THE FRENCH CRISIS

Evening Star, Issue 19143, 9 January 1926, Page 13

THE FRENCH CRISIS

An Improvident Nation C 3 TVk omic rmance Dodges [By ihc Eight Hon. David Lloyd George, 0.M., M.P., former Prime Minister of Great Britain.] Exclusive to the ‘ Evening Star.’ (Copyright by United Press Association of America; reproduction in full or in part prohibited.) No. IL The problem of French finance is insoluble —how. to balance a Budget without lowering expenditure to the level of your revenue, or raising revenue to the height of the expenditure. For ycars._ the answer to this riddle has been postponed by borrowing and fakings, and consequently the answer becomes more difficult every ; year. Expenditure and revenue are two diverging lines which grow further and further apart, and French politicians, with a simple faith in a kind of Einstein theory in finance, think that they will in the end meet. At the end of the war, the accumulative deficits of France amounted to 130,000 millions of francs. 'The additional deficits piled up since the war reached the colossal figure of 160,000 millions, and lyy the end of this year another 13 milliards will have been added. It is a national paradox that a people who individually arc the most frugal and saving in the world should, in the aggregate, be such an improvident nation. Every French household aspires to a margin for the stocking or the funds at the end of each year. Every French Ministry hinds the nation at the end of its term in an increased deficiency—and yet Franco is a pure democracy. Its Parliaments, and therefore, indirectly its Ministers, are chosen by the most^ frugal peasantry and bourgeoisie and working class to be found in any country/ What is the explanation of this inconsistency? It is to be found in the very quality that makes them a saving people. They do not like parting with their money, and so they resist or put of! taxation with every artifice known to their ingenious Gallic brains. . Britain and America immediately they entered the war imposed heavy additional taxation on their people. It reduced the amount of their indebtedness,, and when the war was over it was found easier to continue the high taxation levied during the excitement of; war. than it would have been to impose it for the first time when the national temperature had cooled down. Both countries were thus enabled, not only to meet all current charges, but to set aside substantial surpluses for the redaction of debt. Britain has by this means already reduced her war debts by hundreds of millions Stirling. Taxation was not reduced in our country until this had been accomplished and permanent arrangements made for a steady reduction of debt by £50,000,000 a year payable out of annual taxation. THE EASY COURSE. On the other hand, French Ministers have taken the easy course of resorting almost exclusively to borrowing. During the war they found a plausablo excuse for putting off the unpleasantness of imposing new taxes in the fact that the richest province of: France was in enemy hands. It was essentially an unsound plea, for the remaining provinces were considerably enriched by the enormous war expenditure in their area. Franco having been deprived of her factories and workshops north of the Aisne, the workshops of the south became all the busier and the more prosperous. When the war was over and the lost provinces were recovered, there was further excuse found in their devastation. How could you impose fresh taxation on these shell-ploughed fields and these ruined cities? The first duly of French statesmanship was to repair the devastation and then you could tax. Under this pretext the remaining nine-tenths of France was exempted from taxation adequate to the national needs. Until the day of complete restoration, how was the deficiency to be financed? The combined ingenuity of French politicians and financiers was quite equal to that contingency—at least until the contingency became an emergency, and that evil day could by various shifts and makcbclicvcs be indefinitely postponed. “ GERMANY WILL PAY.” How was it to be done? First of all by the bold assertion that there was no deficit. That was easily demonstrated. More than ihc whole of the deficiency was accounted for by two items —the repair of the devastated regions, and the payment of war pensions. Germany was liable for both. It is true that for a while she either could not or would not pay. French politicians varied the two alternative explanations of her failure to redeem her obligations. Briand had some doubts. Poincare had none. Klotz, whilst expressing no positive opinion as to her present default, was quite sure that she would pay. “ L’Allcmagnc payera ” was his ready answer to every perplexing financial conundrum, and although his successors in the Ministry of finance did not repeat his formula, they all acted on his assumption. But hero came the difficulty; As Germany was not actually paying, what was to be done with the deficit? The answer was very simple. The difficulty was not financial, but purely a book-keeping one. Why not treat the amounts due from Germany, and ultimately to be paid by Germany, as a temporary loan to Germany by France on account of the German liabilities in respect of reparations? How delightfully simple it looked! There was no difficulty in commending it to a public opinion, fed with the most fantastic figures of the value of German coalfields, railways, and forests, without any rudiraenfary explanation as to how these could be converted info reparation gold. There was only one personage that was never quite taken in, but it was the most important and decisive factor in the situation—it was the franc. It had early doubts as to this policy, and they grew as the policy continued and developed. It began to show- that it was worried. Its worry at last affected its health and it became nervous and jumpy, and had fits of depression which steadily grew worse. To-day its condition is serious. • WHO WILL SOLVE THE TROUBLE? How will the trouble be solved, and who will solve it? Clemenceau was driven into retirement so long ago. It was in ihc molten period of this globe. Poincare was dismissed by the French electorate when ihc earth’s crust was cooling down. Herriot was defeated. Millerand tell with a bump. Caillaux lias been put back into the lumber room, and Painlevo lias just vanished. The unshakable Briand still floats on the restless waters. But what can lie do? If the French taxpayers will not put up with any more taxes, and French bondholders will not stand a moratorium, and French RadicalSocialists insist on putting an end to inflation, what can even the resourceful and persuasive Briand do? He has a, wonderful tongue, but his eloquence will not reach the pocket of the French peasant, let alone his bidden stocking. The French peasantry constitute half the population of France, but they only contribute one-hundredth part of its taxation. If recent figures are in he credited the contribution of French agriculturalists to the yield of revenue of Income Tax was only 95 million francs in 1923—that would be loss than four million dollars. They pay less in indirect taxation than other citizens, because they are mainly self-supporting as far as necessaries are con'ccrned, and they have very few luxuries. PAYING BY NOT PAYING. Nevertheless, there is a method by which they are paying—by the depreciation of the value of their savings. The peasant who invested 100 francs in the funds in 1924, has now a security which be cannot sell to-day at much more than twenty francs. At" least fourfifths therefore of the enormous national debt of France has already been wiped out by a process of inflation,, which reduces the real value and therefore the real burden of the national bonds. The paradox is a double one: France is paying her debt by not paying it. Can she go on doing so? One thing is clear —no system of group Government can straighten out the muddle. No single group can afford to quarrel with the powerful electoral interests that would be- affected by heavy increased taxation. The Left must keep in with the peasantry of the South, and the North are dependent for support on the farmers of the North. Whichever of them alienates its supporters fresh taxation, the other is ready to take advantage of it. Such are the temptations of: democracy. What is wanted in Prance is another Waldeck Rousseau. A patriotic man universally respected, who has no political ambitions, and who therefore cares nothing about the effect of his action on Iris own popularity. He would come in just to put French finances right with no ulterior personal aims. Waldeck Rousseau extricated the* Republic out of the Dreyfus tangle. Is there another such man available? If there is, then France will for the time requisite to enable him as a sav * our — then crucify Mm,