THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, FEBRUARY 6, 1935 UNREST IN FRANCE

New Zealand Herald, Volume LXXII, Issue 22027, 6 February 1935, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, FEBRUARY 6, 1935 UNREST IN FRANCE

A year ago a threatening political situation in France, accompanied by serious rioting and bloodshed, was ended by the advent of M. Doumergue's Coalition Government, of which great things were expected. Certainly domestic peace was restored and a measure of political stability. But the Premier, who is old, was slow to move and at the end of nine months had gone no further than to press his measures of constitutional reform. These were suspect in democratic quarters and in any case everyone recognised that France's chief problems were economic and not political. To the solution of the former M. Doumergue had contributed nothing whatever. So in November he was superseded by another coalition headed by M. Flandin, of whom much was expected. He is young and is esteemed as active, calm and businesslike. He recognised that at the heart of the trouble were business and industrial stagnation, unemployment, agricultural distress, labour unrest and all the familiar •symptoms of deflation. Hence he placed the solution of economic problems before constitutional reform and offered a programme which, while it contained some active principles, aimed at the removal of many of the crippling restrictions and regulations which tied up business, industry and agriculture. " The fate of our regime is at stake," the new Premier declared. . " Both capital and labour are in a deplorable state, and democracy has outrun itself, thus denying the very principles of liberty it stands for. The State must abandon all functions it cannot fulfil." M. Flandin'a policy was given an overwhelming affirmative by Parliament, but to-day are reported from several parts of France the mutterings of discontent with sporadic violence. Tension is increasing and a fresh crisis seems imminent.

Hostility has turned in the usual direction, against the Government, although it is obviously unreasonable to expect that M. Flandin or anyone else could within three months have unravelled the economic tangle which has developed sjnce 1931. At that time France's prosperity was such that she considered she had evolved an economy immune to the ill's to which most of the world had fallen heir. But in 1932 France began to feel the depression. Her adherence to the gold standard began to squeeze her export trade, which is still declining. Loss of markets affected business and industry, and through them agriculture and labour. France was fortunate in having recruited 500,000 foreign workers and unemployment was postponed by repatriating this labour force. Nevertheless the number on the dole two months ago was 369,435, to which has to be added an unknown number out of work, bringing the estimated total to almost a million. This source of discontent is supplemented by the unrest of those in work who have suffered reductions in wages. The peasants have of course been affected by the contraction of domestic demand for their products and by the loss of export trade in luxury lines, particularly wine. Their home been protected by stringent tariffs, reinforced by quotas and embargoes, with bounties and subsidies superimposed. This elaborate superstructure has nevertheless not prevented domestic surpluses, and low wholesale prices, although retail prices have remained high. All the State planning and regulation has thus failed in its purpose. Although the point seems to have escaped observers, it would appear that the fundamental error has been the application of conflicting policies. France is determined to remain on 'the gold standard, which under present world conditions merins deflation ; at the same time she is trying to save agriculture by all •sorts of artificial expedients for maintaining prices. The two objects are irreconcilable and the effect is to inflame public anger to a dangerous degree. The few other gold standard countries present similar spectacles, varying only in degree of urgency. Belgium's position is desperate. Since 1930 she has lost half her foreign trade. Unemployment is heavy and steadily increases. Lower wages to labour are further discounted by higher prices, maintained by the familiar tariff and quota devices. The quota, for instance, has raised the price of butter to a level prohibitive to the worker. Yet the farmer is hard-pressed and with him some of the financial institutions on which he depends. In France difficulties have so far failed to produce any strong movement toward inflation. In Belgium, however, in the last political crisis three months ago the new Government was nari'owly confirmed in its determination not to debase the currency. Such a decision could not have been easily reached, because inflation should temporarily stimulate the export trade, for which 60 per cent of Belgium's normal industrial output is destined. Holland finds herself in the same straits as France and Belgium but her general standing is firmer. Like the others, however, a source of weakness is the

attempt to exempt so large and important a class as the agriculturists from the common hardships. In Holland also conditions have created a happy hunting ground for the Communists, the cunning exploiters of public distress and private poverty. Another country in the gold, bloc, Italy, is troubled to maintain equilibrium, and in December she was. forced to take measures to protect her exchanges. The point that fixes attention in the case of all these nations is their devotion to gold. All but Holland have had experience of the evils of inflation or currency depreciation. Even though they are hard-pressed to keep their present faith, their whole economic fabric being strained, they eschew currency tinkering. They may yet have their reward if, as France believes, foreign costs and prices are moving upward to a point where they will meet the descent of her own.