Published by EH.Net (January 2020)

Eric Monnet, Controlling Credit: Central Banking and the Planned Economy in Postwar France, 1948-1973. New York: Cambridge University Press, 2018. xxii + 327 pp. $120 (hardcover), ISBN: 978-1-108-41501-9.

Reviewed for EH.Net by Laure Quennouëlle-Corre, Centre National de la Recherche Scientifique (CNRS).
Many studies have been published about central banking in the second half of the twentieth century, before the recent convergence of central banks towards independence and orthodoxy. Most of them have focused on monetary policy or banking supervision. However, the primary interest of Eric Monnet’s Controlling Credit is to shed light on credit policy, a field of central banking activity which has been overlooked, and which is studied here during the postwar period in France. In that period of the “nationalization of credit,” when “monetary policy and credit policy were conflated” (p. xvii), the book aims at giving a comprehensive understanding of the various facets of credit policy. The first part of the book is dedicated to the institutional framework of credit in France after World War II. The second part explores the ways in which credit was managed under fixed exchange rates and in a domestic perspective, as “a monetary policy without interest rates.” The book provides an accurate study on the allocation of capital across sectors by exploring credit statistics using quantitative analysis. The last chapter compares French credit policy to those of other European countries and associates the end of credit policy in the 1970s to the construction of the European Union.

Controlling credit was, in fact, one of the main tasks of the Banque de France at the time of the planned economy, when the independence of central banks was not even a dream or a wish. Revisiting the so-called “Trente Glorieuses” period (the post-war golden age) in a monetary and financial perspective, Eric Monnet sheds light on the pro-active policy of the central bank in favor of growth, whereas it was traditionally considered as a passive institution which was focused only on the fight against inflation. By studying selective credit policy rather than interest rate policy, the author reevaluates the role of the institution in credit distribution and in doing so, he seriously relativizes the idea of a central bank entirely in the hands of the Treasury. And by accurately studying the selective credit policy, he makes an important contribution to the highly topical issue of industrial policy and credit transmission channels.

For those who are interested in the history of European capitalism, the second main contribution of the book concerns the exploration of the forgotten seventies, which are here revisited as a period of reforms and change. Long perceived as a decade of crises — the end of Bretton Woods system, the 1973 oil crisis, the end of the Golden Age in Europe — and as the beginning of financial globalization, it is more and more considered as a crucial time in recent economic history. In fact, the 1970s marked the beginning of changing attitudes in European domestic financial and monetary policies and Monnet’s research plays an important part in the academic studies which have recently re-assessed this transitional period. The book sheds light on this phenomenon by revealing the desegregation of planned capitalism in France, its difficulty to adapt to the new international order and to join the general movement toward liberalization and openness — especially in the field of money and credit. For instance, at the same time the money market was liberalized and credit supervision (“encadrement du credit”) was reinforced.

To back up his demonstration with the history of ideas and of economic thought, Monnet convincingly demonstrates that, at the time, the central bank was not Keynesian let alone monetarist, but it was inspired by the traditional French reluctance to open market policies since the 1930s. His conclusion, which is based on factual evidence and historical knowledge, brings supplementary interest to the study on credit policies in other European countries and calls into question the common idea of a European convergence of financial systems over the period — the fruit of ideological or teleological points of view.

Both an economist and an historian, affiliated with the Paris School of Economics (PSE), the author founds his research on radical empiricism and uses a variety of sources and different methodologies for his demonstration: exploration of archives, econometrics, and an institutionalist approach. He enters the study of actors by legal framework, economic thought, and institutional arrangements — but also by quantitative analysis and historical files. This multi-disciplinary approach brings particular value to his work. Perhaps some blind spots are regrettable, such as neglecting the group of other players outside of the central bank that were also involved in credit policy — the Treasury, private and public banks, Caisse des dépôts et consignations. As the French financial system was based on political relationships and connections between many financial institutions, the undervaluation of the interactions between them should not be underestimated. Lastly, taking into account the intellectual affiliations of individual actors would be very fruitful to explain the evolutions, the divergences, the resistances to an unfinished convergence and to reconnect the whole story with the history of economic thought.

The book is very rich and addresses many additional topics in financial, monetary and economic areas as well. It offers a new vision of the role of central banking in Europe that can be of use for credit policies in the so-called emergent countries such as China, India or Brazil. Beyond monetary and financial history, it provides an important contribution to the history of capitalism and its variety through time and space.
Laure Quennouelle-Corre is Director of Research at the Centre National de la Recherche Scientifique (CNRS) in Paris, her main fields of research relate to economic and financial history in an international perspective, including work on public debt, money markets, financial elites, and women in the banking sector. She co-edited (with Gerard Beaur) Les crises de la dette publique XVIIIe-XXIe siècle (2019).

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