A paradoxical convergence: French economists and the

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A paradoxical convergence: French economists and thepolicy towards cartels from the 1870s to the eve of the

Great DepressionDavid Spector

To cite this version:David Spector. A paradoxical convergence: French economists and the policy towards cartels fromthe 1870s to the eve of the Great Depression. 2020. �halshs-02967599�

WORKING PAPER N° 2020 – 63

A paradoxical convergence: French economists and the policy towards cartels from the 1870s to the eve of the Great Depression

David Spector

JEL Codes: B19, N13, N14, N43, N44. Keywords:

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Aparadoxicalconvergence:Frencheconomistsandthepolicytowardscartelsfromthe1870stotheeveoftheGreatDepression

September2020

DavidSpector*

Abstract

Justlikeinotherindustrialcountries,cartelizationwaswidespreadinFranceafterthe

1870decade.Cartels,andthepublicpolicytowardsthem,werefrequentlyaddressedin

thepublicdebate.ThisarticledealswiththestancetakenbyFrencheconomistsonthis

subjectuntiltheGreatDepression.Althoughtheyweredividedinseveralgroupsthat

wereinsharpdisagreementonmostscientificandpolicyissues,Frencheconomists

werealmostunitedintheirlackofsupportforanti-cartelpolicy.Theliberaleconomists’

oppositionstemmedfromtheirgeneralhostilitytogovernmentintervention.Unlikein

theEnglish-speakingworld,wheremanyeconomistsotherwisecriticalofgovernment

graduallybecamesupportiveofantitrustaftermountingevidencehadrevealedthe

scopeofcertainkindsofexclusionarybehavior,theFrenchliberaleconomistsremained

constantintheiropposition.Themorereform-mindeduniversityprofessors,aswellas

thesociologists-economistsoftheDurkheimianschool,wereunenthusiasticabout

policiesmeanttosafeguardcompetitionbecausetheyviewed‘excessive’market

competitionasdestabilizingandwasteful.Finally,themostprominentexpertsin

industrialeconomics,whowereemployedbylargecompaniesorprofessional

organizations,alsoadvocatedahand-offapproach,inaccordancewiththeiremployers’

preferences.

*CentreNationaldelaRechercheScientifiqueandParisSchoolofEconomics.

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Thedevelopmentofcartelsinindustrialcountriesfromthelastquarterofthe

nineteenthcenturytotheGreatDepressionputthemattheforefrontofthepublic

debate,involvingeconomists,lawyers,politicians,businessmenandthepublicopinion.

However,theformandthecontentsofthesedebatesvariedalotacrosscountries.This

paperanalyzeseconomists’contributionstothisdebateinFranceandcontraststhem

withthoseoftheirBritishandAmericanpeers.

WhenassessingFrencheconomists’viewsoncartelsandgovernmentregulationof

competitionbetweensecondhalfofthenineteenthcenturyandtheGreatDepression,

onecannotbutbestruckbyaparadox.Ontheonehand,thefieldofeconomicswas

highlyfractured,withdifferent‘schools’ofeconomistsagreeingonnexttonothingon

mosteconomicpolicyissues-suchasfreetradeversusprotectionism,laborlaws,

taxation,theroleofthegovernmentintheeconomy-,onthemethodsandgoalsof

economicsandonitsrelationtoothersocialsciences.Ontheotherhand,eventhough

economists’statementsaboutthemeritsofcompetitioninprinciplewerefarfrom

uniform,inpracticehardlyanyeconomistadvocatedgovernmentpoliciesaimedat

prohibitingcompetition-restrictingconductbyprivatefirms.Moreover,thisskepticism

orevenoutrighthostilitytowardsanysuchpolicydidnotdiminishbetweenthelate

nineteenthcenturyandthe1920s.

ThisstandsinsharpcontrasttoboththeUnitedKingdomandtheUnitedStates.Inthe

UnitedStates,theenforcementoftheShermanAct,evenifinitiallytimid,gradually

exposedthesophisticatedstrategiesusedbycertainlargefirmstocementtheir

dominance.Thisnewlyavailableinformationcausedseveralprominenteconomiststo

revisittheirearlierskepticismandembraceamoreinterventionistapproachinthe

1910s.Likewise,intheUnitedKingdomwherethedominantviewhadlongbeenthat

freetradeprovidedsufficientprotectionagainstabusebydomesticcartels,mounting

evidencetothecontraryledAlfredMarshallandhisdisciplestoconsidercartelsworthy

ofclosepublicscrutiny.

InFrancejustlikeelsewhere,academiceconomistswerefarfrombeingtheonlyoreven

themainparticipantsinthesedebates,whichalsoinvolvedbusinessrepresentatives,

unionleaders,politiciansofallstripes,scholarsinotherfields(inparticularlaw,andthe

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nascentfieldofsociology),civilservantsandjudges.Studyingeconomists’rolesinthese

debatesthusrequiresonetotakeintoaccount,beyondtheirideas,thestatusof

economistswithinandoutsideofacademia,andtheirrelationshiptootherparticipants

tothesedebates,includingforeigneconomists.Thisisallthemoretruethatthroughout

theperiodweareconsidering,economicsinFrancewasnotfullyestablishedasa

separate,well-identifiedfieldofscientificinquiry–muchlessthanintheUSortheUK.

Lawprofessors,specializedjournalistsorexpertsworkingfortradeassociations–with

someoverlapbetweenthesegroups–whoparticipatedinthedebatesaboutthe

regulationofmarketcompetitionwerealsoonoccasionconsideredeconomists,were

appointedbythegovernmentaseconomicexperts,andpublishedarticlesinthesame

journalsaseconomicsprofessors.1

TheevolutionofFrenchpolicyoncartels

ThroughoutthenineteenthcenturyandupuntilWorldWarII,thelegaltreatmentof

cartelswasbasedonArticle419oftheNapoleonicPenalCodeof1810,whichprohibited

“coalitions”ofsellers“thattendnottosell,ortosellonlyatacertainprice”.This

prohibitiondatedbacktotheRevolution:theLeChapelierlaw(1791)hadabolished

guildsandstatedthat“citizensofthesametradeorprofession[…]maynot,when

assembled,[…]draftregulationsconcerningtheirallegedcommoninterests”nor“make

agreementsamongthemselvesdesignedtosetpricesfortheirindustryortheirlabor.”2,3

ThearticlesinthePenalCodereflectingthepartofthisprohibitionapplicabletolabor

wereremovedinthesecondhalfofthenineteenthcenturyasgovernmentsgradually

authorizedworkers’unions,butArticle419remainedinplace,unchangedtill1926.

Beyondthequestionofeconomiccompetition,thisprohibitionreflectedoneofthemain

politicalprinciplesunderlyingtheRevolution,namely,thereplacementoftheoldsocial

organizationbasedonspecificgroupsthathaddifferentprivilegesandobligations(such

asthethreeAncienRégimeorders,certaincitiesorneighborhoods,regional

1OnthesociologyoftheeconomicsprofessioninFranceandthechangesitunderwentsincethenineteenthcentury,inacomparativeperspective,seeFourcade(2001,2010).2ThistranslationisbyStewart(1951:165-166).3In1774,Turgot,whomLouisXVIhadappointedContrôleurgénéraldesfinancesuponhisaccessiontothethronein1774,hadenactedalawabolishingguilds.Butfacedwithstrongresistance,thekinghadreplacedTurgotwithNecker,whoreestablishedguilds,albeitinamodified,supposedlymorerationalform(seeKaplan,2001).

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parliaments,orguilds)withonebasedonaunifiedcommunityofequalcitizens,withno

intermediategroups.Onamoredown-to-earthlevel,theprohibitionofagreements

betweensellersofthesameproductwasinitiallymeanttotarget‘hoarders’of

commodities,andprimarilygrainhoarders.Itaddressedthelong-standingfearthat

theirspeculationscouldaggravateshortagesandinsomecasescausesocialandpolitical

unrest.

Cartelsattheturnofthecentury

Overthecourseofthenineteenthcentury,theconcernoverhoardinggraduallymade

wayforpreoccupationsaboutindustrialconcentration,reflectingtherisingshareof

industryintheFrencheconomy.4Cartelagreementsbecamewidespreadafterthestart

ofthe1873depression.Mostofthemtooktheformofcommonsalesagencies,referred

toascomptoirs.Theirmainrolewastoallocatecustomers’orderstotheirmembersin

ordertostiflecompetitionandstabilizeprices.Thesecomptoirscoveredmostofthe

metallurgicalindustryfrompigiron(the‘ComptoirdeLongwy’,createdin1876)to

weldedsteeltubes(1890),axles(1892),steelbeams(1896),sheetandplatesteel

(1895),coachsprings(1896),semifinishedbarsteels(1897),ironore(1897),and

seamlesssteeltubes(1910).Likewise,cartelswereformedinthesugar,paper,coal,

petroleum,textile(cottonspinninginparticular)andchemicalindustries(see,e.g.,

Freedeman,1988andthereferencestherein).

