FRENCH LABOR UNREST IN 1950 AND ITS IMPLICATIONS FOR THE ATTAINMENT OF US OBJECTIVES IN WESTERN EUROPE

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP78-01617A003800070002-1
• Release Decision: RIFPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: December 27, 2016
• Document Release Date: May 2, 2013
• Sequence Number: 2
• Publication Date: April 10, 1950
• Content Type: REPORT

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at
COPY NO.
FOR THE ASSISTANT DIRECTOR
FOR REPORTS AND ESTIMATES
FRENCH LABOR UNREST IN 1950 AND ITS
IMPLICATIONS FOR THE ATTAINMENT OF
US OBJECTIVES IN WESTERN EUROPE
ORE 100-49
Published 10 April 1950
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SEC
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4S)pfrE T
FRENCH LABOR UNREST IN 1950 AND ITS IMPLICATIONS
FOR THE ATTAINMENT OF US OBJECTIVES IN
WESTERN EUROPE
SUMMARY
French labor discontent will be among the
basic factors contributing to a slowing down
in 1950 of French progress toward objectives
that the US has set for Europe. The follow-
ing specific results of this dissatisfaction are
to be exepected: (1) the expanded efforts,
which the whole French nation must now
make in support of the ERP's long-term aims,
will be retarded more than had been antici-
pated; (2) France's fulfillment of its role in
the first year of the MDAP will be rendered
more difficult; and (3) because the hoped-for
increase in the economic and political
strength of France will probably be retarded
while Germany's recovery continues, the
chances are lessened that the French will at-
tain the position of leadership on the conti-
nent which has been assumed in US planning.
A major factor in all these unfavorable trends
will be the Communist-dominated General
Labor Confederation (COT) , exploiting la-
bor's economic grievances.
Substantial reduction of French labor's dis-
satisfaction over the next few years could be
accomplished only by a decrease in the dis-
parities and inequities that result from the
widely varying standards of living in France,
a general increase in the standards of living,
or both. Progress in either of these directions
will, however, be slightfat least through 1950.
The basic problem will be solved neither
through such wage increases as are likely in
the next few months nor through any dis-
crediting of Communist leadership of the Gen-
eral Labor Confederation (COT).
Ineffectual efforts of union leaders to
achieve substantial improvement in labor's
purchasing power, as well as the workers' in-
tensified discontent itself, will produce ad-
verse consequences for French economic ac-
tivity and political stability. The direct ef-
fects in 1950 are expected to include:
(1) Increased unrest among the workers
and their leaders, encouraged, of course, by
the CGT.
(2) A growing number of strikes, both local
and industry-wide.
(3) Intensified labor pressure on the gov-
ernment.
(4) An appreciable rise in money-wage lev-
els, perhaps amounting over the year to 15-20
percent, accompanied, however, by a corre-
sponding rise in the cost of living.
(5) Diminished incentive toward maximum
production among individual workers.
The anticipated strikes will be among the
major developments which will probably re-
tard the increase of industrial production and
of productivity in 1950. The present degree
of stability of the French economy, moreover,
will be impaired in 1950 by the disturbances in
production, the growing antagonisms in labor-
management relations, and the inflationary
impact resulting both from interruptions in
the scheduled production of goods and from
the expected rise in money wages.
Third Force Governments?the only kind
of French Government foreseeable with the
present Assembly?will be increasingly vul-
nerable to labor pressure, which can be ex-
Note: The intelligence organization of the Department of the Air Force has concurred in
this report; for dissents by the Departments of State, Army, and the Navy, see En-
closures A, B, and C, respectively. This report contains information available to CIA
as of 15 February 1950.
205100ilerr
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2 SE
erted directly either by labor's political influ-
ence on the middle-of-the-road parties or
through work stoppages. The Communist
Party may well succeed, at least temporarily,
in reversing its steady loss of influence in
France in 1949.
