THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, AUGUST 24, 1938 FRANCE AND NEW ZEALAND

New Zealand Herald, Volume LXXV, Issue 23124, 24 August 1938, Page 12

THE New Zealand Herald AND DAILY SOUTHERN CROSS WEDNESDAY, AUGUST 24, 1938 FRANCE AND NEW ZEALAND

After the new deal of the Popular Front under M. Blum, France was left in so sick a condition financially, industrially and politically that a speedy recovery could not be expected. Little was hoped of M. Blum's successor, M. Daladier. He himself spoke of his Administration as a stop-gap until the time was ripe for a National Government, the great need in France to-day being a truce to class schism and a united effort to mend the internal economy and present a united front to a menacing world. The moderate Daladier Government has succeeded beyond expectation, however, making steady if unspectacular progress toward the restoration of finance and production. It may be hoped, therefore, that the political crisis which has arisen over M. Daladier's decision to modify the 40-hour week further will be overcome. The hope is encouraged by the ease and speed with which the Premier has replaced his dissident Ministers of Public Works and Labour and by the fact that the fiery French Parliament remains in recess until December, having armed the Government with special powers before adjourning. The doubtful factor consists in the attitude of the French trades unions whose powerful Labour Confederation played so malign a part in embarrassing M. Blum's Government and in dictating its policy. The French worker is almost as much a realist as the French peasant, however, and trades hall dictation shared in the discredit that fell on the Popular Front. Theories may still be cherished but thenfailure in practice is admitted. Thus the confederation has lost prestige and its influence in the present crisis might be less seriously regarded, were it not for the unrest among the workers owing to the continued rise in the cost of living. M. Daladier recognises the political and social harm this upward movement is causing and his policy is designed to reduce or stabilise prices by the only effective method—by increasing production. The French have proved that they cannot work less and consume more. Shorter hours and higher wages cannot be combined unless labour efficiency be correspondingly improved—they must be earned. A majority of French workers is believed to realise this, but the difficulty with M. .Daladier's policy is the transition period, the waiting for increased output to affect prices and by their reduction increase purchasing power

or real wages. Economic deterioration proceeded so far and so fast under the new deal that it is proving an anxious task to turn ebb into flow. The effect of M. Blum's policy of spending a way to prosperity in an attempt to increase purchasing power was summed up recently by M. Flandin, former Premier and Minister of Finance. He showed that "from May, 1936 (just before the Popular Front took office) until March, 1938 (when it was tottering to its fall), production decreased by 12 per cent, the cost of living increased by 51 per cent, exports decreased by 28 per cent, and unemployment increased by 8 per

cent." If it is recalled, M. Flandin adds, . that in May, 1936, the economic situation was already far

from satisfactory, it will be realised to what extent the downward process has continued. The French retrogression is all the more striking when it is remembered that over the same period employment and production _ increased markedly in most countries and in none more so than in the neighbouring countries of Britain and Germany. Last year, for instance, production in Britain and Germany was respectively 25 and 20 per cent above the boom level of 1929, while in France, under the new deal, it was 20 per cent below. The Popular Front certainly made money more plentiful by exploiting the public credit and spending lavishly on public works, but in the process the money lost value, being more than halved for exchange purposes. The workers' gains of money wages were more than cancelled out by losses of real wages. Finally the internal rise of prices depressed exports while increasing imports enormously, so

rendering many workers unemployed and defeating the chief hope built on the institution of the 40-hour week —the hope of more jobs. New Zealand Labour's policy of "upward and onward" resembles the French new deal so closely that some may wonder that the Dominion has not so far suffered similar consequences. M. Flandin has pointed out one difference, that M. Blum started in a situation that was already seriously prejudiced. The Budget had been chronically unbalanced, the public credit was exhausted, production was sluggish, imports were outrunning exports, the cost of living was high. In New Zealand, Labour inherited a sound position on all counts—a balanced Budget, sound public credit, rising production, favourable trade balances and accumulated overseas credits, and low costs. Thus the Government received a flying start and was able to accelerate on rising export receipts. And now? It has made the pace so hot that some of the symptoms of the French economic malaise are beginning to appear. The Budget is still expected to balance under strain, but accumulated overseas credits are being reduced, production is falling, the cost of living is rising, imports are flooding the country, export values are contracting, and the balance of visible trade has fallen below the margin necessary to meet overseas payments. Reaction here has been delayed for reasons already stated but is as inescapable as that operating in France, for .the causes are the same.