Eventhoughthedetailsofthesecartelsvaried,theyallhadthesameendgoal:limiting

competitionbetweentheirmembersinordertomaintainhighenoughpricesbymeans

ofmechanismssuchaspricefixing,productionquotas,oracentralizedallocationof

customerorderstocartelmembers.Somecartelsdevisedsophisticatedmechanismsto

ensurethattheirfunctioningwouldnotbedisruptedbyamember’sattempttoincrease

itssales,suchasimposingpenaltiesonfirmsthatexceededtheirquotaorhavingall

cartelmembersownsharesinanymember’snewplants.5Likewise,somecartels

devisedcoordinatedresponsestothethreatofexternalcompetition,suchasjointly

acquiringnon-cartelfirmsandthenshuttingthemdown(insomecasesdestroyingtheir

4Hoardingcasesdidnotcompletelydisappear,however.Aslateastheendofthe1880s,acaseaboutcopperhoardingmadeheadlines(Freedeman,1988).5Morsel’s1976studyofthechloratescarteldescribessuchclausesindetail.

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machines)6orengagingintemporarypredatorypricingtobankruptentrantsanddeter

furtherentry.7

Monopoliesandcartelsbetweenpublicoutrageandjudicialleniency

Justlikeinotherindustrialcountries,monopoliesandcartelsoftenarousedstrong

opposition.OneoftheearliestexamplesistheCompagniedesMinesdelaLoire,which

afterofaseriesofmergershadbecomealocalcoalmonopolyinSaint-Etienneandits

regioninthelate1840s.Thehighpricesitchargedcausedwidespreadprotestsfrom

domesticandprofessionalconsumers.Itwasalsoaccusedofkeepingminers’wagesat

artificiallylowlevels.TheseprotestswerestrongenoughtoleadEmperorNapoleonIII

toforcetheCompagniedesMinesdelaLoiretodissolveandsplitintofourdistinct

companiesin1854.Proudhon(1865:405-408)referredtothisepisodeasanillustration

ofhis“antinomyofcompetition”.

Startinginthe1890s,cartels’misdeedswereregularlydenouncedintheChamberof

deputies,mostlybyleft-wing(socialist)andcenterleft(Partiradical)representatives

whoclaimedtorelaythegeneralpublic’sangeratcartel-inducedhighprices.The

maritimefreightcartelwasdiscussedinParliamentin1895and1901;8in1899the

ministerofcommerce,addressingtheChamber,mentionedthatdisgruntledcustomers

hadpointedouttohimcartelsinthealcohol,sugarandmetalindustries;9andin1901a

longdebatetookplaceabouttwocartelsthathadcausedamajoruproarandgivenrise

tolegalproceedings–thesugarrefiningandpigironcartels.10

Atthesametimehowever,judgesbecamemorelenient.Aseriesofrulingsbetween

1894and1902setanewstandardbasedonthedistinctionbetween“good”and“bad”

cartels:goodcartels,whichonlyaimedtostabilizepricesatlevelscompatiblewiththe

6Mastin’s2011studyoftheRoubaixwoolcombingcartelthatfunctionedbetween1881and1914describessuchaggressivemeasurestargetingcompetitors.7Whereasmoststudiesofpre-1914cartelsfindthattheirmaineffectwastoreducevolumesandincreasepricesratherthantoincreaseproductiveefficiency,someeconomichistorianshavepointedtoexceptionstothischaracterization.See,e.g.,Gillet1973.Insomecases,agreementsonpricesrequiredsomeproductstandardization,whichcouldincreaseefficiency.Insomeothersacommonorganizationforexportscouldreducecommercialcosts.8Chamberofdeputies,sessionsof14June1895and18January1901.9Chamberofdeputies,sessionof23November1899.10Chamberofdeputies,sessionsof15and22March1901.

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“naturaloperationofsupplyanddemand”ratherthantosetthemat“excessive”levels,

werenowfoundnottoviolateArticle419.11Themosthighlypublicizedofthese

proceedingswerethoseonthepigironcartel,knownastheCarteldeLongwy,which

endedwithtwopermissiverulingsin1902.

Twomainfactorscontributedtothisevolution.Oneofthemwasthegeneralloosening

oftherestrictionsonthecreationofassociationsofallkinds,andinparticularworker

unions.Thislooseningstartedin1864whentheSecondEmpireenteredamoreliberal

phase,andwasfurtheredatthestartoftheThirdRepublic,withthe1881lawon

associations.Themorelenienttreatmentofcartels–usuallyreferredtoasententes

(agreements)-alsoreflectedawidelyheldviewthatunbridledcompetitionwas

undesirableasitwouldleadtoinstability,largepriceswings,periodicunemployment,

andinsomecasesachainofbankruptciesendinginconsolidationandmonopoly.

TheargumentsraisedindefenceoftheFrenchcartelsaround1900

Accordingtocartelapologists,“pacifying”andstabilizingmarketswasbeneficialtoall,

evenifitledtoslightlyhigherprices.Inparticular,cartelsweredefendedonthesame

groundsasprotectionisttariffshadbeenafewyearsearlier:theywereconsidered

necessarytothesurvivalofmanyindependentmedium-sizecompanies,inlinewitha

specificallyFrencheconomicidealthatreflectedthenationalcharacter:individualism,a

strongdemocraticspiritandadistasteforgiganticorganizations.Justliketariffs

purportedlyprotectedsmallagriculturalandindustrialproducersfromtheviolenceand

chaosofforeigncompetitiontriggeredbythepermanentthreatofoverproduction(even

though,inthewordsofJaurès,powerfulandwealthylandownerswere“hidingbehind

smallpeasants”whenlobbyingforprotection),12cartelsweremeanttoprotectsmall

andmedium-sizedfirmsfromdomesticcut-throatcompetition.13

11TheserulingsincludethoseoncartelsbetweentileproducersintheGrenoblearea,limeproducersintheSouth-West,pigironproducersintheLorraine,andbooksellers(Freedeman,1988).12Jaurèsmadethatclaiminaparliamentarydebateonagriculturaltariffsin1887.13Someprotectionists,whileinprinciplefavorabletocartels,wereconcernedthatcombinedeffectoftariffsandcartelswouldbetoomuchforthegeneralpublictoacceptandwarnedthatabusesbycartelsmighttriggerapopularmovementagainstprotectionism.SeeforinstanceJulesDomergue’sinterventioninthedebateoncartelsorganizedbytheSociétéd’économiepolitiquenationaleon21January1903(BulletinmensueldelaSociétéd’économiepolitiquenationale,1903:12-13).

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ThepartisansofententesoftenstressedhowdifferenttheywerefromGermancartels

(orrather,Kartells,astheyoftenspelledthemtohighlighttheirteutonicessence)or

Americantrusts.14OneofthemostvocalwasJulesMéline,theformerPrimeMinister

whosenamewasassociatedwiththeprotectionisttariffsofthe1890s.Asalawyer,

MélinerepresentedtheCarteldeLongwyinlegalproceedings.Beyondcourts,he

relentlesslypresentedargumentsinfavorofFrenchcartelstothegeneralpublic,inthe

BulletinoftheSociétéd’économiepolitiquenationaleofwhichhewashonorary

president,andwhichhadbeencreatedin1897tosupportprotectionism.Accordingto

him,theFrenchententeswereanemanationofFrance’s“prudentandmoderate”

character,15incontrasttoAmericantrusts,whichweredenouncedasgiganticand

oppressiveacrossthepoliticalspectrum,16andtoalesserextenttoGermancartels.

ThepartisansofFrenchcartelsaround1900rarelyclaimedthattheyfosteredeconomic

efficiency.Theyratherstressedthatthemaingoaloftheseagreementswasmodest,that

is,topreventpricesfromfallingtounreasonablylow(“debased”)levelsandtoavoid

overproduction,consideredthemainevilafflictingindustry,whileallowingeachfirmto

retainamaximaldegreeofautonomy.17AccordingtoPauldeRousiers,alifelong

apologistforcartels(seehereafter),Frenchcartelsweretobecommendedforleaving

theirmembers“independentfromanindustrialviewpoint(…)whereasan[American]

trustmaybestrengthenedbyafortunatediscovery,thankstoindustrialconcentration

thatmakesallmembersofthetrustgainfromit”(Rousiers,1901).Followingasimilar

logic,FrenchcartelswerefavorablycomparedtoGermanonesbyJulesDomergue(a

closeassociateofJulesMéline)becausetheydidnotusetheproceedsfromhigh

domesticpricestoencouragelow-priceexports:“practicedinthatway,acartelisan

absurdenterprise(…).ThecorrectmodelforfutureorganizationsisinLongwy,notin

Germany”.18

14However,forthesakeofreadability,thisarticlewillusethewordcartelunlessitaddressesthe(actualorpurported)differencesbetweenFrenchententesandcartelsinothercountries.15SeeJulesMéline’sprefacetoLaur1903.16OnthewidespreadperceptionoftheUnitedStatesasafrightening“empireoftrusts”,seechapter8ofRoger2002.17SeetheverbatimofdiscussionsoncartelsorganizedbytheSociétéd’économiepolitiquenationale(BulletinmensueldelaSociétéd’économiepolitiquenationale,1901,1902,1903).18ThissentenceisanexcerptfromDomergue’sinterventioninoneofthediscussionsoftheSociétéd’économiepolitiquenationale(BulletinmensueldelaSociétéd’économiepolitiquenationale,1901).