The modest capabilities which France may
gradually develop for supporting the MDAP
with materiel and equipment will be limited
in part by the effects of labor unrest through
1950. The CGT's long-range capabilities for
hampering the MDAP will be assisted by these
effects, despite any reluctance the non-Com-
munist workers may have to answer clearly
political CGT calls for work stoppages. Fur-
thermore, labor's discontent will have adverse
consequences for the MDAP through the wage
increases likely to be won, which will make it
more difficult for the government to increase
its volume of direct defense expenditures.
foSfrlerT
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SE
FRENCH LABOR UNREST IN 1950 AND ITS IMPLICATIONS
FOR THE ATTAINMENT OF US OBJECTIVES IN
WESTERN EUROPE
French labor discontent, which has been
building up steadily over the past six months,
will be aggravated in 1950. This prospect is
of particular concern to the US because labor
unrest will be among the basic factors which
will contribute to a slowing down of French
progress toward objectives that the US has
set for Europe. Although it is impossible to
make specific quantitative estimates of the
direct or residual effects of labor unrest as
such on progress toward particular US goals,
It is demonstrable that the effects now antici-
pated will have seriously adverse consequences
for the US. Specifically, the following results
are to be expected: (1) the expanded efforts,
which the whole French nation must now
make if the ERP is to be concluded in 1952-53
with reasonable assurance of long-term eco-
nomic gains, will be retarded more than had
been anticipated; (2) France's fulfillment of
its role in the first year of the MDAP will be
rendered more difficult, with adverse effects
on the development of the North Atlantic Al-
liance; and (3) because the hoped-for in-
crease in the economic and political strength
of France will probably be retarded while Ger-
many's recovery continues, the chances are
lessened that the French will attain the posi-
tion of leadership on the continent which had
been assumed in US planning. A major fac-
tor in all these unfavorable trends will be the
Communist-dominated General Labor Confed-
eration (COT), which will derive considerable
advantage from exploiting labor's economic
grievances.
Substantial reduction of French labor's dis-
satisfaction over the next few years could be
accomplished only by a decrease in the dis-
parities and inequities that result from the
widely varying standards of living in France*
? See Appendix I.
and/or by a general increase in standards of
living. Progress in either of these directions
will, however, be slight at least through 1950.
The basic problem will be solved neither
through such wage increases as are likely in
the next few months nor through any discred-
iting of Communist leadership of the General
Labor Confederation (COT).
Ineffectual efforts of union leaders to
achieve substantial improvement in labor's
purchasing power, as well as the workers' in-
tensified discontent itself, will produce ad-
verse consequences for French economic ac-
tivity and political stability.* Because it will
be unable to paralyze the economy or to gain
decisive political power, labor will be unable
to force prompt and liberal concessions from
the government. Obviously this inability to
force a substantial rise in real wages will pro-
long labor's dissatisfaction and the ill effects
that will follow.
The direct effects in 1950 are expected to
include:
(1) Increased unrest among the workers
and their leaders, encouraged, of course, by
the CGT.
(2) A growing number of strikes, both local
and industry-wide.
(3) Intensified labor pressure on the gov-
ernment.
(4) An appreciable rise in money wage lev-
els, perhaps amounting over the year to 15-20
percent, accompanied, however, by a corre-
sponding rise in the cost of living.
(5) Diminished incentive toward maximum
production among individual workers."
? For recent and prospective aggravation of
worker discontent, see Appendix II.
?? These direct effects are more fully discussed in
Appendix M.
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1. Economic Considerations.
The anticipated strikes will be among the
major developments?including competition
in foreign markets, continued deficit-financ-
ing of the budget, and decreasing ECA aid?
which will probably retard the increase of in-
dustrial production in 1950.* Interruptions
in the flow of materials and in production
processes over a number of months will act
as a drag both on the volume of production
and on productivity (rate of output per man-
hour) . Productivity will be adversely affected
also by lowered labor morale. Besides di-
rectly impairing the workers' efficiency, lower
morale will render them more receptive to
Communist propaganda which charges that
the demand for higher productivity is a capi-
talist device for exploiting the workers with-
out recompensing them through higher
wages.
