Thistletooth said:"Second rate" doesn't mean "pathetic". It just means "clearly inferior to those who are first rate". It's not just about population, industrial output, or martial prowess. It also has to do with how much weight France could throw around and how freely it could act in the international scene. In both cases, France had some big problems, most noteably that it wasn't capable of acting independently in any major conflict, military or diplomatic; it just wasn't strong enough, and its leaders knew it.
In addition to being dwarfed by Germany and the UK (and the USSR and US) in almost every facet of industrial output and demographics, France was weak enough that it couldn't act against the designs of any other "Great Power" without the support of another. Its foreign policy was tied to that of Great Britain's; it was incapable of acting independently. If it wanted to stand up to Germany, it needed British support. Without that support, it couldn't do anything.
France's leaders knew this; the post-Versailles settlements it pushed for were designed to hobble Germany as much as possible, because France knew they couldn't stand up to Germany on their own, and so wanted to buy as much time as possible and to create as many new allies as it could, to act as a counterweight to Germany. The push for the creation of a Greater Poland, an independent Czechoslovakia, and a separate Austria were all following this very strong political and military need to keep Germany surrounded and as small as they could manage.
Even then, French military and political leaders believed that Germany would attack them again, and their interwar policies were tied towards securing British assistance in the case of any future German aggression, no matter what. One reason* the Maginot Line was created and not extended to the sea was because France knew that if Germany attacked them again, they'd have to go through Belgium in order to go around the border defenses. And by going through Belgium, they'd be guaranteeing British intervention, same as in the last war. Long before 1939, French leaders counted on a German attack into Belgium.
* - Yes, there were other reasons, such as a French desire to fight the war in Belgium instead of in France, but this reason is nonetheless important as far as foreign policy is concerned.
France needed British support in any major war. They needed British resources, British industry, a Royal Navy blockade of Germany, and British armies. After WWI, it was clear that France didn't have the luxury of standing on its own in any major conflict. Their interwar policies regarding their alliances with Central Europe, appeasement, and the military strategies they drew up interwar all followed one line - keep Britain on our side. This kind of diplomatic, economic, and military dependence, more than anything else, is what reduces France in my eyes from a first-rate power to a second-rate. And if you include hindsight, and what that tells us about the true strengths of the US and Soviet Union (which certainly wasn't fully appreciated at the time), France might as well join Japan among the third-rate powers.
Again, I am not using these terms perjoratively. But even in the 1930s, it should have been clear that France was not the France of the 19th century; it wasn't even the France of 1914. It was clearly smaller and weaker than both Germany and the UK, ever fearful of the former and, in any future conflict, completely dependent on the latter. You don't even have to bring its modest (and, compared to most other countries, shrinking) share of the world's industry or its low birthrate, or "the hollow years", or its instability, or its outdated tactics into account. France had the world's 3rd-to-5th strongest navy, but could do nothing against the Royal Navy, one of the more impressive(-looking) armies, but knew they couldn't stand up against Germany on its own, and the 5th-largest economy (but only half the size of Germany's, and probably 2/3s that of Britain). But it could not oppose Germany without British assistance, and, largely due to this, it couldn't afford to oppose Britain at all. It was stuck between its two stronger neighbors. A regional power. Not a Great one.
Despite the commonwealth and it's navy, the same can be said of the UK.
They were more safe on their island behind their navy than France, so more independant diplomaticaly (not that much in fact, since they couldn't do something else than fight germany and be allied with france), but in the end they couldn't really do anything (against germany, or even the USSR if they had wanted) without France and they knew it too.
When they were alone against germany, despite the brillant north africa campaign against the italian, they did nothing else of note. And couldn't.
I am not sure the security of being an island and having a far stronger navy than germany is sufficient to make it a "first rate" power compared to say France.
That the uk was comparatively stronger, yes we agree on that, the help of the nations of the commonwealth, population, industry (although not by that much when you look at the mobilisation of french industrial ressources, who while being a bit chaotic was efficient in the end), but in my opinion they played in the same league nonetheless.
In the same way, Germany since its unification and the demographical decline of France was far stronger, the french leadership knew it perfectly well as you said, they already knew it in 1914. But France could hope to tie germany almost by herself in case of war, winning alone (especially without the blockading power of the Royal navy), well not really, it's true.
But considering this point anyway, i am not sure they really are in a different league either.
After all, in truth, without its conquests and alliance with almost all of europe germany couldn't hope to take on either the USSR or the USA.
So were they really in the same league in 1940 ?
Really, it's not some hurted patriotic feelings that are making me react, just that i feel the way the world looked at Yalta and Postdam is somehow altering the view about France in 1940 as if it was doomed to fail because it was so inferior to the "big 3" (or 4 if you count the bad guys too).