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ThisisincontrastwiththepartisansofAmericantrusts,whoappealedtomorethanjust

thevirtuesofpricestabilization.Theyoftenarguedthattrusts,almostlikefull-fledged

mergers,allowedfirmstopooltheirtechnology,rationalizeproduction,andachieve

economiesofscale.Likewise,thepartisansofGermancartelspraisedtherationalization

ofeffortstopenetrateforeignmarkets.InFrance,suchargumentswererareandthe

defenceofcartelsreliedonanalmostinversecharacterization:forthemostpart,they

weredepictedaround1900asanalternativetothekindofconcentrationand

centralizeddecision-makingthatwassupposedtojustifythemtothegeneralpublicin

theUnitedStatesandinGermany.Likewise,protectivetariffswerecommendedasa

defenceagainstthe“excesses”ofAmericanorGermantrusts–thatis,theirlowexport

pricesthatthreatenedFrenchproducers.19Exceptforafewexceptions,theapologists

forcartelspaidonlylipservicetotheideathattheyfosteredeconomicefficiencyor

consumers’interests,bymakingvagueclaimsthatinthelong-run,stabilitydelivered

betteroutcomesforall.

TherenewalofthedebatesoncartelsafterWorldWarI

Thelenientcourtrulingsofthefirstfewyearsofthecenturysomewhatclarifiedthe

applicablerulesandthetopicofcartelsbecamelessprevalentinthepublicdebateuntil

WorldWarI.20However,thewarchangedthis,fortworeasons.First,asthewarcaused

thestandardsoflivingtofalland“solidarity”insacrificestobecomeacardinalvalue,

profiteeringwasperceivedasintolerable.Accordingly,severallocalcartelsthathad

affectedthepriceofbasicconsumergoods,especiallyfoodstuffs,werepursued(Paxton

1977).

Theresumptionofjudicialactivitywasalsocausedbytheperceivedneedtoreininthe

excessesthathadbeenfosteredbywartimegovernmentpolicyonindustry.Justlikein

otherbelligerentcountries,thegovernmenthadencouragedclosecooperationwithin

keyindustries,especiallythosedeemedessentialtothewareffort.Inmanyindustries,

19SeeforinstanceBulletinmensueldelaSociétéd’économiepolitiquenationale(1901:216)andMéline’sprefacetoLaur1903.20Inalltheperiodicalsstudiedduringthepreparatoryworkforthisarticle,oneobservesthatthefrequencyofarticlesoncartelspeaksbetween1897and1903,anddecreasesafterwards,beforeincreasingagaininthe1920s.

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thelargestfirmshadformed“consortia”thatcoordinatedtheallocationofscarceraw

materialsandmanpower,productionandsales,inordertoefficientlysupplywar-

relatedproducts.Theseconsortia,whichincertainindustriesweretheformal

continuationofanearlierinformalcartel,wereinsomecasesaccusedofprofiteering

throughunjustifiablyhighprices.Themostemblematiccasewasthatofthecalcium

carbideconsortium,whosemembersweretargetedin1915byacomplaintthatwasthe

startingpointofayearlong,highlypublicizedprocedure(Paxton,1977).

Theseproceedingsbeliedthepre-warviewthatArticle419wasarelicofpre-industrial

timesthatincreasinglypermissivecourtrulingshadrenderedobsolete.Thismadea

clarificationnecessary,eventhoughtherewasnoconsensusonwhatthisclarification

shouldbe.

Thetenorofthepublicdebatewasdifferentfromthatof1900:ratherthanmarket

stabilization,industrialmodernizationwasnowtheendgoal,especiallyinviewofthe

needtokeeptheever-presentGermanthreatatbay.Therealsowasbroadagreement

thatthismodernizationwouldrequirelarge-scalecooperation,orevenmergers,

betweencompanies.Viewsdivergedhoweveronwhether,howandbywhomsuch

cooperationshouldbecontrolled.Themainworkerunion,theCGT,demandedsome

kindofworkercontroloverindustry-wideconglomerates.Leftandcenter-left

politicianslikeAlbertThomas(thewartimeMinisterofArmament)andEtienne

Clementel(thewartimeMinisterofcommerce)demandedsomegovernmentoversight

overthecreationandoperationofindustrialagreements.Incontrast,LouisLoucheur,

theformerbusinessmanwhohadsucceededAlbertThomasattheMinistryof

Armamentin1917,concurredwithbusinessleaderswhoaskedforgovernment

interventiontostopnowthatthewarwasover(Kuisel1981).

TheparliamentarydebatesonthereformoftheoldArticle419lastedfrom1922to

1926(seePaxton1977,Freedeman1988,andChatriot2008).Publicsensitivitytohigh

pricescausedbythereturnofinflationfrom1923onwardsmadeitpolitically

inexpedienttoexplicitlyremovethebanonagreementsbetweencompetitors.Instead,

accordingtothelawthatwasenactedin1926,Article419was,fromnowon,applicable

onlyto“coalitionsleadingtopricesthatwouldnotbethenaturalresultoftheoperation

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ofsupplyanddemand”.Theseunspectacularwordswereinfactmeanttoauthorize

cartelsprovidedtheirimpactonpriceswasmoderate:theministerofcommerce

speakingintheSenateinfavorofthedraftlawonNovember19,1926explainedthatit

wouldlegalize“agreementsthatonlyaimtosustainanormalbalancebetween

productionandconsumptionandmarketstabilitywhilepreventingoverproduction

crises”(JournalOfficieldelaRépubliquefrançaise,Débatsparlementaires,1926:1654).

Eventhoughbusinessleadershadclaimedthattheprohibitionofcartelsshouldbe

relaxedinordertoallowforefficiency-enhancingcooperation,inpracticenothinginthe

1926lawreflectedsuchaconcernsincethenewconditionforcartelstobelegalwas

their“moderation”,nottheirpotentialcontributiontoproductiveefficiency–inline

withwhatthepartisansofcartelshadlobbiedforsincethe19thcentury,andwiththe

prewarlenientcaselaw.

Theoverallassessmentbylatereconomichistoriansisthatforthemostpart,themany

cartelsthatflourishedundertheauspicesofthe1926law(inindustriessuchas

metallurgy,coal,chemicals,cement,shipbuilding,wool,cotton,silk)hadlittletodowith

productiveefficiency,andthattheyrathersloweddownmodernizationbyallowingless

efficientfirmstosurviveandbydampeningincentivestocutcostsorincreasequality

(HirschandSauvy1984).21

‘Liberal’,pro-marketeconomists:pro-competition,againstgovernmentintervention

Attheendofthenineteenthcentury,economicsinFrancewasstillanemergingand

fragmentedfield,consistingofseveralgroupsthatagreedonverylittleintermsof

methodologyorpolicy(Fourcade2001,2010,andLeVan-Lemesle2004).

Westartourinquirywiththegroupthatwasdominanttilltheendofthenineteenth

century.Thelibéraux,sometimesmerelycalledleséconomistesinpublicdiscourse,

formedtheoldestandmostcohesivenetwork.Sincethemiddleofthecentury,itsmost

21SomemonographsonspecificindustriestendtoqualifyHirschandSauvy’s1984conclusionthatcartelswereonly“Malthusian”.AccordingtoOmnès1980,thecombinationofmergersandcartelsinthesteeltubesindustrycontributedtoitsmodernization.

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illustriousmembershadoccupiedprestigiouspositionsintheGrandesécolesand,after

itsfounding(1871),attheEcoleLibredesSciencesPolitiques.Theirmainpurposewas

politicalratherthanscientific:inthejournalstheyhadfounded(inparticulartheJournal

desÉconomistesandL’ÉconomisteFrançais)aswellasinotherinfluential,more

generalistperiodicalsandintheirbooks,libérauxauthorssuchasPaulLeroy-Beaulieu,

LéonSayorYvesGuyotextolledthe“eternaltruths”discoveredbytheearlyclassical

economiststoopposebothprotectionismandanygovernmentinterventionthatcould

belabelledassocialist,fromincometaxationtominimumwagesormandatorysocial

insurance.

Manyoftheselibérauxheldpowerfulpositionsinpoliticsandbusiness–mostlyin

sectorsthatfavoredfreetrade,suchasbanking.Thecontextoftheirwritingswasan

ever-presentfearofsocialism,whichhadbeenrevivedbythe1848revolutionandthe

1871Commune;andtheveryrealdominanceofprotectionistsinpolicymaking,

especiallyafter1890.

Theirpoliticalgoalscouldleadthemtodistancethemselvesfromclassicalauthors:for

instance,theyopposedRicardo’stheoryofrentbecausetheydislikeditsrelatively

egalitarianpolicyimplicationssuchasJohnStuartMill’sideaofataxationofthe

“unearnedincrement”orHenryGeorge’slandtax.Lateron,mostliberaleconomists

rejectedmathematicaleconomics,bothbecauseoftheirlackofevenbasicmathematical

trainingandbecausetheydislikedsomeofthepolicyviewsvoicedbythemost

prominentmathematicaleconomists,fromLéonWalras’sself-proclaimedsocialismto

AlfredMarshall’spartialembraceoftheprogressivetaxpoliciesenactedinLloyd

George’sPeople’sbudgetin1910.