The French must, however, not only main-
tain but also increase substantially their pro-
duction levels in the next two years and must
as well make rapid strides in reducing pro-
duction costs, in which higher productivity is
a vital factor. Both these achievements are
essential in order that France may expand ex-
ports and balance its foreign payments ac-
counts by the end of the ERP without suffer-
ing a decline in the standard of living.
French industry and agriculture are already
insisting that they be given some time to cut
costs before accepting keen foreign competi-
tion.** Such competition, nevertheless, is in-
herent in full economic integration, without
which ECA believes a high level of economic
activity is impossible for any Western Euro-
pean nation.
The present degree of stability of the
French economy?as well as planned levels of
? By January 1950, the French production index
still had not advanced beyond the May 1949 post-
war peak of 131 percent of 1938.
"A tentative OEEC study (September 1949) of
comparative labor costs per unit of output estab-
lished the following indexes of minimum costs com-
pared to 1938: France, 206; West Germany, 141; UK,
175; Netherlands, 185; TJS, 190; and Italy, 194. Al-
though average industrial productivity rose about
15 percent in France in 1949, it is still only slightly
above 1938 levels and is at approximately one-
fourth of present US levels.
economic activity?will be impaired in 1950 by
disturbances in production, the growing an-
tagonisms in labor-management relations, and
the inflationary impact resulting both from
interruptions in the scheduled production of
goods and from the expected rise in money
wages. Existing inflationary pressures (see
Appendix II) are likely to remain sufficiently
strong for several months so that wage in-
creases in the major industries will tend to
encourage further price increases. An infla-
tionary effect will almost certainly be pro-
duced by the wage increases which cannot be
avoided in the nationalized industries. Partly
in order to meet their expanded wage costs,
the government will very probably be forced,
in view of political handicaps, to engage in
greater inflationary borrowing than has been
necessary since 1947.
Such a development in public fiscal policy,
as well as a prolongation of the current steady
price rise, would be a fundamental blow to the
considerable improvement over the past two
years in the stability of the French economy.
Further improvement in this stability, which
ECA pursues both in its direct ERP dealings
with the French Government and, in part, by
its accelerated campaign for European eco-
nomic integration, will thus be hampered by
the residual effects of labor discontent.
2. Political Considerations.
Third Force Governments?the only kind of
French Government foreseeable with the pres-
ent Assembly?will be increasingly vulnerable
to labor pressure. This pressure can be ex-
erted directly either in the form of demands
and warnings of labor's spokesmen or through
actual work stoppages. Indirectly, all the ad-
verse consequences of labor's unrest?as it af-
fects production, productivity, price levels,
and Communist capabilities?will tend to
magnify the disagreements among the middle-
of-the-road parties.
Even before the Socialists' withdrawal from
the government early in February 1950, labor
could exert considerable political pressure on
Third Force Governments in that the anti-
Communist Force Ouvriere (FO) was fre-
quently able to influence government policy
through the Socialist ministers, while the
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Christian Labor Confederation (CFTC),
through its connections with the left wing of
the Popular Republican Party (MRP), was
and remains able to influence its actions.
The current seizure of the initiative by labor,
which led to the Socialists' withdrawal from
the already wobbly Third Force coalition, risks
the downfall of the present government and,
subsequently, the dissolution of the Assembly.
Although the Socialists apparently hope to
avert a showdown in the Assembly which
might hasten this event, labor is now in a po-
sition to force their hand in pressing for
prompt satisfaction of its demands. Mean-
while, the Socialists' withdrawal from the co-
alition deprives the government of their re-
straining hand on non-Communist labor's*
strike activities.
Regardless of any changes in the govern-
ment, the Communist Party through the
strike tactics and the enhanced prestige of the
CGT may well succeed, at least temporarily,
in reversing its steady loss of influence in
France in 1949?a trend which would some-
what strengthen its political power.
3. Military Considerations.
The Mutual Defense Assistance Program
(MDAP), although it does not anticipate any
French contribution in the next few months
beyond that of manpower, does entail utiliza-
tion at a later date of the modest capabilities
which France may gradually develop (with
US aid) for furnishing materiel and equip-
ment. The effects of labor unrest will be a
limiting factor on such capabilities through
1950.
