From Empire to Europe: The Decline and Revival of British Industry Since the Second World War. Geoffrey Owen

But this was only an interim arrangement. Final decisions had to await the establishment of the Federal Republic, and by that time the employers, some of whom regarded codetermination as socialism by the back door, had recovered their self-confidence. It was only through the patient diplomacy of Konrad Adenauer that a compromise was reached in 1951, confirming the arrangements that had been made in the Ruhr in 1947, but imposing a more limited form of codetermination in other industries. This was at best a partial victory for the unions, and it was followed by the Works Constitution Act of 1952, which was widely regarded as a defeat. All companies with more than fifty employees were obliged to have a works council, but council members were appointed by the workforce as a whole, not by the trade unions, and there were strict limitations on what the councils could do. They could not, for example, initiate a strike; their role was to act as mediators between management and workforce.

      The strengths of the new system were that it entrenched the rights of employees in a legal framework which was designed to encourage cooperation between the two sides, without seriously impeding managerial freedom. Day-to-day issues in the factory, which were the domain of the works council, were separated from bargaining over wages, which took place at a regional or industry level. The two-tier arrangement was facilitated by the reorganisation of the trade union movement into a small number of industrial unions, each of which bargained on behalf of all blue-collar employees in its industry. Although relations between unions and employers remained uneasy for several years after the new laws had been passed, the bitterness of the Weimar years gradually faded. Even hard-line employers who had barely reconciled themselves to the existence of trade unions recognised that a fresh start had to be made.

      The labour relations reforms, like other parts of the new order which took shape in West Germany in the late 1940s and early 1950s, combined a determination to learn from past mistakes with elements of continuity. Most of the interest groups which helped to build the new order – political parties, trade unions and employers’ organisations – had existed in much the same form under Weimar.¹⁹ But the reforms corrected weaknesses that had prevented the Weimar Republic from functioning effectively. The other crucial difference from the Weimar days was an exceptionally favourable economic environment, for which the US was largely responsible. The importance of the Marshall Plan lay not so much in its financial contribution to the modernisation of German industry as in opening the way towards free trade in Europe and creating the conditions for West Germany’s reintegration into the world economy.²⁰

      Modernisation in France

      The fall of France in 1940 has been described as ‘a psychological avalanche that buried pre-war certainties and created a new landscape on which reformers could build anew’.²¹ From it sprang a collective sense of national failure, and a conviction that fundamental reforms were needed to reverse the country’s economic decline. France appeared to be trapped in a state of permanent inferiority vis-à-vis its neighbour on the other side of the Rhine. Breaking out of this trap was the over-riding objective for post-war French governments. It was to be achieved by industrial modernisation and by preventing Germany from dominating Europe as it had done before the war. The hope was that, if this twin-track policy could be implemented quickly, France would displace Germany as the strongest industrial power on the Continent.

      France’s backwardness could be traced partly to the slow pace of industrialisation in the nineteenth century, partly to the crippling effects of the 1930s depression. France had kept pace with the German states in the early phase of the industrial revolution, but the governments of the Third Republic, established in 1870, did not regard the promotion of industry as an important policy objective. Prosperity and social harmony were thought to depend on preserving a balance between agriculture and industry; Germany and the US, with their pell-mell rush for industrialisation, were not seen as models which France should imitate. This did not prevent an impressive French performance in some of the industries of the second industrial revolution. The French motor industry, for example, was the largest in Europe before the First World War, and France was also the leader in aircraft production. In the 1920s modernising elements in French business sought to propagate scientific management, mass production and other American techniques. But with the onset of the Depression, which came later in France than in other European countries and bit more deeply, French industry reverted to a defensive and inward-looking posture, with an increase in cartelisation and greater reliance on colonial markets.

      This was the legacy which faced General de Gaulle’s provisional government when it was installed in Paris in September 1944. The government was a coalition in which the three main parties were the Communists, the Socialists and the Christian Democrats or MRP (Mouvement Républicain Populaire). The Communist Party, then at the peak of its influence, did not seek to promote a revolution, but rather to retain its hold on power, to preserve the unity of the left and to ensure that France did not align itself with the US-dominated Western alliance. It was also eager to participate in the task of national recovery, pressing its trade union allies to increase production and to refrain from strikes.

      The economic programme was a compromise between the disparate elements in the coalition. Most of the basic industries, including electricity, gas and coal, were taken into public ownership, as were the leading banks and insurance companies (the nationalisation of Renault was a special case, prompted by the owner’s collaboration with the Pétain régime during the war). While these measures gave the government control over some key industrial sectors, they were not part of a comprehensive plan to direct the economy from the centre. Pierre Mendès-France, minister of national economy in the provisional government, tried to formulate such a plan, which would be administered by a strong planning office attached to his department. But he was opposed by other ministers, notably René Pleven at the Ministry of Finance, a former businessman and close ally of de Gaulle. Mendès-France resigned in the summer of 1945 and the Ministry of Finance established a dominant influence over economic policy.

      The shift away from socialism became more pronounced when the Communists left the coalition in 1947. In April of that year an unofficial strike broke out at Renault in protest against the government’s wages policy. The strikers were at first denounced by the Communist Party. But as support for the strike spread, the Communists came under intense pressure to reverse their stance. When they did so, the government insisted that the maintenance of its wages policy was a matter of confidence, and that if the Communists were not prepared to support it they should resign. What emerged after 1947, under governments of a predominantly centrist or centre-right composition, was a distinctively French form of managed capitalism. Its inspiration was not a coherent body of doctrine akin to Ordo-liberalism in Germany, but the conviction on the part of an influential group of politicians, economists and government officials that the archaic structures of the French economy could be reformed only through purposive intervention by the state.

      A central figure was Jean Monnet, appointed by General de Gaulle in January 1946 to head a small planning body, the Commissariat Général au Plan. Monnet was a businessman who had close ties with the US and he greatly admired the dynamism of American industry. He was also well aware, given France’s dependence on US aid, that any modernisation plan had to be framed in a way which was credible to American policy-makers. Monnet was convinced that French industry had to be made fit enough to face up to international competition. The first step was to rebuild and expand the basic industries which had been damaged in the war. The first Monnet Plan, published at the end of 1946, gave priority treatment to six sectors – coal, steel, electricity, railways, agricultural machinery and cement – which were given privileged access to public funds. In other industries modernisation commissions were established, consisting of government officials, businessmen and trade union leaders. The Planning Commission had no powers of compulsion, but the planners were able to put pressure on firms by using the government’s control over the allocation of credit, foreign exchange and essential raw materials.

      Many of the targets set in the first plan were missed, and there may have been over-investment in basic industries to the detriment of the rest of the economy.²² But the existence of the plan, and the skill of Monnet and his colleagues in persuading businessmen to co-operate with it, helped to change attitudes.²³ The choice, Monnet insisted, was between modernisation and decadence, and this was a slogan