Sincethebeginningofthenineteenthcentury,andwithremarkablylittleevolutiontill

the1930s,Frenchliberaleconomistsdevotedmuchenergytoextollingthevirtuesof

marketcompetitionandwarningagainstthedangersofgovernmentinterference.For

instance,oneofYvesGuyot’smanyanti-socialistpamphletswasentitledTheMoralityof

Competition(Guyot1896).Attheendofthenineteenthcentury,invokingtheabstract

virtuesofcompetitionandlaissez-faireagainstsocialreformershadfordecadesbeena

tropeofconservativediscourse-includinginwritingsbybusinessmenorpoliticians

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whoseprofessedloveofcompetitiondidnotpreventthemfromadvocating

protectionism(see,forinstance,Thiers1848:290).

Inlinewiththeirabsolutehostilitytogovernmentinterventionintheeconomy,French

liberaleconomistsadvocatedahands-offapproachtocartels.Thisstancewasidentical

tothatofmostbusinessleaders,towhomseveralofthemajorliberaleconomistshad

closeties:eventhoughsomecompaniesoccasionallycomplainedagainstacartelthat

increasedthepriceoftheinputstheyneeded,22businessleadersweremoreunitedon

thequestionofcartelsthanontradepolicyandthemajorityoftheregionalchambersof

commercelobbiedfortheabolitionofArticle419.

Saveforafewexceptions,thelibérauxdidnotseeanytensionbetweentheir

appreciationofcompetitionandtheirdistrustofgovernmentintervention,andthey

emphaticallydeniedthatgovernmentinterventioncouldberequiredtoprotectmarket

competition.AsJosephGarnier(1859)emphaticallyasked:“Whatisnaturalandfree

competition[…]withouttherighttoenteragreements?”

Ascartelsbecamewidespreadandstartedtotriggercomplaints,thisappealtothemere

principleofabsoluteeconomicfreedomwascomplementedwithstatementsonthe

innocuousnessofcartelsandthelackofanyjustificationforgovernmentorjudicial

oversight.Articleafterarticlemadethesamepoint:cartelabusescouldhappenonlyasa

resultofstateintervention,suchastariffsthatshieldeddomesticcartelsfromforeign

competitors,orlegalmonopoliesoperatedbythegovernment.

Withimpressiveregularity,theJournaldeséconomistesandL’Economistefrançaisthus

publishedarticlesontheinefficiencyandmisdeedsofthegovernment-operatedmatch

monopoly(monopoledesallumettes),withlittlechangefromthe1880stothe1920s,

whilestressingthatabsentgovernmentsupport,cartelscouldnotcauseharmbecause

theyinducedreactionsonboththesupplyside(withtheentryofnon-cartel

22Forinstance,AlgerianchambersofcommerceprotestedagainstthemaritimeshippingcartelthathinderedtheirexportstometropolitanFrance,andrailwaycompaniesprotestedagainstthecartelintherailsupplyindustry(Caron1988).

13

competitors)andthedemandside(withsubstitutiontootherproducts)thatmadethem

largelyineffective.

Theseargumentswerealwaysformulatedasgeneral,obvioustruths,withonly

superficialreferencetoempiricalobservation.Theywerealsoremarkablyconstantover

time.ConsiderforinstancePaulLeroy-Beaulieu,oneofthemostprominentlibéraux:in

1900,inanarticleinwhichheadvocatedtheabolitionofArticle419,preciselyatthe

timewhencourtswereinvestigatingseveralhigh-profilecourtcasesinvolvingclear

evidenceofcartel-inducedpriceincreases,hewrotethat“oneshouldnottaketragically

allthesetruststhatpeopletrytopaintasscary“because“inafreemarket,thelawof

substitution”isenoughtopreventabuses(Journaldeséconomistes,1900;41(1):119and

127).23Herepeatedexactlythesameargumentinthe1914editionofhiseconomics

treatise,claiming,withreferencetoafewpastcartels(zinc,coffee,oil,copper)andtohis

personalexperienceinbusinessthatcoalitionsareboundtofailandcouldnotdurably

raiseprices(Leroy-Beaulieu1914,1:660).Healsoshowedextremereluctanceto

concedearoleforthegovernmentinindustriesthatEnglish-speakingclassicalorneo-

classicaleconomistshadrecognizedasexceptionswarrantingeitherpriceregulationor

directadministrationbythegovernment–explicitlycriticizingJohnStuartMill’s

statementthatcompetitioninpostalserviceswasinefficientandevenunworkable,and

ignoringJ.B.Clark’sandAlfredMarshall’snuancedviewsofrailways.

Tosumup,fromthe1880stothe1920s,themainmessageconveyedbyFrenchliberal

economistsregardingcartelswasreassuring,andaboveallhostiletoanygovernment

regulationofcompetition–eventhoughtheirjournalsoccasionallymaderoomfor

contrarianviews.24Thishostilitywasamatterofprinciple-forinstanceananonymous

contributortoL’EconomistefrançaiscriticizedanAustriandraftlawmeanttosubmit

cartelstoadministrativeoversightbylikeningittocommunistfantasiesofabsolute

statism(L’Economistefrançais,1901:533-535).Liberaleconomistsoftendescribedthe

23ThesestatementsweremadeduringadiscussionoftheSociétéd’économiepolitiqueon5January1900.Inthesamediscussion,anotherliberaleconomist,ArthurRaffalovich,statedthatinprotectionistcountriessuchasFranceorGermany,cartelscouldhaveadverseeffects.Butthisobservationdidnotdeterhimfromopposinganti-cartellegislation(boththeFrenchArticle419andtheAmericanShermanAct).Hehadmadeasimilarpointin1889.24See,e.g.,GeorgesVillain’sappraisaloftheCarteldeLongwyatthemeetingoftheSociétéd’économiepolitiqueon5March1900(L’Economistefrançais,1900:842-843).Anotherliberaleconomistwhowroteinfavorofstricterenforcementofanti-cartellawswasEdmondVilley.

14

fulllegalizationofcartelsasanobviouslogicalnecessity,inviewofthefreedomof

associationthathadbeengrantedtoworkerunionsin1884(see,e.g.,Nouvions1918).

Even Clément Colson, who, as a mathematical economist was more exposed to the

influence of contemporaneous British and American economists and had an atypical

profilewithinthegroupofFrenchliberaleconomists,heldaconstantlylenientviewof

cartelsandwarnedagainstanypolicyaimingtocontrolorrestrictthem.25Inthe1927

editionofhisCoursd’économiepolitique,hewrotethat“specialrepressivemeasures[…]

are neither necessary nor efficient” (Colson 1927:265) and that cartels were mostly

harmless because they could not raise prices durably unless they deterred entry, and

entrydeterrencewastoocostlytobecredible.26Thiswasexactlythesamestanceasthe

one he had expressedmore than twenty years earlier (Journal des économistes, 1904,

3(1):103-113). In the 1933 edition of hisCours, hewould argue against international

cartels,butonlytotheextentthattheyfosteredgovernment interventionthattriedto

controlthem(Colson1933,7:76-79).Justlikehim,YvesGuyot(1927),whobythenwas

a kind of patriarch of the old French liberal economic school, and the author of the

abovementioned Morality of Competition, approved the demand by one of the main

businessconfederations(theUniondesindustriesminières)forafullabolitionofArticle

419,eventhoughthe1926lawhadmadeitpracticallytoothlessafewmonthsearlier.

Thisunchangingandabsolutehostilitytoanylegalrestrictionsoncartelscontrastswith

theviewsexpressedbycontemporaneousneoclassicalBritishandAmericaneconomists.

It iswell known that afterwidespread skepticism regarding the ShermanAct (1890),

Americaneconomistsgraduallywarmedtoantitrustpolicy.Severalanalysesofthemain

Americaneconomicjournalshavedocumentedthisevolution,whichcanbeillustratedby

a comparison of the 1901 and1912 editions of JohnBates Clark’sControl of Trusts.27

Whereasthe1901editiondismissedthefearsofabuseofmarketpower,arguingthatsuch

abuseswouldnecessarily triggerentry, the1912editionrecognized thata trust could

resorttocertainexclusionarytactics(inparticular,selectiveprice-cutting)todeterentry

25OnColsonandhispositionattheintersectionbetweentwoseparategroupsofFrencheconomists,themathematicallytrainedengineer-economistsandtheliberalnetworks,seeLeVan–Lemesle(2005)andPicory(1989).26Hehadmadethesamepointinthe1903editionofhisCoursd’économiepolitique,aswellasinOrganismeéconomiqueetdésordresocial([1912]1918).27The1912editionwasco-authoredwithJ.B.Clark’ssonJohnMaurice.

15

and charge excessive prices durably. The causes for this gradual shift have long been

discussed(Stigler1982,Scherer1989,Mayhew1998)butoneofthemstandsout:inthe

courseof the legalproceedings that resulted fromtheapplicationof theShermanAct,

muchhithertohiddeninformationbecamepublic,revealingthebrutal,sophisticatedand

ofteneffectiveexclusionarystrategiesusedbydominantfirmsortruststodeterentryor

evict smaller, less financially solid competitors. This body of evidence belied the

reassuringview thatpotential entrywas sufficient tokeep trusts in checkandcaused

manyeconomiststochangetheirmind.

