With its economy devastated by war, its national glory sullied by ignominious defeats at the hands of Germany and Japan, and its colonial legacy morally undercut by the Atlantic Charter, France in 1945 faced immense challenges. Especially daunting was the job of restoring its empire, particularly in distant Indochina.
For French political leaders and imperialists who equated empire with national greatness, simply granting Indochina its independence was out of the question. But reoccupying the lost colony would be no easy matter. Certainly the tremendous task of rebuilding at home left few resources to spare for a tropical war against native rebels thousands of miles away. Mobilizing the needed resources would require generating political enthusiasm, not mere public acquiescence, for a costly foreign adventure. Yet the once powerful colonial lobby,1 composed of overseas traders, investors, bankers, soldiers and civil servants, had seen its economic base largely wiped out by the war.
Supporters of France’s imperial mission hit upon a novel way to restore the economic fortunes and thus the political clout of the colonial lobby: issuing a decree to overvalue the Indochinese piaster. That obscure and apparently technical financial decision gave soldiers, bureaucrats and businessmen a powerful profit motive to serve in Indochina. Above all, it greatly inflated their buying power. By giving them more francs for every piaster they earned in Indochina, a high exchange rate allowed them to stretch their money. They could import goods from France on the cheap, including luxuries they could otherwise never afford. Any piasters they chose to save rather than spend could be repatriated at a premium in francs to family members or others in France