Black market in wartime France

Overview

After the defeat of France in 1940, a large black market developed in both German-occupied territory and the zone libre controlled by the Vichy regime. Diversions from official channels and clandestine supply chains fed the black market. It came to be seen as "an essential means for survival, as popular resistance to state tyranny invading daily life, as a system for German exploitation, and as a means for unscrupulous producers and dealers to profit from French misery." It involved smugglers, organized crime and other underworld figures, union leaders and corrupt military and police officials. It later became a civil disobedience movement against rationing and attempts to centralize distribution, then eventually evading Nazi food restrictions became a national pastime. Those who could not, such as long-term psychiatric patients, simply did not survive. Vichy market regulation was the first French attempt at economic planning. The parallel economy undermined the official centralized attempts to regulate the production, storage, transport, quantity, quality and price of food. Even after the liberation of France and the end of the Second World War, problems with supply kept rationing and the black market in operation until 1949.

1930s: inflation, instability and unrest

French politics were very unstable in the 1930s. Twenty-one different governments formed in the Assemblée Nationale in that decade, some of them only in office for days. Subsequent changes to the French Constitution under the Fourth and Fifth Republic made it more difficult to hold a vote on a motion of no confidence and thereby force the dissolution of the government. In the 6 February 1934 crisis multiple far-rightist leagues rioted on the Place de la Concorde near the French National Assembly. The police shot and killed 15 demonstrators. Elections were called over this, even though a popular prime minister had just been elected. The Popular Front formed around the socialist SFIO and won the 1936 elections. Léon Blum became the first socialist prime minister of France. Two million workers seized factories and stores in a wave of strikes, brought on by dissatisfaction with the state of the Depression-era French economy. Blum negotiated the reforms of the Matignon Accords with the labour unions. The wage and hour concessions that emerged from the strikes have been blamed by some economists for the runaway inflation and subsequent stagflation that ensued, but more recent studies indicate that delay and reluctance to devalue the franc and abandon the gold standard were also factors, and possibly more important. After 1935 inflation was a recurring theme in the French economy. Wage increases agreed to by the administration of Léon Blum further stimulated the economy, increasing inflationary trends. After the German occupation, Vichy printed money to make the ruinous payments Germany demanded to cover its inflated estimate of its occupation costs, pushing inflation to 27%. "Yet, once they imposed huge occupation payments, the victors left the French to decide how to raise the funds and contend with passive and active resistance from the population."

Fall of France

After the Battle of France and the armistice with Germany, France was split into the Vichy government controlled zone libre ("free zone"), Pas-de-Calais, Nord and the zone interdite under the German military, the zone occupée under German control in the remainder of Northern France. Italy occupied part of France on the Mediterranean coast and Alsace Lorraine was annexed by Germany. During the war black markets arose when government imposed quotas and regulations to control supply and distribution, and demand exceeded supply; a phenomenon described as "the free market at its most brutal."

1940-1941

From late 1940 onwards, the black market became a widespread and almost universally condemned practice. Its very existence called into question the policies of the Vichy government, which in turn tried to suppress it. More than a million black market citations were issued during the four years of the occupation. As a matter of policy, the German Army stripped France and the other countries it occupied of their output and assets; "the Germans embarked immediately upon the general requisitioning of all raw materials and all goods in the occupied countries," said Francois de Menthon, the French prosecutor at the Nuremberg trials in his address to the court. The German Military Commander for France reported on 10 September 1942 (EC-267), that since the Armistice 73 percent of the normal annual French consumption of iron, nearly 5 million tons, went to Germany. Up to July 1942, 225,000 tons of copper and 5,700 tons of nickel went to Germany: 80 percent and 86 percent of the French supply respectively, as well as 55 percent of its aluminum and 80 percent of its magnesium production. France could keep only 30 percent of the normal production of the wool industry, 16 percent of the cotton production, and 13 percent of the linen production. All locomotives produced in France, and most of its machine tool production, went to the Nazis.

Origins

Under Article 18 of the Armistice of 22 June 1940 France agreed to pay "occupation costs", but in a violation of the Hague Conventions, Germany demanded 400 million francs a day, an extravagant sum, a total of 479 billion francs from 1940 to 1944. The levy went down in 1941 to 300 million francs a day, then increased to 500 million a day by 1943 as the Germans began to lose the war. At one point a quarter of the French GDP, in 1943 the payments were equivalent to 55.5 percent of French economic output. German diplomat Hans Richard Hemmen testified after the war that the figure assumed three million German soldiers in France, and that these sums were spent on the black market, "a clear misuse of the money." The Germans also required the French to finance the transportation of exports to Germany, and paid for their purchases with special currency pegged to an exchange rate that was artificially advantageous to them, at 20 francs to one Reichsmark. The French economy, blockaded and in a state of disarray, was largely inactive at the time, and had been chaotic and plagued by runaway inflation for years before the armistice.