EventhoughthecontextintheUKwasdifferent–withatotalfree-traderégime,less

industrialconcentrationandlesscartelization–theevolutionwassimilar,atleastas

regardsthe(dominant)neoclassicalschool.AlfredMarshall’sstanceontrusts,cartels

andeconomicconcentrationshiftedfromanalmosttotallackofconcernin189028toa

morenuancedviewdecadeslater.InIndustryandtrade(Marshall1919),hewarnedthat

cooperation,evenwhenjustifiedbyactualefficiencygains,wasalwayslikelytoleadto

‘militantrestrictivemonopoly’.Healsonotedthatfreetradedidnotalwayssufficeto

preventcartelabusesinallcases.JustlikeClarkataboutthesametime,hewarned

againstexclusionarypracticesthatcartelsormonopoliescouldusetodeterentry,such

asdiscriminatorypricing,especiallyintheformoflocalprice-cuttingorexclusive

dealing.Thisexplainswhy,whileexpressingasomewhatagnosticviewofthenatureof

thedesirablegovernmentscrutiny,Marshallcriticizedthesuppressionin1921ofthe

short-livedStandingCommitteeonTrusts,whichinhisviewcouldhavebeenavaluable

sourceofinformation.

Frenchliberaleconomists’unwaveringhostilitytoanypolicyrestrictingcartelactivity

cannotbeexplainedbydifferentialaccesstoinformation,sincedetailedreferencesto

theBritishandAmericandebateswereubiquitousinarticles,booksandparliamentary

debatesafterthepassageoftheShermanAct–includinginmanyoftheirownwritings.

NorcanadifferenteconomicsituationexplainFrencheconomists’lackofconcern.On

thecontrary,thecombinationofprotectionism(unlikeinBritain)andasmaller

28InSomeAspectsofCompetition,Marshall(1890:624)dismissedconcernsovertrusts’abilitytoexploitconsumersbyresortingtothegeneralclaimthathighprices“temptthoseontheinsidetobreakfaithandthoseontheoutsidetostartrivalworks”.

16

domesticmarketthanintheUnitedStateswaslikelytomagnifytheadverseeffectof

cartels.Infact,onemaybesurprisedthatFrenchliberaleconomists,havingclaimedthat

freetradewasthecuretotheillsofcartels(Marshall’smorenuancedpostwarposition

notwithstanding)andobservingthatitwasunlikelytoprevailinthenearfuture,didnot

advocatesomekindofpublicrestrictionofcartelactivityasasecond-bestpolicy.

Thiscomparisonconfirmsthatthehostilitytotherepressionofcartelsdisplayedby

mostFrenchliberaleconomistsstemmedfromtwoprinciplesthatoverrodeallthe

others:absolutedistrustofgovernmentinterventionandclosealignmentwithbusiness

interests.

The“solidarist”universityprofessors’lukewarmviewofcompetition

Thesecondmaingroupisthatoftheuniversityprofessors.Aftertheteachingof

economicshadbeenmadeacompulsorypartoflawstudiesin1877,severalpolitical

economychairswerecreatedwithinlawfaculties.Forthemostpart,theywerefilledby

professorswhodidnotsharethelibéraux’faithinthevirtuesofunregulatedmarkets.29

Theroleassignedbythegovernmenttotheholdersofthesenewchairswastopromote

viewsthatfellwithintheconsensusthatcharacterizedthefirstdecadesoftheThird

Republic,namelythedefenseofsocialandeconomicstabilityandlipserviceto

cautiouslyprogressivesocialpolicies.30Thesebroadprinciplesleftroomforvastly

differentviews,fromprotectionistactivisminconjunctionwithbusinessassociationsto

thepromotionoflabor-friendlyregulationsandprogressivetaxation.Butinspiteof

someheterogeneity,mostoftheneweconomicsprofessorssharedaprofessedrejection

ofthelaissez-fairedogmatismoftheirliberalcolleagues.Incontrast,theycouchedtheir

writingsinthediscourseofsolidarisme.Thisdoctrine,whichwasdubbedthe‘official

philosophyoftheThirdRepublic’(andwasassociatedinparticularwiththePartiradical

thatwasthebackboneofmostgovernmentsafter1900),stressedthevalueof

cooperationasopposedtocompetition,andwasinvoked(bydifferentpeople)tojustify

protectionistpolicies(reflectingthesolidarityofurbanconsumerswithfarmers),some

29OneofthefewexceptionswasEdmondVilley,whowasalsooneoftheveryfewlibérauxwhoadvocatedarepressivepolicytowardscartelsandcriticizedtheweakeningofArticle419(Villey1924).30InthewordsinLeVan–Lemesle(2004:321),economicsprofessorswereexpectedto“produceconsensus”(“produireduconsensus”).

17

socialinsurance,andthefirststepsintoprogressivetaxation,inthenameofan“implicit

socialcontract”bindingtogetherthemembersofasociety.

Accordingly,thetreatieswrittenbytheseprofessorswerecriticalofcompetitionifit

was“excessive”,“anarchic”,“cut-throat”.ConsiderforinstancePaulCauwès(1843-

1917),oneofthemostprominentprofessorsofeconomicsattheturnofthecentury.He

washeavilyinfluencedbytheGermanhistoricalschoolandhewasoneofthefounders

in1897oftheSociétéd’économiepolitiquenationale,togetherwithJulesMéline,the

politicianwhoasamemberofparliamentandthenasPrimeministerwasthedriving

forcebehindtariffincreasesofthe1890s.Asitsnamesuggests,thisassociationaimedto

countertheinfluenceoftheolder,liberalSociétéd’économiepolitique,chieflyonthe

questionoftradepolicy.

Contrarytoliberaleconomists,hedescribedcompetitionasanunstablestateboundto

endinmonopolyandthusharmfultobothconsumersandworkers.Accordingly,inhis

Coursd’économiepolitique(1893),whilecriticizingcartelsthatpracticed“monopoly

prices”,heclaimedthatmostofthetimetheyhadapositiveimpactbecausethey

reducedoverproductionandstabilizedprices(Cauwès1893,vol.2:147-149).Tenyears

later,afterseveralcartelshadcreateduproarinFrance,heagainpraisedcartels’

stabilizinginfluence.Theonlyreasonhedisagreedwithcallsforacompleterepealof

Article419ofthePenalcodewasthatin1903,recentcourtdecisionshadvoideditofits

substance(BulletindelaSociétéd’économiepolitiquenationale1903).

Cauwès’spro-cartelstanceiscoherentwithhiscloseassociationwithbusinessinterests,

especiallyvisiblethroughhisproximitytoJulesMéline,who,havingresumedhisactivity

asalawyerafterhistimeingovernment,representedtheLongwycartel.Thesame

remarkcannotbemadeaboutCharlesGide(1847-1932),whoasthefounderofthe

Revued’économiepolitiqueandtheauthorofthebest-sellingeconomicstreatisein

French(with26successiveeditionsfrom1884to1931),wasforseveraldecadesthe

mostprominentrepresentativeoftheeconomicsuniversityprofessors.Hewasleaning

politicallytotheleftandwasthemainpromoterinFranceofproducerandconsumer

cooperatives,inthenameof“cooperativesocialism”.However,hisgreaterdistancefrom

businessinterestsdidnotmakehimanadvocateofanti-cartelpolicyanymorethan

18

Cauwès.AcomparisonofthemanyeditionsofhisPrincipesd’économiepolitiqueshows

anunchangingassessmentofcompetition:whileacknowledgingitsroleasastimulant,

Gidemostlystressedthenegativeconsequencesofcompetition:itsdestabilizingeffects

onmarketsoftenendupinmonopoly,itiswasteful,anditinducesfirmstodegrade

quality.31

Asubstantialdiscussionofcartelsappearsonlyinthepost-1900editions,inaccordance

withthegrowingimportanceofthesubjectinpublicdebate.Gide’sPrincipesmention

themeritsofAmericantrustsintermsofproductiveefficiencyaswellasthelikelihood

ofabuse,bothbythemandbythelessintegratedFrenchcartels.But,truetohis

skepticismtowardscompetitionandtohispreferenceforcooperativesolutions,he

statesthatthemostpromisingsolutionliesnotinthedismantlingofcartels,butrather

inthedevelopmentofconsumercooperativesthatcouldwieldtheirbuyerpower

againstcartels,allowingsocietytobenefitfromthegreaterproductiveefficiencyand

stabilitycartelsaffordedwithoutfallingpreytotheirabusivetendencies.

