Failure Exposed

The street fighting of 6 February triggered much more than a cabinet change; it marked the first fusillade in what some historians have called an undeclared civil war in France, a polarization of left and right that threatened the stability of the Republic until 1937.^[57] Right-wing extremists rebelled against the ineffectuality of the republican center. Their rebellion, in turn, prompted Communists, Socialists, and Radicals to forge a popular front against fascism at home and abroad. As the political temperature rose, many people gradually altered their views on foreign policy and national defense. Many leaders on the left drifted away from pacifism and toward an enthusiasm for national preparedness, whereas many of their counterparts on the right swung away from a traditional hostility toward Germany to defend appeasement. This re-

versal only began to evolve in 1934; it would take another three years to complete. But almost immediately after the February demonstrations it was easy to see that France, as the British journalist Alexander Werth wrote, "was in an acute state of 'nerves.'"^[58] Political polarization made the center-right cabinets of 1934 and 1935 all the more stalwart in their conservatism. Such rigidity could not help but affect the way government officials and businessmen addressed the unsolved problems of industrial reform.

This changing political climate made the new air minister, General Denain, all the less likely to adopt Cot's healthy disrespect for the conventional boundaries of state intervention. Denain, unlike Cot, had little interest in pondering the difficult questions of economic reorganization. He was a war hero and an energetic promoter for the air force. He had risen rapidly through the ranks, and by the time he became air minister at the age of fifty-four, he had acquired an easy familiarity with nearly everyone of political consequence in the world of aviation—generals, ministers and industrialists. Ambitious builders like Marcel Bloch and Henry Potez felt comfortable with the man.^[59] Denain no doubt cared deeply about Plan I and the fate of the air force, but his style was to grease the machinery of state-business relations rather than tinker with its structure.

The contrast between Cot's irreverence and Denain's accommodation with the business world became apparent in the way Denain handled the airline question. Just when it seemed that the creation of Air France had brought some order to civil aviation, Denain mired himself in the Air Bleu affair. In July 1935 Louis Renault and two former administrators from Aéropostale, Beppo di Massimi and Didier Daurat, inaugurated Air Bleu, an airline providing postal service between six major cities in France. They designed the scheme shrewdly: Georges Mandel, the postal minister, granted them exclusive rights to domestic postal routes, and Denain gave them subsidies to buy a fleet of Simoun aircraft build by Louis Renault's aircraft division, Renault-Caudron. Thirteen months later, the airline collapsed. Just as Louis Bréguet and other unsympathetic officials at Air France had warned, Air Bleu could not compete with the overnight trains, which could carry the mail more cheaply. It was a fiasco in state-business collaboration worthy of the 1920s: the Air Ministry had once again embarrassed itself by supporting costly, unviable routes, and Denain found himself open to charges by the left that he enriched his friends at public expense.^[60] The Air Bleu affair did little for the effort to establish the ministry as an august authority safely removed from profiteers.

Of greater importance was General Denain's failure to advance the cause of industrial concentration. To be sure, the air minister made ges-

tures in this direction. In July 1934 Paul Dumanois, a distinguished state engineer who as industrial and technical director had assumed Caquot's role in the campaign for industrial reform, presented a new plan to the builders for revitalizing the airframe sector. His plan, addressed to the Chambre Syndicale, called for accelerating the drive to locate factories in the provinces, adopt modern machinery, and consolidate the airframe sector into five or six firms. Dumanois wanted genuine mergers, "a unification of administrations," and not the phony mergers that the earlier groupements strategy had disguised. To press his point, he warned the Chambre Syndicale that Joseph Caillaux, the chairman of the Finance Committee of the Senate, had lost his patience with the industry and had recommended "the purchase of foreign airplanes and the need for tightening credits and reducing orders from French industrialists."^[61]

The leaders of the Chambre Syndicale responded to the Dumanois plan with characteristic finesse. Henry Potez, Chambre president and by now the most accomplished builder in the airframe business, endorsed the call for concentration. He warned his colleagues, prophetically, that "if the Chambre Syndicale does not find a concrete solution, [the air minister] himself will proceed with his own program on account of the pledges made before the Senate."^[62] The Chambre Syndicale saw fit to follow Potez's heed. By the fall of 1934 builders had put together a new configuration of six groupements , which presumably would go further toward merging firms. In practice, however, this scheme fell far short of genuine concentration. Eight firms either dragged their feet or refused outright to enter the new groups. Firms that did cooperate still maintained their autonomy within their groupement , preserving their own fixed capital, production facilities, research laboratories, and administrative services. Each group created a central bureau to parcel out orders to member firms, negotiate contracts, and search for foreign clients.^[63] In effect the groups served more as marketing cartels than as central administrations, and in this respect they differed little from the two large groupements they replaced.

