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.

Background

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

+ Classification for rationing Class Category E Children up to 3 years old J1 3 to 6 years old J2 7 to 13 years old J3 13 to 21 years old A 21 to 70 years old V Over 70 years old T Workers C Farmers

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 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 ("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