THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JANUARY 20, 1938 FRENCH ECONOMIC SHIFTS

New Zealand Herald, Volume LXXV, Issue 22941, 20 January 1938, Page 10

THE New Zealand Herald AND DAILY SOUTHERN CROSS THURSDAY, JANUARY 20, 1938 FRENCH ECONOMIC SHIFTS

Present political uncertainties in France are a reflection of the country's industrial, financial and economic troubles. These have been chronic ever* since 1931, but were aggravated 18 months ago by the policies pursued by the Socialist M. Blum on taking office with a Popular Front Government, supported by Radicals, Socialists and Communists, the three parties of the Left. .His new deal failed, a new deal that aimed chiefly at improving labour conditions and at "developing the purchasing power of the people" by raising wages, salaries and pensions through the use of public credit and large expenditure on public works. The policy collapsed in financial chaos and industrial depression within 12 months (that is, in June last year) when M. Blum resigned and the new deal was abandoned. A great many legacies were left to the new Premier, M. Chautemps, a Radical who had yet to rely for support on the other two Popular Front parties, the Socialists and Communists. For a period, the crisis being acute, M. Chautemps, was empowered to govern by decree and with the help of an able and courageous Finance Minister, M. Bonnet, made some headway against the economic storm.' The public finances were restored, national and local budgets were more or less balanced, the running sore of railway deficits stanched. But when M. Chautemps' extraordinary powers expired and Parliamentary and political influences reasserted themselves, financial and business confidence again began to decline, and strikes and industrial tx*oubles to increase. Last week the Government fell and, after some days of uncertainty, has now been propped up again on the very precarious basis of almost solely Radical support. The question whether it can survive for long on Socialist and Communist sufferances may be left to the event to determine. More interesting to most people is the fate of M. Blum's hours and wages policy. The 40-hour week in France was introduced by M. Blum by instalments, beginning with the coal and iron miners, and has yet to be generally enforced. Its extension was checked by the "pause" in industrial laws and public spending reluctantly adopted by M. Blum himself nine months ago. Even in its partial form, however, it reduced output and raised prices in affected industries. France found she was producing less at home and had to import more from abroad. Her adverse balance of trade rose steeply to 1,500,000,000 francs (about £10,000,000) a month, further embarrassing her troubled exchanges and internal finance. Coal production, for instance, fell from 3,210,000 tons in August, 1936, to 2,672,000 tons in August, 1937. The people do not grow richer by producing less. Not unnaturally the Finance Minister saw in the 40-hour week his chief handicap. As labour efficiency did not increase, output or the fruits of labour decreased, and everyone was becoming poorer. The Premier agreed with his Minister and pressed for the abandonment or substantial modification of the shorter working week. Labour at once became restive, as recent 'Paris messages have shown. The General Committee on Production, to which the 40hour week was referred, has preferred not to recommend any "general modification." Instead it has decided on certain necessary "adjustments," and these are being applied piecemeal. Iron miners, for instance, are to work two extra days a month (making their average week 43 hours), and to receive overtime rates 25 per cent higher than the normal for the extra time. Shops are to be open six days a week, thus altering the famous "8-by-5" rule. So "adjustments" are being made. But the facts of French business and industry leave no argument that either industrial and labour efficiency must be increased or longer hours be worked. As it is French workers are' not producing enough to maintain their standards of living.

While the 40-hour week is thus being compromised, the gains in wages have already been irretrievably lost by the fall of the franc. That stands to reason* of course, because people can divide up among themselves only what they produce. If their output falls, their shares fall with it. Under the Blum Government, workers, civil servants and pensioners gained money increases ranging from 12 to 35 per cent. But almost immediately the value of the money they were paid with began to decline. When the new deal began, the franc was worth about 3d; to-day it is worth about l£d; it has fallen in round figures from 75 to 150 francs to the pound sterling; its value has been halved. The workers received a few more francs every pay-day, but found, they could buy less. M. Blum set out to "develop purchasing power" by increasing wages and public spending, and exploiting the national credit. He ended by reducing it through the debasement of the currency and the rise of prices. That is the second great cause of labour unrest in France to-day. Most of the workers, however, are as yet unwilling to accept the lesson of the "Blum experience" or recognise the failure of the purchasing power experiment. But the French are a logical people and may come to accept the conclusion that purchasing power cannot be created by legislation or Government fiat, or by manipulating credit. Wages must be earned. A leader in whom they could place trust and confidence might induce clearer economic thinking, but that leader is not M. Chautemps. The expectation meanwhile is. that, just when a strong and united France is most needed, weakness and division "will continuo,)