Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, MONDAY. MAY 9, 1935. FRANCE ON THE SLIDE

Poverty Bay Herald, Volume LXV, Issue 19625, 9 May 1938, Page 4

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE, MONDAY. MAY 9, 1935. FRANCE ON THE SLIDE

The situation that has now developed in France provides an example and a warning of what can happen as the result of socialistic legislation and the so-called control by the State of currency and credit. When the first of the popular Front Governments assumed office in June, 1936, the franc was valued at 75 to the pound. By the end of that year it had fallen to 105, and last year it dropped to 151. Now it has been “stabilised” at 179. To many people this trend might be meaningless, but the effect can be understood when it is explained that the “result is similar to the position that would be created in New Zealand if the rate of exchange on London were increased from 125 to 300. When the rate in the Dominion was raised by only 15 per cent there was an outcry against the resultant increase in costs and complaints on that score are still heard. The situation that would exist if the rate were increased to 300 is best left to the imagination, and that, in effect, is precisely what has happened in France. What could previously be purchased for 75 francs, measured by world standards, will today cost 300 francs. It is little wonder that the Premier displays concern. He might well declare that the nation is being drained of its life-blood and issue an appeal for renewed confidence.

There are two main factors that have contributed to the position in which France finds itself. Firstly, there have been substantial increases in all costs brought about by the 40hour week —which later had to be modified—and other industrial legislation. Higher manufacturing costs inevitably meant a loss of export trade, since France was unable to compete with other countries operating on a lower basis. At the same time, the purchasing power of the people was reduced since what increases had taken place in wages were insufficient, as is invariably the case, to overtake the steady rise in prices. To Counteract this situation the first step was taken ih devaluating the franc. This, in turn, sent prices still higher and brought into operation the second factor —the flight of capital. Instead of the Government assuming control of currency and credit, currency and credit took charge of one Government after another, bringing about their downfall. The confidence of the public was undermined, and the result was that money flowed in a steady stream to Britain, America, and elsewhere, depleting the resources of France just at a time when they were most needed. Previous inflationary measures failed to stem the unfavourable tide, and it remains to be seen how far the present move will succeed.

The Socialist Government has proved a veritable boon to the speculator who is supposed to be anathema to Socialists. A man who, two years ago, took the precaution of sending 10,000' francs to London, where it has presumably been earning interest all the time, can now receive back 23,600 francs, plus interest. This explains why money is pouring back to France at a rate which the bank is unable to handle. It explains, also, how inflation fails to remedy national problem?? and increases the difficulties of the working classes. More than that, it is further evidence of the absurdity of attempting to carry out socialistic measures on a foundation of capitalism, because, under constant threats, capital has a habit of disappearing. In plain language, where there is socialism there is no confidence; and where there is no confidence there can be no progress but only financial chaos. The workers of France are to-day paying, and paying dearly, for the socialistic experiments of their own Government. France has been attempting to carry out whaj Mr. Nash or Mr. Savage would describe as a policy of insulating the country from world influences, but the attempt has proved disastrous and in M. Daladier’s words, “The whole truth is that our economy has been hard hit.” Significantly, he again declares that the franc has been stabilised, that there will be no further devaluation, but once a nation starts on the slippery slope of inflation it is not easy to call a halt. The position in France cannot be ignored by the rest of the world, for interference with the currency of one important nation has almost unending effects. Immediate concern has been expressed as to the possible ell’ect on other exporting nations. The position is easily understood by reference to the value of the franc. Two years ago £1 would purchase 75 francs worth of French manufactures; to-day it would pay for goods to the value of 180 francs. In such circumstances, it is inevitable, not only that imports from other countries would be affected, but also that home industries might be seriously penalised. On the other side of the picture is the expdrt'trade, and it is here that New Zealand can realise the extent to

which the manipulation of foreign currencies can effect her exports. In 1936, 75 francs would purchase £1 worth of wool, but at the present time 180 francs would be needed to acquire the same quantity. It is clear, therefore, that French purchases of wool are likely to be considerably reduced, so that even New Zealand might suffer from the disturbances created by socialistic administration on the other side of the world. The masses of the French people, in turn, will be penalised all round by being less able to buy those things they need to give them ordinary living standards, but this, after all, is the one certain result of a policy of inflation.