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The Quasi-War Between France and the United States

“Neither a borrower nor a lender be,” Polonius admonishes his son Laertes in Shakespeare’s Hamlet – a warning that is consistently ignored by governments. Yet debts and loans can play havoc with bi-lateral relations – and they did just that in two epic disputes separated by 100 years or so between the United States and France. On both occasions France was the debtor, and many historians point to the resulting acrimony as root causes of France’s recurrent anti-Americanism.

In the 1830s there was tension between the two countries over compensation claims by U.S. citizens for goods and shipping seized under Napoleon Bonaparte’s 1806 embargo against neutral countries like the United States trading with Britain, then at war with France. The government in Paris made a counter-claim: the United States had still not fully repaid loans that had helped to finance the American Revolution. The U.S. had already paid France $6,352,500 between 1778 –1815, but the two countries had signed a convention agreeing on a shortfall in the American debt of 1.5 million francs and capping U.S. claims against France at 25 million francs ($5 million).

When the first installment from France came due in 1832, no payment arrived: the French chamber of deputies had failed to ratify the agreement and to vote on the authorization. An angry President Andrew Jackson sent former secretary of state Edward Livingston, to France in the 74-gun warship Delaware to secure “prompt and proper fulfillment” of the agreement.

In 1834, after postponing the issue for almost three years the chamber finally voted on the appropriation, but rejected it by 176-168, greatly embarrassing King Louis Philippe and his government. President Jackson, who was noted for his short temper was furious, but so were the French. Deep public resentment had built up against what was seen as American ingratitude after France’s sacrifices in support of the American Revolution. Jackson delivered a tirade against the French in the U.S. Congress, hinting at possible action. Congress, he said, had to decide whether “to adopt such provisional measures as it may deem necessary,” which would be “faithfully enforced by the Executive.”
Resentment ran high in France. Diplomatic relations were severed and as tension mounted the French were reminded that the U.S. war fleet was stronger than its own. Pressed by the government, the French chamber voted again and the appropriation passed – but coupled with the demand for a “satisfactory explanation” of President Jackson’s remarks.  Although Jackson refused to apologize the day was saved when Britain intervened to cobble up a reconciliation, and the indemnity was paid.

But a residual rancor remained. At one point Lamartine observed sadly, “I have always been deeply astonished by the lack of sympathy and gratitude America has towards our country.”  The French historian Rene Remond has been quoted as saying that after  1835, “[Franco-U.S.] friendship was replaced by indifference, or even by resentment. It would not be until 1917 and America’s intervention in our shores that the French population’s bygone friendship would be restored.”

By 1919, a new and more complex confrontation had built up over France’s refusal – along with the United Kingdom and 13 other World War I belligerents – to pay huge war time loans to the United States while at the same time pressing for equally large financial reparations from a defeated Germany. Two famous remarks captured the divergence in emphasis. The taciturn Calvin Coolidge, who became president in 1923 at the height of the controversy, pressed for repayment by the Allies, arguing, “They hired the money, didn’t they?” But for Louis-Lucien Klotz, the French finance minister, the number one issue was, “L’Allemagne paiera” (Germany will pay).
The resulting friction dragged on for 20 years, doing serious damage to the goodwill that had blossomed during the conflict.

Differences emerged in the Versailles Peace Conference of 1919. For U.S. President Woodrow Wilson Germany’s economic and industrial recovery was paramount to restore international trade. The French government wanted a Germany weakened by punitive reparations to the Allies.
As the French Prime Minister Georges Clemenceau argued to Woodrow Wilson, “America is far away, protected by the ocean…We are not.” Besides, France needed German reparations to help finance its own post-war reconstruction.

European belligerents had financed the conflict through loans, mainly from the United States, and as a result France owed the United States $4,137,224,354, about 80 percent of it directly to the U.S. Treasury and the rest to American banks. In 1918 the French issued a plea for “financial unity,” which was code for all the Allies sharing the cost of the war, with the U.S. absorbing some of the debt.

The American response became Washington’s refrain of postwar diplomacy: the war debts must be honored by the respective governments – an attitude that angered the French. A succession of French statesmen argued that the war had been a common cause, and the sacrifice of each nation should be taken into account. Louis Marin, a former finance minister, pointed out that 1,450,000 French soldiers had died in battle and another 500,000 later, from their wounds, and that should be worth at least 50,000 francs per soldier. The other French argument was that the French spent $2,997,477,800 of borrowed American money in the United States on everything from weapons and ships to tobacco and food, so that in a sense, the Americans had already been paid.

The French responded to American pressure by stalling. The image emerged of a U.S. growing rich and powerful at the expense of a shattered and impoverished Europe. “Rather than a promising lender, the uncle [Sam] has become a demanding creditor.” By 1923 the Germans had defaulted on the reparations so many times that France and Belgium occupied the Ruhr industrial area in what turned out to be an unsuccessful attempt to force Berlin to resume payments.

In 1924, yet another conference was convened, this time in London, at which the United States proposed the Dawes solution (named after later Vice-President Charles G.Dawes): the U.S. loaned Germany an initial $200 million in U.S. bonds to help meet its financial commitments to France, Britain, and other claimants who, in turn would be in a better position to make payments to the U.S.  At the same time, France and Belgium agreed to pull out of the Ruhr.

So long as the funds kept going the system worked. But the Great Depression wrecked the international financial system and the U.S. drastically reduced capital outflow, causing Germany to default again. In June 1931, in response to appeals from France and Britain, President Hoover postponed all Allied war debts for one year. On December 1932, when the annual payment of $19 million came due after the expiration of the Hoover moratorium France defaulted on its debt – as did all the other European debtor countries except Finland.

In a secret meeting with the poet Paul Claudel, then the French ambassador to Washington, the incoming president Franklin D. Roosevelt (who had not yet taken office) was conciliatory, saying he would forgive France the interest on the loan, but Congressional and public opposition proved too strong, and Claudel later reported that the Americans continued to insist on full payment. And as U.S. anger grew, so did American isolationism.

With the outbreak of World War II, Roosevelt instituted the Lend-Lease Program which in essence loaned them weapons, planes and equipment – but not cash. But with the end of the second world conflict, Washington and Paris again turned to the unfinished business of the first one: the outstanding loan. This time the mood was different, and in 1946 a partial consolidation of the French debt was agreed in which $2 billion were written off. The balance was absorbed into U.S. contributions to France from 1947 under the Marshall Plan for European recovery ($2.296 billion).

How much France paid of the original debt is hard to determine. Both the French Embassy in Washington and the U.S. Treasury declined to provide information. The best estimate is that nearly 53 percent of the French debt was cancelled in part by adjusting interest downward (compared, for example with 75.4 percent of the Italian debt).  Of all the 15 original debtors, only Finland re-paid the full amount.

Article published in the April 2016 issue of France-Amérique.

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