverse balance would be much greater if account were taken of the tremendous rise in prices of the preceding two years. In con nection with similar figures, the Economist later undertakes to reestimate the extent of the adv~rse balance, giving data from which some indication of the extent of the rise might be com puted though not with precision. Thus, for the first seven months of 1916 the figures show an adverse trade balance at 1914 prices of 3,419,000 francs; corrected figures would show exports of 2,990,000, and imports of 10,336,000, making the adverse balance 7,346,000. We reach more certain ground in the estimate of the Customs Department for the imports and exports of the first nine months of 1916, where it is stated that articles of import are 90 per cent higher in price than in 1914, and articles of export 50 per cent higher than in 1914.4 This gives us an average for the first three quarters of 1916 so far as articles of export and import are concerned. Exports during that period at 1914 prices were 2,516,000; imports 7,381, 000, or more than twice as great. But the imports are much understated, since not all government imports were declared at the customs house. If we weight imports by three, in construct1 London Econom,ist, November 6, 1915, page 900.

2 Ibid., January 15, 1916, page 99. 8 Ibid., page 189. • Ibid., October 28, 1916, page 823.

FRANCE 75 370 384 258 297 315 339 215 229 ing our average, and exports by one, we shall not be exaggerating imports. The average rise in prices of exports and imports on this basis then would be 80 per cent, as compared with 1914 prices, for the first three quarters of 1916. This tal\es no account of internal prices. It takes no account of many items needed in a good index number. It is not at all a satisfactory figure to compare with the figures of the Bulletin de la Statis tique Generate de la France, which begin with the third quarter of 1916 ..But it may be worth something for this comparison. The figures of the Bulletin de la Statistique') compared with the figures for English prices of the Statist (Sauerbeck' s series), both reduced to a base of 19()1-1910, are as follows: 1 FRANCE 1901-1910 1912 1913 1916 1917 1918 100 118 116Entire period 1st quarter . 2d quarter . 3d quarter .

4th quarter . UNITED KINGDOM 1901-1910 1912 1913 1916 1917 1918 Entire period 100 116 116 1st quarter 223 255 2d quarter 240 260 3d quarter 181 240 4th quarter... 203 249 There is a pretty close convergence of the estimates of the two French authorities. The rise over 1913 of the general wholesale index number of the Bulletin de la Statistique is about 85 per cent for the third quarter of 1916. The rise for wholesale prices of exports and imports e'stimated by the customs house authori ties for the first three quarters of 1916 is about 80 per cent. Perhaps the figures given will suggest the following rough gen eralizations: prices of all kinds rose rapidly in France during 1916 and subsequently; prices of articles of import rose more rapidly and higher than other prices.; prices of articles of export were lower than other prices. In connection with the great rise in prices we have seen, it will be interesting to study some of the statistics regarding physical quantities of goods produced or imported, and to se,e something 1 July, 1918, page 289. This is the latest number to which the writer has had access.

76 EFFECTS OF THE WAR ON MONEY, CREDIT AND BAN~ING Oats Quintals 51,541 51,826 46,206 34,625 40,223 34,462 Barley Quintals 11,014 10,437 9,758 6,920 . 8,331 8,980 Year also of the extent to which economies in consumption have been made use of, voluntarily or otherwise, by the French public. We shall give some account of supplies in foods and in coal and shall refer. briefly to consumption. The following figures for cereal production in France are given out by the Minister of Agriculture: 1 (In thousands of francs) Wheat Millet Rye Quintals Quintals Quintals 1912 . .. 90,991 1,554 12,382 1913 86,919 1,490 12,714 1914 76,936 1,353 11,147 1915 60,610 1,098 8,420 1916 55,767 1,07~ 8,471 1917 JP,482 879 6,993 These figures are ominous. The wheat crop in 1917 was the most deficient in fifty years. The deficient oat crops of 1917 reflected itself by January, 1918, in an extensive slaughter of horses. 2 The whole drift of these figures would lead one to expect a diminution in the meat supply and in the numbers of live stock, which of course are dependent on cereal food. There has been a marked diminution, though it has not been so marked as the reduction in cereal production. The following figures will be of interest: 3 Horses Mules Bovines Sheep Pigs December, 1913 , 3,222 188 14,787 16,131 7,035 July, 1917 2,282 150 12,443 10,586 4,200 The meat problem has been a grave one. The whole food problem has been increasingly grave. Increasing restrictions have been placed on restaurants and on the purchases of private families. Meatless days and meatless meals have been tried, milk has been wholly eliminated at times from the menus of public eating places, even when mixed with coffee, the number of courses has been limited-matters which American newspapers have found of interest and have discussed in considerable detail.