The French Communist Party has already
revealed its determination to wage an unre-
S E C
mitting struggle in France against the MDAP.
The CGT's long-range capabilities in this re-
spect will be assisted by the direct effects of
labor discontent, despite any reluctance the
non-Communist workers may have to answer
clearly political CGT calls for work stoppages
in obstruction of MDAP shipments. The
Communists will fully exploit the CGT's strike
tactics and membership drives, as well as the
agents it maintains in industries critical for
the progress of the MDAP. As the workers in
the near future increase their efforts to obtain
wage increases, the CGT will find it more and
more feasible to call strikes on economic
grounds which will at the same time promote
their anti-MDAP objective. The CGT's posi-
tion as the strong champion of metal workers
and dockers will be especially useful to the
Communists' efforts to discredit the program
and disrupt the production and distribution
of armaments. Despite some government
progress in reducing direct Communist pene-
tration of labor in the nationalized industries,
the Party still has agents, particularly in the
aircraft industry, capable of causing work
stoppages and sabotage.
Aside from the assistance which the Com-
munists may be expected to derive from labor
unrest, the workers' discontent will also have
adverse consequences for the MDAP through
the wage increases likely to be won. These,
by seriously aggravating the government's
tight budgetary position, will make it more
difficult for the government to increase its
volume of direct defense expenditures, which
it would undertake in any event only after a
general and sizable increase in productivity
permitted a considerable diversion of produc-
tive capacity to defense purposes.
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APPENDIX I
LABOR'S GRIEVANCES
French labor expresses its basic griev-
ances?multiple and often complicated?
along four general lines:
(1) The total income (from wages and so-
cial benefits) of many types of workers has
not risen in proportion to the increase in liv-
ing costs.
(2) The working class as a whole has not
received its share of the rising national in-
come.
(3) Particular groups of workers have suf-
fered inequities as a result of periodic adjust-
ments in social benefits.
(4) Social benefits, often awarded to work-
ers in lieu of wage increases, can (in the work-
er's mind) substitute only in part for actual
pay.
The bulk of the workers will remain deeply
dissatisfied because they will still believe that
they are not individually receiving their full
share of the benefits of the nation's rapid eco-
nomic recovery. Should the cost of living
continue to rise (see Appendix II), the work-
ers will become more apprehensive lest their
standards of living be lowered further rather
than raised. Labor leaders could, therefore,
be expected to intensify their demands both
for wage increases and for a greater share of
the national income, particularly by means of
shifts in the tax burden and enforced price
reductions where profits "permit." Even a
substantial increase in money wages, if prices
continue to rise, will not satisfy labor. Hence
its leaders will call more insistently for major
sacrifices by classes (especially entrepreneurs
and farm groups) now holding the preponder-
ance of political power.
The accentuation of inequalities and inequi-
ties in French living standards, about which
the workers complain, has resulted largely
from the postwar inflation in France. Be-
cause rising wages have lagged well behind
price increases, the majority of workers have
found themselves able to purchase a smaller
share of available goods than before the war.
They have watched some members of their
class gain disproportionately by the govern-
ment's expansion of "indirect wages" or "so-
cial benefits": family and transportation al-
lowances; industrial accident, medical, and
hospitalization payments; and vacation pay.
Meanwhile labor as a whole has watched other
classes improve their living standards dispro-
portionately by means of black market opera-
tions, price-fixing agreements, changes in
taxes and tax methods, direct access to the
sources of food supplies, and opportunities for
large profits during the period of rising prices.
A comparison of the indexes of living costs
and income for the laboring class as a whole
is misleading. In January 1950, the cost-of-
living index and the average weekly income
of workers (including social benefits) were
both roughly 17 times greater than they had
been in 1938. A breakdown of laboring class
incomes, however, reveals glaring disparities.