By the end of 1935 the structure of the industry had still scarcely changed: only two of the groups, Potez-Bloch-Cams and Farman-Mureaux-Blériot, even functioned in accord with the new plan of the Chambre Syndicale. By 1936 seventeen firms still preserved full autonomy behind the facade of the company groups.^[64] If a handful of the feeblest firms was beginning to fall by the wayside, the basic problem of fragmentation remained.^[65] The Air Ministry had once again failed, and employers had wasted what would soon prove to be their last chance to reorganize the industry on their own.

If Denain and Dumanois ran up against the same wall of resistance that Albert Caquot had encountered years before, at least they had an

opportunity to use the handsome production orders of Plan I to encourage encourage the strongest firms to enlarge. But here too Denain failed. Like his predecessors, he could not resist the temptations to spread out the largesse. In November 1934, for example, he gave contracts for building Bloch 200s not just to the two firms his staff had recommended for the job but to four, apparently to give more firms the benefits of new orders. In the fall of 1934 Denain and Dumanois clashed openly in the Air Ministry's Matériel Committee over which firms should be granted new orders.^[66] By April 1935 the practice of dissipating orders had become so common that an angry and beleaguered Dumanois told Denain one last time that everything should be done to concentrate orders in a few firms and when possible grant serial production contracts to the mother firm, that is, the company that had invented the original prototype.^[67] Soon thereafter Dumanois resigned. Years later he would accuse Denain of practicing favoritism in awarding contracts and of undermining the effort to decentralize factories.^[68]

Conflicts between Dumanois and Denain crystallized tensions that had been building up in the Air Ministry. As a proud member of the state aeronautical engineering corps, Dumanois epitomized the staff professional of the ministry—technocratic, distrustful of industrialists, eager to enforce standards. When in 1934, for example, he discovered that Renault had failed to build fifty motors according to specifications, he proposed to Denain that the contract be canceled, "having believed frankly that after the sixth of February some things would have changed."^[69] Denain preferred, however, to let the matter slide and continue Renault's contract as usual. Other conflicts of this ilk, pitting technical standards against company interests, led Dumanois to view the ministry as divided into factions—with Denain and his personal staff, on the one hand, willing to yield to business pressure, and professional engineers, on the other, alone committed to protecting the interests of the state. Though Dumanois obviously had his own axe to grind, he no doubt spoke for other engineers whom Denain had dismayed by failing to force industrialists to reform.

As long as the controversy remained within the ministry, little was likely to change. But when the airplane companies fell behind the schedule for Plan I, the bankruptcy of the reform effort became obvious to everyone privy to procurement policy. By January 1936 the industry had produced only 588 of the 725 planes scheduled for completion, and ministry officials predicted the builders would fall even further behind by the summer.^[70] Design changes had created some of the delay, but the main cause was clear: the industry, wrote a liaison officer in the Air Ministry, "was not equipped to respond to massive orders."^[71] A large cluster of undercapitalized firms that still relied on artisanal methods simply

could not build the airplanes of Plan I in the time required. In March 1936 the Air Ministry had to revise its deadlines so that by the end of the year the companies could deliver what had been originally anticipated for 1935.^[72] What made the delays doubly painful, moreover, was the knowledge that Plan I had become pitifully inadequate to the country's needs. As early as 1934 intelligence reports had concluded that French air superiority would disappear by the end of 1936. Worse still, the airplanes of Plan I would be outmoded as soon as they left the factories.^[73] Beyond Plan I lay the larger challenge of producing a new generation of airplanes in numbers several times larger than that plan had entailed. Plan I, which looked like a boon to builders in early 1934, exposed how little they had done to adapt to the needs of national defense.