The end of 1917 was an especially critical period in the matter of bread, in view of the wholly disappointing wheat crop in France and the submarine war. England came to the rescue as 1 London Economist, October 6, 1917, page 496. 2 Ibid., January 19, 1918, page 83. 8 Ibid., October 13, 1917, page 535.

FRANCE '17 far as she could. America with a short wheat crop had not the ability to do as much 'a~ in previous years, despite the restric tions in America and the vigorous efforts of Mr. Hoover. The normal wheat consumption in France is 500 grammes per day per person. As a result of desperate efforts, it was possible by January, 1918, to get the supplies in France back to a point where 300 grammes per day could be assured. Switzerland, meanwhile, had only 150 grammes per day, and England, between 225 and 250. England was exceedingly generous to France. The Eng lish recognized, however, that the habits of the French people made bread a much more important part of their diet than was the case in England. 1 Food conditions continue very bad, even chaotic, into the summer of 1918, and further restrictions are being increasingly applied. A similar story, though one of intensified degree, may be told of coal. French coal production was terribly cut at the outbreak of the war, as Germany seized the best mines. Throughout the war, England has been helping her to the best of her ability.

The submarine war made this increasingly difficult. French domestic production, though cut heavily at the outset, has in creased decidedly since the early days of the war. As we have seen, about two-thirds of the normal production was checked by the German invasion. Of the mines remaining in French hands the production was further cut by the mobilization. In August, 1915, there was still a labor shortage of .40 per cent in the mines left under French control. By the end of 1917, however, the production of these same mines was 40 per cent above the prewar normal. With all that both France and England have been able to accomplish, however, the coal supply of France remained in 1917 and early 1918 about where it had been in 1916, nearly one-third below the amount normally consumed. (Th~ normal consumption is about 5,000,000 tons per month. The 1916 consumption was 3,300,000 tons per month.) 2 As has been stated before, 1916 was the period of greatest 1 London Econotnrist, November 17, 1917, page 806; December 8, 1917, page 915; February 2, 1918, page 159. See Journal 0 fficiel, December 5, 1917, for details of the rationing plan.

2 London Econontist, May 5, 1917, page 776: May 27. 1916, page 1019; September 22, 1917, page 424: September 8, 1917, page 357; June 23, 1917, page 1154; annual reports of the Banque de France, for the war period.

78 EFFECTS OF THE WAR ON MONEY, CREDIT AND BANKING luxury in France. Throughout, the peasants appear to have been thrifty. There are constant references to 'the hoarding of bank notes in France throughout the war as a matter involving bil. lions of francs. Numerous other classes, particularly the rentiers J those living on fixed incomes from investments, have been exceedingly economical. But in France, as in other coun tries (though it does not appear that the thing has gone ~s far in France as it did in Germany or as far as in the United States in 1916) those classes who have profited most by the war indus tries appear to have spent money freely it:J. luxurious consump tion. The laborers have done this, particularly the female laborers and the entrepreneurs who had war contracts or who shared in the prosperity growing out of these contracts. There was a great increase in the consumption of tobacco, especially in pipes, during 1916. 1 There was also a great increase in importa tions of American automobiles, other than those used for war. 2 There was a good deal of talk about this in France and various efforts were made to enforce economy, as well as to shame the people .into it. Some of the methods of coercion have all the legal indirectness of American constitutional law. Thu~, there was a prohibition on the wearing of dress suits in state aided theaters. 3 Coal was economized by various measures, including early closing hours for restaurants, limitations on lighting, etc.

The people did not take kindly to these measures and at times openly defied the restrictions on the use of gas in their own homes, when it was a matter of heat in the midst of a cold winter. 4 But by and large, there is not evidence enough at· hand to justify the general charge of extravagance against the French people at any stage of the war, and barring the year 1916 they may even be credited with general frugality. Their troubles were real troubles, unavoidable troubles, in large degree, and their high prices were due f~r more to inevitable scarcity than to avoidable consumption. 5 '1 London Economist, August 12, 1916, page 287. 2 Ibid., June 3, 1916, page 1065. 8 Ibid., November 25, 1916, page 998. ~ Ibid., February 3, 1917, page 187. IS The luxury taxes. which came into effect in the summer of 1918, pro duced much less than was anticipated. For July, 1918, the actual yield was ten million francs, against an estimated yield of thirty-two millions. The FRANCE· 79 The question of causation involved in these price changes need not detain us long here. We shall discuss the £eneral theor.y of war time prices briefly in connection with American prices, where data are more abundant. The present monograph is chiefly con- .