The total of weekly payments to some provin-
cial workers with five children was 25 times
greater than in 1938, while most Parisian
workers without dependents received average
total payments only 10 times greater. Most
workers complain, moreover, that social bene-
fits paid in services and not in cash (e.g.,
medical care and hospitalization) cannot be
applied to the purchase of such essential
budget items as food, clothing, and household
necessities.
Quite apart from the question of relative in-
come trends, the actual basic wages of a great
mass of French workers are so low as to breed
despair. More than one-third of the total in-
dustrial labor force receives less than 15,000
francs ($45) per month in basic wages. One-.
half the total income of unskilled Paris labor-
ers without dependents is spent for food, and
for many families with children, food expendi-
tures are estimated to amount to a consider-
ably higher percentage of the budget.
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APPENDIX II
RECENT AND PROSPECTIVE AGGRAVATION OF WORKER DISCONTENT
In the first half of 1949, after persistent and
at times rampant inflation following the war,
French workers were moderately encouraged
by a slow decline of the cost of living. Their
fundamental complaints against inequalities
and inequities remained, however, and acute
hardship persisted in the low-paid categories.
Late in August 1949 a new restlessness ap-
peared among organized labor when retail
prices resumed their upward trend. This de-
velopment was a result both of the severe
drought and of an expansion of credit induced
by fears of excessive deflation. The workers'
reaction to the unfavorable price trend was
such that the government promptly took an
unusual step over the protests of the powerful
farm and industrial blocs; it invited immedi-
ate extraordinary imports of scarce goods vital
to workers' budgets by reducing many
quota restrictions and customs duties.
In mid-September, devaluation intensified
the existing labor dissatisfaction, as labor at
once anticipated a much more powerful im-
petus to the continuing price rise. An imme-
diate result was the resignation of the Queu-
ille Government, which had been relatively
stable, over labor's demand for a special sup-
plement to the monthly wage. By lath No-
vember, the leadership of the anti-Commu-
nist labor confederation Force Ouvriere (F0)
felt obliged to call a one-day general strike
for the 25th, despite the real risk of Commu-
nist exploitation.
At the beginning of 1950, the average cost-
of-living index for the Parisian worker with-
out dependents stood 4 percent above Septem-
ber 1949 and 18 percent above September
1948. Meanwhile combined wages and social
benefits had not risen appreciably since early
September 1948, when a general increase of
about 15 percent was permitted. Now labor's
discontent was sufficiently acute to drive the
Socialists to a long-postponed decision, criti-
cal for governmental stability: on 3 February
they withdrew from the Third Force coalition
over the distribution of another wage supple-
ment, which was under consideration by the
Bidault Government for the more needy cate-
gories of workers.
A further deepening of labor discontent over
the coming months is indicated. During at
least the first half of 1950, labor's real income
may not rise appreciably, and could even fur-
ther decline. The initial rise of money wages
(see Appendix III, Section 4) following the
recent restoration of collective bargaining will
be slow, will probably not benefit all classes
of workers, and will probably be largely if not
completely offset by continued retail price in-
creases. These are already foreshadowed by
a 3 percent rise of wholesale prices in January.
Inflationary pressures underlying this trend
at least for the coming months will include
large-scale government investment spending,
large-volume credit not subject to ceilings, de-
clining ECA aid, any wage increase paid gen-
erally, and especially the strongly-intrenched
private restrictions on price behavior. The
necessary government efforts to overcome
these forces will be politically impracticable
for some time to come.
LEoscjiloeles
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APPENDIX III
DIRECT EFFECTS OF LABOR'S DISSATISFACTION
1. Growing Unrest of Workers and Their
Leaders.
A general intensification of labor's efforts
to obtain satisfaction of its demands will stem
from: (a) a widespread belief among the
workers not only that their burdens are be-
ing made heavier but that action cannot be
longer delayed; and (b) the CGT's eagerness
to exploit this belief.