Hisdiscussionofpossiblepoliciestoprotectcompetitionisconsistentlyskeptical,when

hedoesnotmerelyignorethem:the1890ShermanAntitrustActisnotmentioneduntil

morethantenyearsafteritsenactmentanditsdiscussionmostlystresseshoweasily

firmscancircumventit.The1913editiondescribestheabusesofRockefeller’sStandard

Oil,butitfailstomentionthattheShermanActallowedacourttoorderitsdismantling

in1911.Likewise,whereasearliereditionsstressedthatoneofthemanywaysfirms

couldcircumventtheShermanActwasbymergingthroughacquisitions,thelater

editionsfailtomentionthattheClaytonActwasenactedin1914toprecludethisway

out;andthe1926editiondoesnotevenmentionthecontemporaneousdebateinFrance

aboutthereformofArticle419.Allinall,thesubjectoftherepressionofcartelsseems

tohaveembarrassedthisleadingproponentofco-operativesocialism,whocould

neitherdefendcompetition,towhichhewasideologicallyaverse,norsidewithcartels

whoseabusesheacknowledged.

31Thisparagraphandthenextonesarebasedonananalysisofthe1893,1898,1913and1926editionsofhisPrincipes(respectivelythe4th,6th,14thand25theditions).

19

Thespecificcaseofthe‘Durkheimian’sociologists-economists

TheapproachtocompetitionbythefoundersofFrenchsociologydeservesaspecific

discussion,becauseoftheinfluenceofEmileDurkheimandhisdisciplesinacademia

andinthelargerpublicdebate,butalsoinpolicymaking.Severalofthem,aswellas

theirstudents(inparticularattheEcoleNormaleSupérieure)reachedpositionsof

powerduringandafterWorldWarI.Inparticular,AlbertThomas,asMinisterof

Armamentinchargeoforganizingwarproduction,hadthetwosociologists-economists

MauriceHalbwachsandFrançoisSimiandworkwithhimasadvisors.

Durkheimwashighlycriticalofeconomiccompetition.Hedoubtedthatchaotic

competitioncouldbringaboutaspontaneousorderandthatpriceadjustmentscould

swiftlyrestoreequilibriumonmarketsafterademandorasupplyshock(Durkheim

1893).Buthisoppositionwentbeyondthestrictlyeconomicquestionofhowquickly

competitioncouldbalancesupplyanddemand:Durkheim’sentireworkislargelya

critiqueofindividualism,bothasascientificmethod(heandhisdisciplesrejected

methodologicalindividualismintheirscathingreviewsofneoclassicaleconomists’

books,inalmosteveryissueofL’AnnéeSociologique)andasasocialreality.Accordingto

him,asocietymostlyruledbyeconomiccompetitionwasboundtosufferfromanomie,

thatis,alackofsocialorder,ofstructureandofmeaning.Accordingly,Durkheim

advocatedthe“urgent”creationofprofessionalassociations.Hehopedthatanewkind

ofguilds,differentfromthosethanhadexistedbeforetheRevolution,couldbringabout

“cohesion”and“regularity”inawaythatwouldpacifysociety(Durkheim1902).

TheviewsofMauriceHalbwachsandFrançoisSimiand(who,comparedtoDurkheim,

devotedamuchlargershareoftheirworktoeconomicsubjects)reflectboththis

intellectualstanceandtheirpolicyexperience.Duringthewar,theywereinchargeof

organizingcooperationbetweenprivatecompaniesrelevanttowarproduction.They

lamentedthelingeringanti-cartellegislation(Article419)thatthreatenedtorestrict

interfirmcooperation,inthesametermsasthebusinessleaderswithwhomtheseself-

identifiedsocialistshaddevelopedcloseworkingrelationships.

20

Duringandafterthewar,SimiandandHalbwachsadvocatedtherepealofArticle419.32

Eventhoughtheiradvocacyofsomekindofgovernmentoversightoverinterfirm

agreementswasnotsharedbybusinessleadersandliberaleconomists,thisdifference

appearsminorrelativetotheirmainpointofagreement,thatis,theneedtoremovethe

prohibitiononsuchagreements.Simiand’seconomicscoursetaughtin1930illustrates

thisconvergencequitestrikingly.Hisassessmentofthepriceeffectofcartelsisalmost

identicaltobusinessleaders’and(French)liberaleconomists’:accordingtohim,cartels

cannotcreatemuchharmbecauseanyattempttoraisepriceswillface“competitorsand

limits”thatwillmake“moderation”theonlyrationalcourseofaction(Simiand,

1932:572-613).Simiand’sselectivementionofAmericananalysesofcartelsandhis

misrepresentationoftheirfindingsalsotestifiestohispro-cartelbias:hequotes

JeremiahJenks’sTrustProblembutnotClark’sandMarshall’slaterandmorecritical

contributions.Inaddition,SimiandinaccuratelyclaimsthatJenksfoundtheAmerican

sugarcarteltohavehadlittleeffectonprices.33Thedismissalofthefindingthatinsome

casesthemaineffectofcartelsmaybeapriceincreaseattheexpenseofconsumersisall

themorestrikingthatJenksdidnotderivefromthisconclusionablanketcondemnation

ofinterfirmcoordination.Rather,heacknowledgedtheirpossibleefficiencymeritsand

heproposedacriteriontodistinguishefficiency-enhancingcartelsfromthosethat

merelyexploittheirclients:“theactualeffectsoftheindustrialcombinationuponprices

formcertainlyoneofthebesttestsoftheirusefulnessordisadvantagetosociety”(Jenks

1912:131-132).Thataleft-leaningeconomistsuchasSimiandpreferredtoignore

altogethertheriskofcartelabusestestifiestothestrengthofhisrejectionof

competition.

ThetrajectoryandactionofeconomichistorianHenriHauser(1866-1946)isinmany

wayssimilartothatoftheabovementionedsociologists-economists.Hewasan

academichistorianwho,likeHalbwachs,wroteonaverybroadrangeofsubjects(such

asreligiousanddiplomatichistory),includingcontemporaneousindustrialorganization

–whichexemplifiestheextenttowhicheconomicswasnotconsideredinFrancea

32Paxton(1977:280).33AccordingtoSimiand(1932:586-587),thedatapresentedbyJenksontheAmericansugarcartelthatoperatedafter1887showthatthecarteldidnotmateriallyincreasepricesoverasubstantialperiodoftime.ThisisatoddswithJenks’s(1912:144)summaryofhisanalysis:“Onthewhole,thechartseemstomakeitperfectlyevidentthatthesugarcombinationhasraisedthepriceofrefinedsugarbeyondtheratesinvogueduringtheperiodofactivecompetitionbeforetheformationoftheSugarTrustandthetwocompetitiveperiodsduringitsexistence.”

21

separate,highlytechnicalfieldofexpertise.Duringthewar,hewastheclosestadvisorto

EtienneClementel,theradical(centerleft)MinisterofCommerce,andassuchhewas

involved,likeHalbwachsandSimiandattheMinistryofArmament,inthecoordination

ofwarproduction.Justlikethem,hewassensitivetotheefficiencymeritsoflarge-scale

productionandinterfirmcooperation.However,his1918proposalsforareformof

Article419gofarbeyondthepromotionofagreementsenhancingproductiveefficiency:

underhisproposedwording,interfirmagreementswouldhavebeenillegalonlyifthey

hadrecoursetoobviouslyfraudulentmethodssuchasthedisseminationoffalse

informationortheplacementoffictitiousordersinorderto“momentarilycausethe

increaseordecreaseofprices”(Hauser1918).Eventhoughhealsosuggestedthat

interfirmagreementsshouldberegisteredasaconditionfortheirclausestobelegally

binding,onecannotbutnoticethatthisproposalamountedtoauthorizeallcartels–

includingthosethatwereonlymeanttoraisepricesorlimitoutput,withoutany

rationalizationofproduction–whichisclosetotheDurkheimians’proposals.

ThislenientviewofcartelsbytheleadingFrencheconomists-sociologistsofthe

DurkheimianschoolisincontrastwiththoseexpressedbythemostinfluentialBritish

andGermansociologists,respectivelyLeonardHobhouseandMaxWeber,whose

politicalstancewerealsocenter-left.InLiberalism,LeonardHobhouse(1911)denied

thatcompetitionwasboundtodegenerateintomonopoly,claimingthatintheBritish

case,freetradehadlimitedcartelization,thusbelyingKarlMarx’somberprediction.As

forMaxWeber,whileacknowledgingthatconcentrationcouldincreaseproductive

efficiency,hewascriticalofprice-fixingandproductionquotasbyGermancartels,which

hedeemed‘economicallyconservative’(Roth2006).

Left-leaningeconomistsversusleft-leaningopinionandmembersofparliament:ideas

versusinterests

Theskepticismoftheabovementioned“solidarist”economists,orthesociologists-

economists(whobelongedtooverlappingacademic,socialandpoliticalcircles,see

Topalov1999)regardinganti-cartellegislationisatoddswiththeanti-cartelopinions

expressedbyalargefractionofpublicopinionand,inparticular,left-wingmembersof

parliament.Asmentionedabove,thetopicofcartelabuseswasrepeatedlyaddressedin

parliamentinthelastyearsofthenineteenthcentury.In1924,whentheChambredes

22

députésdiscussedtheproposedreformofArticle419,thevotesagainstthelooseningof

itsanti-cartelprovisionscamemostlyfromitscommunistandsocialistmembers.34A

fewyearslater,theloudestvoicesagainsttheoutputrestrictionsthatcouldresultfrom

“rationalization”camefromthecommunist-dominatedtradeunionCGTU,whichwarned

that“capitalistrationalization”wouldraisepricesandcauseunemployment,andit

accusedthemoremoderateCGTofcolludingwithbusinessagainstworkerinterests(La

Viesyndicale,1927).

