The Evening Star TUESDAY, MAY 10, 1932. FRANCE, GERMANY, AND WORLD TRADE.

Evening Star, Issue 21098, 10 May 1932, Page 6

The Evening Star TUESDAY, MAY 10, 1932. FRANCE, GERMANY, AND WORLD TRADE.

The commentators in Paris are at pains to point out that the result of the elections implies no change in France’s foreign policy. There has been a decided swing to the Lett, and M. Herriot is indicated as the next Premier. A Radical Socialist, he held brief Ministerial office in 1916, and not much longer office in 1924 as Premier, while lie appears to hold almost in perpetuity the mayoralty of Lyons, to which he has been elected more than a score of times. The point to be emphasised is that he unites with remarkable energy a grip on economics second to none in the Chamber of Deputies, if not in France. Fie was one of the strongest opponents to the French occupation of the Ruhr, holding that it benefited all countries except France. He has always urged the importance of Allied co-operation in the revision of the terms imposed on Germany in tho matter of reparations—which is to say that he is the antithesis of the Frenchman who is always harking back to the Treaty of Versailles in support of bis insistence on his pound of flesh iron) Germany. In view of all this one wonders at the almost premature insistence on the improbability of France’s foreign policy undergoing any change. The cables inform us that the issues on which tho election was fought were domestic, such as unemployment and tho cost of living. That is to say, Franco is now feeling tho effects of world depression, France being one of the last countries to come under its devastating grip. And, especially in the case of France, the connection between foreign policy and internal conditions simply cannot bo disregarded. In fact, there arc authorities on finance who place Franco-German relations as tho main factor leading to the world’s financial and economic crisis and a scarcely less important factor telling against the world's recovery. hi March of this year Lloyd's Rank published a special E-ue on 1 World Depression and Franco-German Economic Relations.’ Sir William Dampier, who introduces the subject, writes: “It is not too much to say that the future welfare of Europe depends upon the progressive reconciliation of Franco and

Germany. , * , In both Germany and France men of goodwill arc seeking to find a solution of the problem. Unless such a solution can be found the mechanism of international trade may break down, the world will remain in deadly peril, and Western civilisation stand in imminent danger of collapse.” lie thus names the age-long antagonism between Gaul and Teuton as “ a fatal block in the way of world appeasement and economic recovery.” It is thus by no means a purely individual or purely nationalist view which Dr Bruening, German Chancellor and Foreign Minister, expressed this week when he said; “On Lausanne depends not only Germany’s but the world’s fate. The reparations bill must some day be receipted as pa'id. Germany’s sacrifices must end. The crisis is still marching with giant strides, but statesmen, after years of comforting illusions, hesitate to tell people the truth.” Probably the reason for this reticence is that no party or Ministry is prepared to do so because of the certainty of political death. But repeatedly there have been from financial and industrial circles grave expressions as to the inevitability’ of collapse of the economic structure of Central Europe and the repercussions this would produce throughout the world. What is the truth which politicians seek to hideP Broadly it is that Germany has borrowed to pay reparations, that the loan money has disappeared as through a sieve, and that both borrower and lenders confess the impossibility, let alone the undesirability, of continuing the process. In the ‘ German View ’ presented in the Lloyd’s Bank publication by Professor Schumpeter, a contrast is drawn between other capital movements of the past and these. The Bonn University professor writes: “ They served to develop new countries. They created the wealth which repaid them as far as they were repaid at all. They were not meant merely to soothe the pains of ills without healing them, nor to hide impossible situations for a time and to perpetuate them thereby’. At any rate, they always made things worse in the end whenever they did no more than this. They strangled the debtor or they spelled loss to the creditor. Germany is an instance in point. She, and with her the world, would be much better off if she had not received credits for industrial purposes from 192(5 onwards, and not any at all, except the Dawes loan, to finance her public expenditure. She would have had a hard time, but the realities of the situation would have faced her squarely, and she and the world would have overcome them hy now. As it was, she is paying dearly for the sham prosperity of two years and for the aversion of politicians to tackle ical problems.” The ‘ French View,’ as presented by M. Jenny, financial editor of ‘ Lo Temps,’ admits that France is ready to reconcile her legitimate claims on Germany with international economic necessities. French public opinion is as resolute as over that reparation reductions must be offset by an equal diminution of France’s war debts, but is becoming reconciled to a reduction of the “ net balance ” allocated to Franco. She is no longer seeking the impossible. But M. Jenny’ resists the theory that Franco-German relations, necessitating the pouring of capital into Germany only to lose it, arc mainly responsible for the crisis. lie contends that, after the post-war boom, financiers did nothing to dissipate producers’ illusion of enduring prosperity. “On the contrary,” ho writes, “ by a systematic expansion of credit facilities, finance actually incited industry and even agriculture to produce more and more abundantly’, constantly to improve equipment, and to flood the world with commodities. The policy of unrestricted credit in 1925-1929 impeded producers from regaining the true standard of natural consumption. . . .

The consumer himself was deceived as to tho extent of his purchasing capacity —particularly in the United States —by a baneful development of consumers’ credits, a development which heavily mortgaged the future in favour of a merely ephemeral present. Tho day had to come when all this artificial system must crack. This day came at the last stage when the products reached the ultimate consumer whoso purchasing powers had been abruptly curtailed. Then it was that stocks accumulated at every stage of production; industry ceased to provision itself; paralysis gripped the whole economic fabric. Here is the origin of tho fall in prices.” That fall, lowering tho security, superimposed an “ emergency stop ” to the brake already applied to lending. From almost indiscriminate lending the position changed suddenly to no lending. Debtors’ alternatives were to sell more, buy less, ship gold, or default. The first is impossible and tho third soon becomes so. In Germany’s case default seems probable if not inevitable. Franco will have to face that probability at Lausanne. As wo have sought to show, tho responsibility resting on her in regard to the continuance or lifting of the world depression is grave.