Rationing and price controls

Vichy retained control of economic policy across both zones, subject to the approval of the Germans in the occupied zone. The decree of 30 July 1944 instituted rationing of sugar, pasta, rice, soap and fats. Starting on 23 September 1940, Vichy set up a top-down agricultural supply system as well as an authoritarian distribution of raw materials and industrial products. For consumers this meant food rationing, which they were told would ensure a more even distribution and prevent excessive influence of price on availability. At this point the nascent black market took off. French people were classified by age or occupation group, according to eight categories. (see Table 1)

To buy goods, consumers needed government tickets authorizing them to buy a certain quantity. Starting in the autumn and winter of 1940–1941, bread, sugar, milk, butter, cheese, oil, meat, coffee and eggs were all rationed, as was coal. In 1941, rationing was further extended to chocolate, produce, shoes, textiles and tobacco. Non-smokers who drew their ration anyway fed it into the black market. The caloric value of French rations was insufficient for a healthy diet. Historian Kenneth Mouré, an authority on the period, wrote in 2022 that this was deliberate, "to punish French civilians", and set to match conditions in Germany's World War I Turnip Winter. For category A (adults), rations provided on average around 1,080 calories a day, while an adult man needs around 2,200 calories. This energy intake allowance was the lowest level in any western country over the 1940–1944 period; rations in Belgium for example had a calorific value of 1800 and in Germany over 1900. This shortfall resulted in malnutrition, which led to higher mortality, stunted growth, vitamin deficiency and more cases of tuberculosis and diphtheria. In the first three months of 1941, some 113 people were arrested for stealing rabbits or chickens in the impoverished southern region of Hérault, compared to three over the same period the year before. In July and August 1941, 429 people were arrested for stealing food, and there were 159 "other" thefts, most of which also had links to other shortages. Stores often did not have enough inventory to provide the ration allowance of food; so people found food elsewhere. Large employers were mandated to provide employee canteens, and some people were able to grow vegetables, buy directly from farms, or have rural family members ship them food. There was also the black market. Those with no access to these resources, such as internees or patients in psychiatric hospitals, often suffered starvation: 45,000 patients died in French psychiatric hospitals during the Occupation. In the small Italian occupation zone in Menton, the situation was less serious, and rationing did not begin until July 1941.

Diversion from official channels

From the start the black market was fed by products diverted from their official channels. Wholesalers took advantage of geographical differences in price. On 19 May 1941, Vichy imposed price controls on fruit and vegetables, which had had none until then. Merchants in the Paris region sent telegrams to provincial suppliers asking them to redirect their shipments to regions where prices were highest. Parisians found themselves without fruit and vegetables for several days. In the end, the authorities had to relent and raise prices in Paris, while the affair, reported in the press as the "telegram affair", stirred up public opinion. Wholesalers also put pressure on retailers to pay them kickbacks, to ensure they were kept supplied.

Clandestine networks

Supplies for the black market also came from channels entirely outside the official system. Many smugglers were SNCF (French railway) employees or retirees with free rail passes. For example, of 51 official reports on smugglers in February 1941 in the Rodez area, 41 concerned railway workers. The gendarmes in Ille-et-Vilaine noted in April 1941 that "on certain market days, the passenger carriages are so crowded with employees and their parcels that it is impossible for a passenger, or even a ticket inspector, to cross part of the carriage".

Hidden stockpiling

Many producers and traders hid their stockpiles, particularly of industrial raw materials. In the Tarn 8,000 t (7,900 long tons; 8,800 short tons) of wool and cotton were allegedly hidden from the Germans, then supplied to the clandestine textile industry. Even when in autumn 1940 Vichy required businesses to report their inventories, much still went unreported. This unreported inventory, of wood or leather for example, then became available for sale through black market channels. Black market transactions between farmers and consumers increased considerably. Farmers withheld a portion of their production from the official harvest collections of the service du Ravitaillement ("resupply service"). Official nationwide production dropped 35% from the first three months of 1941 compared to the same period in 1942. Similarly in 1942 pork disappeared altogether from government channels; only 24 porkers were available in Seine department from July to December. In February 1943 German requisitions and French fixed costs exceeded available resources by thirty percent and that disparity continued until the end of the occupation. So by June, more than two thirds of the cattle market was diverted to the Germans and by 1944 the German cattle requisition had tripled since 1941.