Thiscontrastpointstoaconflictbetweeninterestsandideas.Manycontemporary

observersconsideredcartelstobeharmfultoconsumers–inparticular,thosewho

derivedincomeonlyfromlaborandnotfromashareoffirms’profits.Thismadethe

repressionofcartelsaworker-friendlypolicyandthisexplainswhysupportforthe

repressionofcartelscamemostlyfromtheleft.Ontheotherhand,endorsingthe

repressionofcartelsimpliedanacknowledgementofthemeritsofmarketcompetition,

whichwasindirectcontradictionwiththeviewsofmostleft-leaningeconomistsaswe

haveseenabove–andmoregenerally,withtheviewsofleft-leaningintellectuals.This

principledoppositiontomarketcompetitionwasareactiontothewayFrenchliberal

economistshadsincethe1840sinvokedthevirtuesofcompetitioninordertodefend

theexistingsocialorderandtoopposeallprogressivefiscalandlaborpolicies,however

cautious–incontrasttoEnglish-speakingeconomistslikeJohnStuartMillorHenry

George,whohadsimultaneouslyextolledcompetitionandadvocatedrelatively

egalitarianfiscalpolicies.

Industryexpertsindefenceofcartelsinthenameofmodernization

Thelastimportantgroupofeconomistsweneedtomentionistheso-calledindustry

experts,whowereactiveinthedebatesaboutcartelsandindustrialpolicymore

generally.Theseauthorswereforthemostpartbusinessleaderswhowrotebooksand

articlesontheside,journalistsor“publicintellectuals”whohadbeenhiredbyindustrial

associationstoworkaslobbyists.

34SeethedetailedanalysisoftheMarch14,1924voteinPaxton(1977:29).

23

Owingtotheuncertainstatusofeconomics,whichwasnotconsideredadistinct

academicfield,frontierswereporousbetweenpositionsinbusiness,government,and

academia(inparticularintheGrandesécoles,whichhadamorepracticalorientation

thanuniversities).Themenconsideredthebestspecialistsofindustrialeconomicsin

Franceinthefirstdecadesofthetwentiethcentury,whowereconsultedbyvarious

governments,hadcareersstraddlingthesethreespheres.Theyfoundthemselvesatthe

centerofjointeffortsbycertainbusinessleaders,governmentofficials,andpoliticiansto

modernizeFrenchindustrythroughamixofmergers,interfirmcooperationand

governmentintervention(seeKuisel1981).

PauldeRousiers(1857-1934)wasconsideredthebest-informedspecialistoncartelsin

France.Apolygraphwhomadealivingasthesecretary-generaloftheshipbuilders’

associationandwhowroteonsubjectsrangingfromtheBritishworkingclass,toFrench

havens,elitesinmodernsocietiesandmodernAmericancivilization,heauthored

severalarticlesandbooksoncartels:Lesindustriesmonopolisées(Trusts)auxÉtats-Unis

(1898);LesSyndicatsindustrielsdeproducteursenFranceetàl’étranger(trust–cartells

–comptoirs–ententesinternationals)in1901,withseveralsubsequenteditions;aswell

asareportoncartelsforthecommitteepreparingthe1927InternationalEconomic

ConferenceoftheLeagueofNations,towhichhewasappointedasanexpert.Even

thoughthesewritingsspanalmostthreedecades,theyexpressanunchangingview,

namelythatthemarketstabilizationmadepossiblebyFrenchcartelswasbeneficialto

allandcouldneverleadtoabusessimilartothoseofAmericantrusts.35

AnotherbusinessmanconsideredamongthebestexpertsoncartelswasHenride

Peyerimhoff(1871-1953),whosecareeralternatedbetweenbeinganadministrative

judge,ahighofficialattheministryofagricultureandoneoftheleadersofthe

coalminesassociation,theComitécentraldeshouillèresdeFrance.Hewasalsothevice-

presidentoftheConseilnationaléconomique,agovernment-sponsoredcouncilthat

includedlaborandbusinessrepresentatives,afteritscreationin1925.36Hewas

appointedtotheFrenchdelegationatthe1927InternationalEconomicConference,

35ForamonographyonPauldeRousiers,seeSavoye(1988).36OnPeyerimhoff,seeChatriot(2005)2013.

24

wherehedefendedcartels,whichaccordingtohimshouldbefreefromgovernment

oversight,apositionhedefendedagainina1929article.

The1927conferenceledtonotangibledecisionsexceptthecreationofacommittee

taskedwiththestudyofcartels,theInternationalIndustrialCartelCommittee(CEII).

OneofitsmemberswastheindustrialistLouisMarlio(1878-1952)whoafterafew

yearsingovernment,becameabusinessleaderinthealuminiumandelectricity

industries(heendedupbeingchairmanofthealuminumcompanyPéchiney),oneofthe

leadersofRedressementfrançais,anorganizationpromotingthemodernizationand

concentrationofFrenchindustry;whileatthesametimebeingaprofessorofeconomics

attheEcolenationaledesPontsetChausséesandtheEcolelibredessciencespolitiques

(Morsel1893).Unsurprisingly,LouisMarlio’sreportontheglobalaluminiumcartel(to

whichhisfirm,Pechiney,wasaparticipant)fortheCEIIwasnotparticularlyalarming,

nomorethananarticleonthesametopicthathepublishedinLaRevuedeParis(Marlio

1930).37

ThedifferencebetweenFrenchandBritisheconomists’viewsofcartels

IntheaftermathofWorldWarI,inbothFranceandtheUK,politicalandbusinesselites

sharedasimilarconcern,thatis,thefearthatinmanysectorstheirindustrywaslagging

behindthatofGermanyandtheUnitedStates,whereincreasedconcentrationhadmade

producersmoreefficient.Inbothcountries,interfirmcooperationandmergerswere

seenaspossiblesolutionsandsupportforgovernment-supportedrationalizationwas

widespread.

However,asseenabove,economists’stancetowardscartelswasmarkedlydifferentin

bothcountries,withBritishliberaleconomistssuchasMarshallacknowledgingcartels’

possibleabusesandtheusefulnessofsomegovernmentoversightinordertoprotectthe

competitiveprocess,unlikeFrenchliberaleconomistsoreconomistsofanyotherstripe.

TheInternationalEconomicConferenceheldin1927undertheauspicesoftheLeagueof

Nations,isinstructiveinthisrespect.

37Onthealuminiumcartel,seeBertilorenzi2015.

25

Economicexperts’assessmentofglobalcartelsattheInternationalEconomicConference(1927)

Theconferencewasmeanttoexplorewaystoincreaseinternationaleconomic

cooperationandinparticularreviveinternationaltrade,inlinewiththemoregeneral

missionoftheLeagueofNations.TheFrenchpoliticianandformerindustrialistLouis

Loucheur,whowasthedrivingforcebehindtheorganizationoftheconference,had

proposedtoincludeinternationalcartelsamongthetopicstobediscussedbecausehe

consideredthatinternationalcartelswouldmakefreetradelessdestabilizingandcould

decreasetheappealofprotectionism(Barjot2013).38

Overthecourseoftheconference,agroupofcountriesledbyFranceadvocatedthe

creationofaninternationalframeworktoencourageandgivealegalstatusto

internationalcartels,apositionthattheBritishdelegationopposed(Hantos1930:153-

162;Bussière1992,1994;Hara1994;Berger,2006;Bertilorenzi2016).Amongthe

economicexpertswhowereaskedtosubmitpreliminarystudiesonthesubjects,Paulde

Rousierswroteamarkedlypro-cartelreport,unliketheBritisheconomistDavid

MacGregor,theOxfordprofessor(andformerstudentofMarshall)whowasconsidered

Britain’sforemostindustrialeconomist.MacGregor’sreport(MacGregor1927a)

acknowledgedthatinterfirmcooperationandconcentrationmightbedesirableinsome

circumstances.Buthewasadamantthatthethreatofabuseshouldbekeptincheckby

thecompetitivepressurebroughtaboutbyfreetrade,andhedisapprovedof

internationalcartelsbecausetheywouldweakenthissourceofoutsidecompetitive

pressure,justliketariffswould(seealsoMacGregor1927b).

AccordingtoabookpublishedinParisin1928,MacGregor’sskepticismcouldeasilybe

explainedbythefactthat‘he[was]anEnglishman,and,likeeveryBriton,he[had]1)an

instinctivedistrustofanythingthatgoesagainsttheEnglishindividualisttradition,and

2)arepulsiontowardsanyoverlypreciseinternationalcommitment’(Palivachi

1928:376).However,acomparisonofthestatusandcontentsofeconomicexpertisein

bothcountriesbetteraccountsthan‘nationalcharacter’forthedifferencebetweenthe

FrenchandBritishdelegation.

38LouisLoucheurhadsucceededtheabovementionedAlbertThomasattheMinistryofArmament.