The builders, of course, bore a hefty share of the blame for the failure to modernize the aircraft industry. Together they had conspired to avert the Darwinian struggle that a serious wave of mergers, acquisitions, and bankruptcies would have involved. They made little effort to lobby the government to invest in reequipping the industry. Since 1928 they had clung stubbornly to a strategy of collective defense—a strategy that, though effective in the short run, left them increasingly vulnerable to government critics. When Marcel Déat, the neo-Socialist and future right-wing extremist, became air minister in Albert Sarraut's government in early 1936, he expressed his exasperation with the builders, and no doubt that of many other people, in no uncertain terms in front of a Senate subcommittee: "I cannot have confidence in my manufacturers. The groupements are purely a facade, and the aircraft industry as such does not exist. You can't build on moving sand. . . . As for the manufacturers, they work when they please, practice blackmail, play with layoff threats and the rising price of raw materials. It really is, excuse the word, a filthy mess [pétaudière ]."^[74]

If in retrospect, however, it is easy to see that employers were short-sighted in resisting Caquot's invitation to restructure the industry on their own, at the time it clearly made sense from the builders' point of view to stick to their defensive strategy. Aircraft manufacturing was still as precarious a business in 1935 as it had been in the late 1920s. Handsome profits could be made, but only sporadically—with a big production order, a coveted export contract, or a successful prototype. Because the irregularity of demand made it hard to amortize the costs of plant and equipment, builders had little incentive to invest in factory expansion or the latest machinery; it seemed wise to minimize capital expenditures, especially in periods when orders were scarce.^[75] Most of the time companies tried to finance yesterday's payroll on tomorrow's delivery. Cash flowed, and builders lined their own pockets, but the companies remained financially insecure.^[76] In another business owner-manufactur-

ers might have sold out for more promising vineyards. But aviation was different: most manufacturers were in it to stay, having long since accepted its uncertainties for the chance to make their own airplanes. Men who derived such prestige from their products, and often enough real personal wealth, placed a high premium on their autonomy.^[77] Under these circumstances Malthusian business practices—dividing up markets rather than trying to expand them and compete for larger shares—made sense to these men in the short run, even though they ran the risk, as Henry Potez warned, of mortgaging their independence down the road.

Yet it would be a mistake to view entrepreneurial conservatism as the chief source of the ills of the aircraft industry. For one thing, the younger generation of builders—Potez, Bloch, and Dewoitine—had great ambitions, as their work in the late 1930s would eventually show. Even some of the older pioneers might have expanded more aggressively in the early 1930s under different market conditions, as Louis Bréguet had tried to do in the previous decade until he was stymied by government obstacles. What made Malthusianism a rational strategy was the willingness of the government to sustain it. Air ministers from Laurent-Eynac to Denain had all called for industrial reorganization; none took effective measures to promote it. From Caquot's prototype program to Denain's favoritism, the Air Ministry had preserved rather than transformed an outmoded industrial structure. Whereas builders followed a logic of short-term survival, government officials were stuck in a shortsighted logic of their own. Laurent-Eynac, Denain and even Cot all assumed that structural reform could be gradual, that it could accompany rather than precede rearmament, and that the builders could be persuaded to take up the cause of reform as their own. Cautiousness at the top, moreover, played into the hands of air force and Air Ministry bureaucrats, who did not wish to see any one firm emerge as too powerful a force in the industry. By the end of 1935 the bankruptcy of government policy had been laid bare—so much so that Denain came under heavy criticism on the floor of the Chamber of Deputies. "There really has been no industrial policy in the Air Ministry," Antoine Brocard, a center-right deputy from the Isère, said to Denain on 17 December. "You have pursued precisely the opposite of an industrial policy. . . . So it is not surprising that our aircraft industry, after having been overwhelmed by orders of considerable quantity, finds itself a prey to the worst difficulties."^[78] Deputies across the political spectrum applauded after Brocard's remarks, a sign of the rising tide of impatience in parliament over the impasse in aeronautical reform.

