Moralizing the Market

MORALIZING THE MARKET

This book started as an inquiry into a very specific case of policy transfer from the United States to France in the late 1960s: prompted by the outrage generated by a spectacular insider trading scandal at the Paris Bourse, French policy makers endeavored to “moralize the market”; to that end, they established an independent securities regulator, the Commission des Opérations de Bourse (COB), loosely modeled on the American Securities and Exchange Commission.

My curiosity in this rather esoteric episode of postwar financial history was piqued by the fact that it took place toward the end of Charles de Gaulle’s presidency, at a time when, according to conventional wisdom, strident opposition to American imperialism was a tenet of French foreign policy. While the American origins of the COB were not a secret—Gaullist reformers acknowledged them in their memoirs and they are routinely mentioned in books on the Paris securities market—, they had never been investigated thoroughly from a historical perspective.

A close look at the rich archival records confirmed that Michel Debré, then Minister of Finance in the government of Georges Pompidou and a staunch advocate of national sovereignty, initiated the process. He relied on the expertise of a small group of dedicated senior civil servants—the famed “hauts fonctionnaires”—, many of whom had spent significant time in New York and Washington. The modeling of the COB on the SEC illustrates the circulation of men and ideas across the Atlantic; it is also a powerful testimony to the global and enduring impact of the New Deal, of which the 1933 and 1934 securities reforms were then considered a major component.

Political expediency played a part too. Disappointed by the results of the March 1967 legislative elections, Debré convinced both President and Prime Minister to use the powers granted them by the 1958 constitution and issue a series of “ordonnances” intended to modernize the French economy; the September 28, 1967 “ordonnance” establishing the COB was one of them. In their defense of the “ordonnance” procedure, Gaullist leaders emphasized the need to prepare for the opening of French borders. De Gaulle’s presidency, remembered today as a moment of national assertion, marked a decisive step toward France’s integration to the European Common Market and, more largely, the global economy.

Only a few weeks after the newly-created regulator began its operations, the May 1968 events shook the nation—during the night of May 24, demonstrators even attempted to set the Paris Bourse on fire. In the rebellious France of the early 1970s, market moralization was used a rhetorical weapon to defend the capitalist system. Pierre Chatenet, the first chairman of the COB, successfully enforced the Brandeisian principle that small shareholders had to be protected through the disclosure of complete, accurate accounting information; he also set himself to the task of promoting mass investment.

Indeed, in the context of a protracted stagnation of the Paris Bourse, French reformers saw regulation as a tool to attract domestic and foreign investors, and foster market development. Along with the bank reforms of 1966-1967 and the effort to create a more liquid money market in the early 1970s, the creation of the COB was part of the long-term process of government intervention to enhance the role of the financial market in the financing of the French economy. This challenges the view that such action started much later, in the 1980s, and primarily through waves of deregulation—the adoption of the American model of securities regulation had little to do with the subsequent ascent of neoliberal ideology.

The securities markets of the early 21^st century do not have much in common with the antiquated Bourse of the 1960s; citizens and elected policy makers willing to regulate, if not “moralize,” them are facing increasingly complex dilemmas. In the end, however, the story of the COB remains relevant and reveals a lot about the exercise of power in modern democracies, the interaction between business and government, and the mechanisms of institutional innovation.

Yves-Marie Péréon is an assistant professor of American history at the University of Rouen-Normandy. He is the author of Franklin D. Roosevelt. Most recently he is author of Moralizing the Market: How Gaullist France Embraced the US Model of Securities Regulation