26

Inbothcountries,themajorityofbusinessleadersandoflaborrepresentativeswere

favorabletocartels,eventhoughtheydifferedonwhoshouldcontrolthem–with

unionsdemandingsomeoversightbygovernmentsorworkerrepresentatives.Alfred

Mond,thechairmanofoneoftheUK’slargestcorporations,ImperialChemical

Industries,advocatedthedevelopmentofinternationalcartelsinhisworkasanexpert

fortheconference,andinoneofhispro-cartelspeechesheridiculedthereluctanceof

economistssuchasMacGregorwho“stillheldtheantiquatedideathatbusinessmensat

solemnlyroundatablewithaviewtoshovingupprices”(Mond1927).ArthurPugh,the

unionleaderwhowasoneofthemembersoftheBritishdelegation,wasalsofavorable

tocartelsiftheyweretobesubjectedtogovernmentandunionoversight.Thesestances

weresimilartothoseexpressedbybusinessandunionrepresentativesinother

delegations,includingtheFrenchone.

Themaincontrastbetweenbothcountriesregardingthe1927conferencehastodowith

thenatureoftheeconomicexpertisetheyprovided:oneoftheBritishexpertswas

MacGregor,andoneofthefivemembersoftheBritishdelegationwasArthurLayton,the

editorofTheEconomistandaformerstudentofMarshallwho,whilefavorableto

industrialrationalization,wasskepticalofcartels(seee.g.his1927articleonthe

forthcominginternationalconference).OntheFrenchside,oneoftheeconomicexperts

wastheabovementionedpro-cartelPauldeRousiers39,and,amongthemembersofthe

delegationwhowereinvolvedinthediscussionofinternationalcartels,onlythe

abovementionedPeyerimhoffcouldclaimsomeexpertiseonindustrialeconomics.40

Inotherwords,theBritishexpertswereacademicallytrained(inthedominant

Marshallianmould)andwereindependentofbusinessinterests,whereastheFrench

expertswere,aboveall,representativesoflargeindustrialfirms.Onecannotbut

establishalinkbetweenthisdifferenceandthefactthattheBritisheconomicexperts’

39TheotherFrenchexpertwasWilliamOualid,alawprofessorwhosereportcannotbedescribedasclearlypro-oranti-cartel.40TheothermembersoftheFrenchdelegationweretheheadofthelargestworkerunion,arepresentativeofanagriculturalassociation,andDanielSerruys,aliberal-leaningeconomicexpertthenworkingfortheMinistryofCommerce.Serruyswasinvolvedinthediscussionsontariffsbutnotinthoseoninternationalcartels.

27

stanceonglobalcartels,butnotthatoftheFrenchexperts’,wasatoddswiththe

demandsofbusinessrepresentatives.

Economists,competitionandrationalizationinFranceandintheUK

CharacterizingBritisheconomistsorpolicymakersinthefirstdecadesofthetwentieth

centuryasuniformlystaunchdefendersofcompetitionagainstcartelsandmonopolies

wouldbeplainlywrong.Ontheleft,startingaround1900,theFabianeconomists

departedfromJohnStuartMill’spromotionofcompetitivemarketscombinedwith

redistributivetaxation(andideathathadbeenmadeevenmorepopular,globally,by

HenryGeorge’slandtaxmovement).Theyconsideredthattrusts“heraldedthenew

SocialistAge”andtheytouted“guildsocialism”(Mercer1995).AfterWorldWarI,even

theLiberalPartydepartedfromitseconomicorthodoxy.Whenitlaunchedanindustrial

inquiryin1927,itentrustedthesectionon“theorganisationofbusiness”toKeynes,

who,inhiscontributiontotheparty’sbookentitledBritain’sIndustrialFuture(1928),

chartedafuturecharacterizedbyacorporatistmanagementofindustry,withcartels

achievingcoordinationandrationalizationundertheaegisofgovernment.

Movingfromideastopolicies,itisintheUK,notinFrance,thatgovernmentsactively

supportedwidespreadcartelization:startingattheendofthe1920s,theBritish

governmentsupervisedrationalizationandcartelizationinmanysectorsincluding

shipbuilding,coal,textile,steel,sugarandlinershipping(Mercer1995).

NosuchpolicieswereattemptedinFrancetilltheGreatdepression.Eventhen,attempts

inthatdirectionwereforthemostpartunsuccessful.Adraftlawmakingcartelization

mandatoryifamajorityoffirmsinanyindustrialsectorwantedit(the“Flandin-

Marchandeaulaw”)ultimatelyfailedinparliament(in1935),largelyasaresultof

disagreementsregardingtheextentofgovernmentoversight(Chatriot2007:13-16,see

alsoDenord2008),andalsobecauseofthegeneraldifficultyinhavinglawspassedin

bothchambersofparliamentinatimeofpoliticalinstability.

28

Conclusion

Afocusontheexperienceofthe1930sintheUKandinFrancemightsuggestthat

economists’ideasaretoovolatile,ortooirrelevanttopolicy,toreallymatter.Thealmost

totallackofsupportamongFrencheconomistsforanti-cartelpolicies,andtheir

widespreadsupportforinterfirmcooperation,didnottranslateintosystematic

government-sponsoredcartelizationinthe1930s,whereastheinverseconfiguration

prevailedintheUK.Onemightbetemptedtoconcludethateconomists’viewschanged

sothoroughlyattheendofthe1920sintheUKthattheMarshallians’previous

skepticismwassupersededbydifferentideas,ormoresimplythateconomists’

discourseonthesesubjectshadlittleinfluenceonpolicy.

However,consideringthelongerrun,suchaconclusionmustbequalified.Inthelate

1930s,aftergovernment-sponsoredcartelizationintheUKwasfoundtohaveamore

positiveimpactonprofitsthanonproductivity(BroadberryandCrafts,1992;Crafts,

2013)andKeynes’GeneralTheoryshiftedthepolicydebatetomacroeconomics,many

Britisheconomistsreturnedtoamorepositiveappraisalofcompetitivemarketsand

pro-competitionpolicies:Keyneshimself,inthefamouslastchapteroftheGeneral

Theory,butalsotheyoungergenerationofsocialisteconomistsattheNewFabian

ResearchBureauwhowentontohaveinfluenceonpolicyafterWorldWarII(Durbin,

1985).Whilethepost-WorldWarIILabourpartycannotbedescribedaspro-market,

theseeconomistshadsomeimpactonthepoliciesitfollowedwheninpower,fromthe

limitationofthescopeofnationalizationstonaturalmonopolies(pluscoalandsteel)in

the1940s(Milward1997)toananti-cartellawin1948,supportforthestrengtheningof

anti-cartelpolicyin1956(underaconservativegovernment)andamergercontrollaw

in1965,thesecondintheworldaftertheAmericanClaytonAct(Mercer1995:92-94,

140-141).Althoughidentifyingintellectualgenealogiesiscomplex,theMarshallianview

ofcompetitionprobablyplayedarole:evenifitseemedtobesidelinedbythelate

1920s,itwaslaterincorporated(andcomplementedwiththenascenttheoriesof

oligopolisticcompetition),togetherwithKeynes’ideas,intheneoclassicalsynthesis,

whichwasfirstformulatedinthelate1930sandthenformedthebasisfortheteaching

ofeconomicsintheEnglish-speakingworld.

29

Incontrast,Franceremained,formostofthepost-WorldWarIIdecadesanduntilnow,

theEuropeancountrymostconsistentlyreluctanttowardscompetitionpolicy,savefora

fewexceptionalepisodes.41ShortlyafterthecreationoftheEuropeanCommunity,the

Frenchgovernment,supportedbytheItalianone,attemptedtopreventtheanti-cartel

clausesoftheTreatyofRomefrombeingimplementedtooforcefully(thatis,bythe

EuropeanCommission,withlittleroomforinfluencebynationalgovernments),finally

failinginthefaceoftheoppositionofGermanyandBeneluxcountries(Warlouzet2006,

2008).Lateron,successiveFrenchgovernmentsinsistedthatagriculturebelargely

exemptedfromcompetitionrulesandtheyblocked(till1989)thecreationofa

Europeanmergercontrolmechanism.Francehasbeenpermanently,fordecades,

irrespectiveofwhichpartywasinpower,thecountrypushingmoststronglyinfavorof

relaxingcompetitionrulesinthenameofindustrialpolicyorpublicservices.

ThehistoryofthedebatesoncompetitionpolicyinFrancethroughoutthetwentieth

centuryfallsoutsideofthescopeofthisarticle.However,consideringthepermanenceof

theFrenchreluctance–inspiteoffar-rangingpoliticalandeconomicchangesoverthe

sevendecadessincethebeginningsofEuropeaneconomicintegration-,onecan

hypothesizethattheintellectualconfigurationunderlyingtherejectionofcompetition-

promotingpoliciesbyalmostallFrencheconomistsinthedecadesleadinguptothe

GreatDepressionhadalong-lastinginfluence.

41ThemainexceptionconcernstheoriginofEuropeancompetitionpolicy:theFrenchgovernmentwantedacompetitionprovisiontobeincludedinthetreatycreatingtheEuropeanCommunityofCoalandSteel(1951)outoffearthatGermansteelproducersmightbenefitfromanunfairadvantagethroughpreferentialaccesstocheaperGermancoal.TheseprovisionswerethebasisforthecompetitionarticlesintheTreatyofRome.

30

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