Labor's determination to act in the months
ahead will be conditioned by the return to col-
lective bargaining initiated in February. Un-
der the system of government-controlled
wages prevailing over the previous decade,
labor could hope to achieve important gains
only by a united offensive against government
policy. Such an effort was not, however,
practicable, chiefly because organized labor,
controlling less than half of the workers, is
badly split by rival confederations.* In addi-
tion, the majority of the workers have been
consistently reluctant to abet the CGT's politi-
cal aims and have lost considerable faith in
the ability of their leaders in general to win
important economic gains. These factors are,
however, no longer decisive handicaps to a
stronger stand. As negotiations are under-
taken with individual employers or indus-
tries, the more aggressive union leaders and
the more aggrieved groups of workers are freer
to act independently, and non-Communist
leaders will no longerisbe immobilized by fear
of the ultimate consequences of unity of ac-
tion with the CGT in nation-wide strikes.
Labor's will to strike henceforth will be lim-
? Of the total labor force which could be union-
ized (about 9 million), less than half is controlled
by the national confederations. The CGT has
nearly twice as many supporters (about 2,300,000)
as the combined memberships of its chief rivals:
the Socialist-oriented Force Ouvriere (FO-probably
under 500,000), the Christian Labor Confederation
(CFTC-probably over 500,000), and the new con-
servative Independent Labor Confederation (CTI-
about 200,000).
ited by two principal obstacles: its poor finan-
cial preparedness; and the fact that the work-
ers are not uniformly aggrieved, in view of
the substantial social benefits granted to a
sizable number. Strike action will tend to be
strengthened, however, insofar as it is now
taken in defense of the particular interests of
the local workers involved.
In addition, labor will grow more aggressive
in the coming months because both the em-
ployers and the government will persistently
resist liberal concessions to the workers.
Management will fight to protect present
profit margins,* and to prevent price increases
which would jeopardize present or prospective
markets. The government will be inclined?
somewhat less thinly?to check labor's pres-
sure because labor's influence in the Cabinet
has declined, and the anticipated rise in gen-
eral wage levels must inevitably be extended
to the nationalized industries, where any
sharp increase in costs would seriously jeop-
ardize the government's financial situation.
The reasons for the CGT's promotion of
labor militancy will be: (a) its fundamental
motive of seeking to develop labor's discontent
to the greatest possible extent in order to
hasten Communist participation in the gov-
ernment; (b) its determination to reverse the
slow decline since 1947 of its prestige among
the workers; and especially (c) its Moscow-
directed mission in 1950 to impede the devel-
opment of the NAT by methods of attrition
if not by inciting general social strife.
The CGT is well prepared to exert a leading
influence, at least in the early stages of labor's
1950 campaign. Of all the confederations, it
has the best-trained organizers, the largest
funds, probably the greatest strength of pur-
pose, and a persistent reputation as the
strongest champion of all labor.
? Although profit margins have not been accu-
rately reported, the ECA Mission to France believes
they were "very high" in 1949, "amounting in many
cases to 20 to 30 percent of sales."
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VAPIMIPT
Furthermore, the COT'S aggressive stand
will tend to draw the non-Communist labor
confederations into adopting more militant
tactics in order to forestall desertions of their
local unions to CGT leadership. Such a trend
in non-Communist labor policy has become
more likely in view of the growing urgency
of the workers' demands and the Socialists' re-
linquishment of governmental responsibility.
2. Growing Number of Strikes.
Labor's greater aggressiveness will be
demonstrated principally by a multiplication
of strikes and by intensified pressure on the
government in support of bolder demands.
The seriousness of the work stoppages will lie
in their growing number and breadth of effect
on the nation's industrial life. Most will be
local, inasmuch as both the CGT and the em-
ployers are promoting separate negotiations
for each enterprise. A few, however, will be
widespread ? for example, among metal
workers, miners, railroad workers, dockers,
and government workers ? especially when
organized by strong industry-wide non-Com-
munist unions, or by the COT for political
purposes. Both the union treasuries and the
workers themselves are, however, ill prepared
financially for strikes of unlimited duration.
A large number of strikes will be based on
urban centers, where union control is stronger,
economic grievances are more acute, and the
CGT can best carry out its immediate political
objectives.