Grey market

From the end of 1941 to 1943, a "grey market" emerged in which more and more city dwellers travelled into the country for their groceries. The prefect of Ardèche reported that at the height of the trend, as many as two thousand people a day cycled into the countryside to buy food. City-dwellers paid farmers more than the official price, but less than the official urban retail price for consumers. This became common practice and no longer seemed immoral once survival required it and the Catholic Church no longer condemned it. Under the law of 15 March 1942, Vichy had de facto tolerated small-scale black market activity and concentrated on large-scale trafficking. The black market and the grey market at that point accounted for around 30% of national agricultural production, and were most extensive near large cities, especially Paris. The profits mostly however went to upstream wholesalers and large-scale suppliers rather than to smaller growers or merchants."Many black-market profiteers seemed, to the citizens they had exploited, to escape punishment, Mouré wrote in 2023: "The breadth of the black market and its 'essential' nature for survival made postwar justice appear flawed: black-market practices continued, some newly re-legalized, and the state opted in 1947 for fiscal measures to tax rather than punish the actors and activities needed for reconstruction."

Privileged French

In the early years of the war, most Parisians spent long hours queuing for food. Riotous buying by Germans had created a bubble that made the black market inaccessible to the general population. French clients of the black market were from the most affluent layers of society, and escaped restrictions on their daily lives. They lived in the richest parts of the country, in Paris and in tourist destinations such as Deauville, Nice and Megève. They bought food, but also clothes, coal and gasoline. Restaurants in particular were an ongoing example of the social inequities of the time, as the prices they charged were unaffordable to most Parisians. Luxury restaurants supplied themselves on the black market and served many more dishes than their customers' ration coupons permitted, going well beyond their officially posted menus. An enforcement operation in early 1941 found violations of the black market code in almost half of the restaurants it checked. In April 1941, a police report pointed out that Le Lido and Fouquet's were using underground suppliers, and by November 1941 Paris police were reporting that if rationing were enforced, many restaurants would have to close. Restaurant owners went themselves to the country and did their buying there. Luxury restaurants were at first protected because of their German clientele, but in summer 1941 an agreement between Vichy and the occupiers officially exempted some ten luxury restaurants in Paris from the rules, including Maxim's, frequented by many Germans including senior Nazi Hermann Göring; La Tour d'Argent; Fouquet's; the Carlton, the Drouant-Gaillon; and Lapérouse, frequented by journalists like the collaborationist Jean Luchaire.

Occupation forces

The German occupiers were big clients of the black market. Individual soldiers and civilians made many purchases, benefiting from the artificially advantageous exchange rates; the French franc was fixed at 20 to the Reichsmark. The way they emptied the stores of food, clothes and shoes strongly accentuated the shortages and the French quickly nicknamed German soldiers doryphores ("potato beetles").

German military units organized their bulk food purchases from farms, with no regard for regulations. These purchases were particularly numerous during the invasion of France in the spring of 1940, when the speed of the Blitzkrieg's advance over-extended their supply chains. The regions of Normandy and Brittany particularly suffered from this type of military resupply. Without coordination or prior planning, the German agents used black market networks to get hold of stocks of raw materials. The best-known of these buying agencies was bureau Otto, created in the fall of 1940 by an Abwehr (German intelligence) officer, Hermann Brandl, nicknamed Otto. Located in the 16th arrondissement of Paris with warehouses in Saint-Ouen and Nanterre, bureau Otto, which at the beginning of 1941 employed more than 400 workers, was one of the largest underground networks. About 15% of the funds paid to Germany by France during the occupation were spent on black market purchases, a report from the French army's general staff in March 1942 estimated that "each day the Germans were passing more than 100 million francs worth of merchandise from the free zone to the occupied zone." The Germans offered protection and passes to French middlemen. The most well-known of these collaborators included Georges Delfanne, known under the pseudonym of "Masuy", and Henri Lafont, head of the gang at rue Lauriston, which became known as the Carlingue. Another notable collaborator was Frédéric Martin, known by the pseudonym Rudy von Mérode, who with the help of the Devisenschutzkommando, seized gold from traffickers who used the black market on pain of arrest and managed to collect over four tons. They also used established merchants, competent opportunists who built fortunes, such as Joseph Joanovici in scrap metal or Michel Szkolnikoff in textiles. Among those involved in the black market were Joseph Joanovici, Mandel Szkolnikoff, Baron de Wiet, and Marie Tschernitcheff. They were associated with networks involved in black-market activities during the period. Szkolnikoff accumulated substantial property holdings in France, including numerous buildings in Paris, hotels in resort towns, a game preserve in Sologne, and a château in Saône-et-Loire.