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Historical Dictionary

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ECONOMY OF WAR, FRANCE

War and the instability it generated adversely affected the economic value of Indochina for the French. In 1940, Indochina attracted 46% of all private French assets invested in the empire, down from 55% on the eve of World War I. The great depression and the slump in the rubber industry in the 1930s accounted for part of this drop. Private capital fled at an even faster rate during the Indochina conflict, falling 30% annually in 1947, 1948 and again in 1951. In real terms, Laurent Césari tells us, total private assets in Indochina fell by two-thirds between 1943 and 1954 while public assets declined by a third. The majority of this colonial investment was transferred to colonial North and West Africa. French investments in Africa increased from 127 million francs in 1945 to 137 in 1948 to 229 million in 1953. The vagaries of war increased production, transportation, and labor costs for operating plantations and industries in Indochina. The development of synthetic rubber further depressed the postwar rubber industry there. Importers preferred to buy cheaper rice on the Southeast Asian market and even turned to growing it in the Camargue region in southern France. Plans to industrialize Indochina also failed during the conflict. However, Indochinese imports from the metropole were second only to Algeria, rising from 56,9% of the value of all Indochinese imports in 1947 to 78% in 1951 and again in 1953. The French achieved this quasi monopoly by denying import licenses to those wishing to do business in Indochina from countries outside the zone franc. However, with the end of the war in 1954, the French lost the right to issue such licenses and with it the monopoly. French goods may have accounted for 52,4% of the State of Vietnam’s total imports in 1955 but that number rapidly declined to 24,7% in 1956 and only 19,4% in 1959. Moreover, as Césari points out, Indochinese exports to France only covered half of the war related expenditures allocated in the French budget. In short, the conflict was a serious drain on French finances. The United States helped ease the burden by covering on averge 41,9% of war expenditures between 1952 and 1954. To make matters worse, French rearmament in Europe accounted for a greater investment than that put in the Indochina conflict. Military spending as a percentage of French gross national product soon matched the high levels registered by the Americans as they moved to contain the communist bloc globally. See also EUROPEAN DEFENSE COMMUNITY; KOREAN WAR.