Work stoppages can be expected to continue
through most of 1950. A united strike front
against government policy being no longer a
prerequisite, labor will consider the individual
employer or industry a more nearly equal op-
ponent. In addition, particular demands of
local groups of workers will tend over a con-
siderable period of time to bring fresh strik-
ing forces into labor's struggle with industry.
3. Intensified Political Pressure of Labor on
the Government.
Labor's political pressure upon the govern-
ment is likely to grow during the next few
months. Labor will oppose the strong senti-
ment within the Cabinet both to raise as little
as possible the former minimum wage (12,000
francs a month)? a power retained by the
government?and to restrict the right to
strike. Union leaders will, moreover, support
all possible legislation to undermine industry's
strong position, insisting especially that the
government shift a greater share of the tax
burden to business and take decisive action to
force price reductions.
4. Gradual Rise in Money Wages.
Despite industry's strong position for resist-
ing labor's demands, there will be an appreci-
able rise in money-wage levels in 1950, per-
haps amounting to 15-20 percent. Business
will probably come to permit this extent of in-
crease in view of: (a) the desirability of break-
ing the full impact of labor's drive; (b) the
undeniable decline in real wages over recent
months; and (c) the fact that the government
has already found it justifiable to authorize
wage supplements amounting to as much as
25 percent for low-paid workers ? cost-of-liv-
ing bonuses which, however, were authorized
only twice, in November 1949 and again in
February 1950.
The anticipated extent of increase in gen-
eral money-wage levels, however, will be
achieved by labor only after some months of
collective bargaining and strikes. Industry
will probably be able to limit the rise in wages
by exploiting the workers' already existing
fears of unemployment, by using the lock-out,
and by promoting negotiations on the local
rather than regional or national levels. Each
industry will strive determinedly to gear the
size of its wage adjustments to the increase
in its own productivity.
5. Lower Labor Morale.
Labor's morale and hence its productive-
ness may be reasonably expected to decline
somewhat in 1950. In general, the fair prob-
ability that money-wage increases may for a
time be more than offset by price increases
(see Appendix II) suggests that the workers
will be further disillusioned after their long
wait for the restoration of collective bargain-
ing. In particnlar, the renewed local bargain-
ing directly between employees and employers
is likely to have a deeper effect on the workers'
personal attitudes toward their jobs than did
the previous negotiations between national la-
bor confederations and the government.
ET
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S T
ENCLOSURE A
DISSENT BY THE INTELLIGENCE ORGANIZATION, DEPARTMENT OF STATE
The Intelligence Organization of the De-
partment of State dissents from ORE 100-49
because it disagrees with the conclusion that
"French labor discontent" will have "seri-
ously adverse consequences for the U.S." in
1950 by reducing France's contribution to
ERP and MDAP and preventing France from
maintaining a position of leadership in West-
ern Europe. The Intelligence Organization
appreciates the seriousness of French labor
unrest as a factor limiting France's potential,
but believes that the conclusions of ORE 100-
49 are not supported by the available evi-
dence.
On the contrary, the Intelligence Organiza-
tion of the Department of State believes that:
a) wage increases will be less than indicated
In this paper, while there will be some increase
in real wages; with consequent diminution in
labor unrest;
b) there will be strikes, but present evidence
indicates that there will not be extensive or
lengthy strikes such as to have serious eco-
nomic consequences;
c) there are many reasons for thinking that
inflationary pressures are sharply diminish-
ing, and that the deleterious consequences of
inflation indicated in this paper are unreal;
d) even were the worst anticipations of this
paper correct, France's planned contribution
to MDAP would not be seriously affected,
partly because the French government could
easily control the fraction of French produc-
tion concerned, partly because MDAP plans
have discounted some of the possibly adverse
conditions.
