The Outbreak of the War in France
This long discussion of French banking before the war has been necessary for an understanding of the course of events since the war began. And it has been particularly necessary since much of what has been written in America about French banking has been based on an uncritical acceptance of the encomiums which much of French financial literature has for decades been pronouncing upon the French system. As regards Banque de France, these encomiums have been deserved. But serious reservations must be made for not a few of the great credit houses.
For two years before the war France had been suffering from depression,1 growing in no small part out of the general policies which we have been discussing. French industry was languishing. The bourse was sagging and breaking under the discovery that many of the foreign loans were precarious. The Balkan wars had weakened the market in Balkan securities and had led to further apprehensions of war. The state too had had its share in bringing about the depression. The French Government, under the influence of radical parties, had been increasing its budget rapidly, and the public debt was very heavy—well over thirty billion francs—five times that of Germany and twice that of England.2 (This comparison is unduly favorable to Germany, since German municipalities, especially the smaller cities, had much heavier debt burdens than French municipalities.)3 Further, there was great political instability throughout the first half of 1914. Ministries were dissolving frequently. The passage of the budget was delayed long beyond the normal time. The radical____________________