cerned with history, rather than with theory, in any case. It is easy enough to find .reasons connected with the abundance or scarcity of individual commodities which indicate the general direction in which their prices will have to move. There is a grec~.t scattering of prices, some rising greatly through extreme scarcity and others rising little if at all because abundant in supply. The latter category grows increasingly smali as the war goes on and labor scarcity is felt in every field.. Goods of almost all kinds in France grew scarce, there was a general rise in the values of goods and hence a general rise in commodity prices. To this general cause there must undoubtedly be added a further rise in prices due to the depreciation of the. franc. The Banque de France early ceased to redeem its notes on demand and for four years they have been circulating under' cours force. Prolonged suspension of specie payments has never failed in the history of money to lead bank notes to depreciate below their nominal coin equivalent. 1 It is not easy to measure the extent of the depreciation of the notes of the Banque de France. There is no free gold market in France, as was the case in New York during the greenback period in the United States. The foreign exchanges have become so dislocated that the rates on different countries tell different stories. We shall have occasion to con sider the matter in connection with the subject of the foreign exchanges.

tax· is an exceedingly unpopular tax, as so much of French business has normally been in the field of luxuries and amusements. Undoubtedly, how ever, the tax is checking-luxurious expenditure. The tax on all meals cost ing over five francs is leading very many people to dine at home instead of at restaurants. How far social saving is involved in this-savings in terms of actual food, labor, fuel, etc.. consumt!d and wasted-is not clear. Probably there is real saving. On other things, the saving is pretty clear. Vide London Economist, August 17. 1918, page 210. 1 There is one case, that of Austrian paper money following 1866, where, after a prolonged period when the notes were deprechted below the value of the silver in which they were nominally redeemable, they finally appre ciated above the value of the silver. But there are. many cotTIplications here, and a discussion of this episode lies outside the scope 'of this paper.

Cf. the discussion of this case in Professor Laughlin's Principles of ill oney, and the present writer's discussion of the principles involved in chapter 7 of his Value of Money.

80 EFFECTS OF THE WAR ON MONEY, .CREDIT AND BANKING There is a further possibility that gold itself may have depr~ ciated during the war, which would add a third cause to the rise in French prices. This possibility should be entertained, since competent writers have suggested it, but we shall elsewhere offer reasons for regarding it as an error. By the fourth quarter of 1917 French wholesale prices had risen, as compared with 1913, 192 per cent; English wholesale prices had risen only 114 per cent; wholesale prices in the United States, as shown by the Bureau of Labor Statistics index number, had risen only 81 per cent by December, 1917. The writer ventures the general thesis that at this period the rise in prices in th~ United States was wholly a matter of increased values of goods, currency depreciation being non-existent; that for Great Britain, the rise was chiefly a rise in goods, with cur rency depreciation slight; that f.or France, there was a still greater rise through scarcity in the values of goods, but that even so the element of currency depreciation was large.

A great many details for individual commodities and classes of commodities may be found in the Bulletin de la Statistique Generale de la France} especially after July, 1916. These de tails are for the mo~t part unsummarized, e~cept for the general index numbers given above. Such examination as the writer has had time to give to them will justify the general conclusion that the rises are in considerable measure correlated with variation in supplies, and that they are very uneven. Professor Laughlin has summarized certain of these figures, taken from the Bulletin of July, 1916 (pp. 306-312) in the following table: 1 RISE OF PRICES FROM MIDDLE OF 1914 TO MIDDLE OF 1916 Per cent Freights . . . . . . . . . . . . ... 300-400 Chemicals 130 Fodder (Paris) '. 74 Vegetable oils (Paris)............................... 116 Metals (Paris) 70 Cotton yarn (Rouen)................................ 47 Grains (Paris) 64 Sugar, rice, etc. (Bordeaux).......................... 217 Silk (Lyons) 36 Cotton, wool, leather, etc. (Havre)................... 67 1 Laughlin, Ope cit., page 183, note.

FRANCE 81 Professor Charles Gide, writing in April, 1916, places the rise in French prices at 35 per cent, against a rise of 50 per cent in England and a rise of 100 per cent in Germany. Gide does not give his sources. 1 1 For Gide's discussion, see Kirkaldy: Labour, Finance and the War, Lon don, 1916, pages 251-253.