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ENCLOSURE B
DISSENT BY THE DEPARTMENT OF THE ARMY
The Office of the Assistant Chief of Staff,
0-2, Department of the Army, dissents in ORE
100-49 for the following reasons:
1. ORE 100-49 "French Labor Unrest in 1950
and Its Implications for the Attainment of
U.S. Objectives in Western Europe", is based
solely on the assumption of a deteriorating
labor situation in 1950 with no credence given
to the fact that:
a. A portion of labor's demands may possi-
bly be attained through collective bargaining
agreements and additional cost-of-living bo-
nuses in individual local or national indus-
tries, ameliorating labor unrest to a certain
extent.
b. ERP and OEEC 1948 and 1949 goals were
In the main achieved in spite of COT di-
rected major strikes, rotating strikes and pe-
riodic work stoppages.
c. Though 80% of French labor is still un-
derpaid, the over-all situation is better than
during the period 1947-1949.
d. Basic unrest exists neither as a new fac-
tor on the French scene nor as a more serious
threat to French stability and United States
security in 1950 than in 1947, 1948 and 1949.
2. The conclusions are overdrawn and in
some instances contradictory especially with
respect to . . . "seriously adverse conse-
quences . . ." in contrast to the milder termi-
nology of the report summary.
3. Even if French labor unrest should reach
the proportions predicted in ORE 100-49, 0-2
does not believe that the facts presented war-
rant the conclusion that such anticipated un-
rest would have "seriously adverse conse-
quences" for U.S. security.
4. ORE 100-49 concludes that labor unrest
will seriously affect France's contribution
toward MDAP goals during its first year of
operation. It is flatly stated that wage in-
creases (which it is assumed will be granted
in order to satisfy increased demands of
French industrial workers), "will make it more
difficult to increase the volume of direct de-
fense expenditures". The expected wage in-
creases, it is claimed, will produce a "tight"
budgetary situation.
0-2 believes these statements to be funda-
mentally incorrect for the following reasons:
a. In the first place the size of the antici-
pated French wage increases will probably not
exceed 5 to 10% instead of the 15-20% fore-
cast in the study. In any case, it is believed
that the maximum probable increase, if any,
in the general price level, as a result of such
increases and other contributory factors,
would not exceed 5%. Moreover, only a part
of any possible additional wage bill would be
paid from (and thus directly affect) public
funds and the budgetary situation. Further-
more, to the extent that additional funds
might be required for the payment of wage
increases to civil service and other govern-
ment functionaries (at the most 2 million out
of a 20 million labor force) there are available
a number of fiscal measures ? taxation, in-
creased borrowing, etc. ? which the French
government could and presumably would,
take before its budgetary position were actu-
ally threatened. But above all, it should be
emphasized that French military expendi-
tures are carefully predetermined and esti-
mated long in advance as a result of current
Indo-China operations, as an extraordinary
factor, and normal fiscal planning practices
as another. Certainly at least through 1950
such relatively fixed military expenditures as
those envisaged under MDAP cannot conceiv-
ably be threatened by such extraordinary
budgetary considerations as those posted in
the study.
ores
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E T
ENCLOSURE C
DISSENT OF THE OFFICE OF NAVAL INTELLIGENCE
The Office of Naval Intelligence dissents
from ORE 10049 for the following reasons:
(a) Paragraph one of the Discussion esti-
mates that French labor unrest in 1950 will
have seriously adverse consequences for the
US. ONI believes that this overstates the ef-
fects of French labor unrest as well as their
relationship to the US.
(b) Paragraph four of the Discussion pres-
ages five effects of labor unrest which point
to a steady deterioration of the situation in
1950. This steady deterioration seems to rest
upon anticipation rather than proof. It also
presupposes that a dynamic element of power
has been introduced into the French labor
scene unaccompanied by (1) a desperate
plight of labor, (2) a labor leadership that
has strength and unity of purpose and organi-
zation, and (3) a government lacking power
for counter-measures.
(c) OM believes that because France as a
whole has not satisfactorily solved her basic
economic and political problems, there will
continue to be, as in the past, a latency of
labor unrest that flares up periodically or re-
sponds, often sectionally, to Communist
maneuvering. When studied in relationship
to past labor developments, this unrest as-
sumes a continuity that does not appear in
ORE 10049, where it is introduced as a rela-
tively new deterrent to France's attainment
of post war goals.
SipiefeCr 17
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n/DiR
1930 APR I I 15 43
UFO- Style Serv.. 4925
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