In criticizing Denain, however, Brocard neglected to say that industrial policy was itself a hostage of the same fiscal conservatism and military antipathy that had plagued every air minister since 1928. Despite

Plan I, budgetary allocations to the air ministry actually declined from 29 billion francs in 1933 to 24 billion in 1936, largely because of the deflationary policy that the conservative governments of Doumergue, Laval, and Flandin upheld.^[79] The high command, moreover, remained just as antogonistic to the air force as before. Under Denain's ministry the air force even lost some of the autonomy it had won under Cot: General Weygand reestablished the right of the army to command more than 86 percent of the aerial forces in the event of a war.^[80] In 1936 the air force still garnered only 18 percent of the defense budget.^[81] In contrast to Britain, where the Royal Air Force was able to win a serious commitment to aerial rearmament in 1935, in France financial and military policy would continue to hamper the Air Ministry until late 1937.^[82]

If conservative economic policy and hostility in the general staff prevented the government from investing in the modernization of the industry, might not the Air Ministry still have been able to force the builders to consolidate firms? In principle nothing was to prevent a crusader at the boulevard Victor from using the leverage of contracts to force firms to merge. But political realities stood in the way. Laurent-Eynac, Caquot, Denain, and the bureaucrats they presided over in the Air Ministry lacked the autonomy to carry out rigorous reforms. These men were too closely tied to the conservative business culture of aviation to overcome the resistance of the manufacturers. As Cot later wrote, "Most of the civil and military officials of the [Air Ministry] were honest people who would have resisted every bribe. But it was impossible to establish watertight bulkheads between administration and purveyors; social or family relations and friendships grew up and destroyed the absolute independence that should have existed." Cot understood how tough it was to break the habits of patronage: "The 'pioneers' of the aeronautical industry . . . thought that they had a lifetime or hereditary right to partake of the manna of state orders. Their bankruptcy would have been considered scandalous."^[83] Despite the importance every Air Ministry clearly attached to decentralizing the factories, consolidating firms, and modernizing production methods, air ministries lacked either the autonomy or, in the case of Pierre Cot, the political support of a strong regime to reorganize the industry.

Thus the failure of industrial reform had its roots in the ability of the builders to exploit an entrenched pattern of state patronage that government officials were either unwilling or unable to change. This pattern had a distinctly French character. In the United States a small number of large firms emerged in a competitive struggle to capture the market for commercial aircraft. In such a huge country there was a sizable demand for commercial aircraft, especially to carry the mail. By 1933, Boeing, Douglas, and Curtiss-Wright had already emerged as the leading firms;

civil aviation, not the military, propelled the industry. British airplane manufacturers, by contrast, were much more like the French: they depended directly on an Air Ministry that as a matter of policy supported an artificially large number of firms. But in contrast to France, in Britain there was a modest movement toward concentration in the aircraft industry, centered around the Hawker Company. More important, British manufacturers and government officials did not engage in a protracted struggle over industrial policy. The British Air Ministry did not try to play midwife to a process of industrial reorganization. Once rearmament had got under way after 1934, the ministry expanded production by subcontracting work to a wide variety of metalworking firms rather than restructuring the industry.^[84]

France in the 1920s and early 1930s was, as Stanley Hoffmann has argued, a stalemate society. Economic interest groups relied on weak regimes and stable bureaucracies to protect their established position. To be sure, France's centralized state bureaucracy had a good deal of potential power to implement change; but as long as the political balance of power vacillated innocuously between weak center-left governments and weak center-right ones, the predictable dependencies that had developed in the aircraft industry survived. For all the rancor between reformers in the Air Ministry and the builders in the Chambre Syndicale, in the end the reformers were stymied by a regime that as Hoffmann has written, "had plenty of brakes and not much of a motor."^[85]

Had airplane manufacturing been merely a commercial affair, politicians and bureaucrats might have tolerated the impasse over industrial reorganization a good while longer. But German rearmament kept everyone's feet to the fire. By the winter of 1935–36 even conservatives in parliament were expressing frustration with the recalcitrance of men like Louis Renault who were successfully rebuffing government promptings to move some of their operations away from Paris.^[86] Paradoxically, after spending years resisting the injunctions of Albert Caquot, Pierre Cot, and Paul Dumanois, manufacturers were beginning to exasperate even the die-hard defenders of laissez-faire. When the left-wing parties of the Popular Front coalition issued a call, as part of their electoral campaign in the spring of 1936, for the nationalization of the arms industry, the spontaneous impulse of most conservatives was to dismiss the notion out of hand. But as events would soon show, much of the confidence in the conventional framework of state-tutored private enterprise had disappeared. By squandering their credibility and resisting reform, the builders unintentionally set the stage for a revolution in state-business relations that would follow the coming to power of the Popular Front.