Evening star. [volume] (Washington, D.C.) 1854-1972, 1926-08-29
FRANCE BASICALLY SOUND,
BUT FACES BIG SACRIFICE
Virtual Cancellation of $4,000, 900, 600
Domestic Debt Held Essential to
Sterilization of Currency.
BY FRANK III. SIMONDS.

" NO WEEKS ago / discussed al
length the conditions in Great
Britain-economic, social and
Il political - which explain the
present crisis and the continu
Ing difficulties. What, by contrast,
are the equally vital circumstances in
the French situation? The last state
ment of the number of British I'M
employed receiving government aid
fixed the figure at nearly 1,10O,OOO,
while this was exclusive. of course. OF
at least an equal number actually I'M
employed by reason of the miners
strike At the same date the number
OF French receiving government aid
was 312 and in the same week several
thousand foreigners had entered
France and obtained jobs while the
official list of positions vacant amount
I'd TO more than 10000.
= The French situation. then, must be
perceived to be totally different from
The British. Industrially. France is
busy as perhaps never before in her
history. The coal mines OF the devas-
xated area are producing an appre-
GLADLY larger yield than before the
war, while the small coal areas ac-
Guired in Lorraine have added to the
French supply. France has replaced
Britain as the third country IN the
production Of iron and steel and is ac-
tuallv crowding Germany hard. Ger
many holds second rank, while we
lead.
French agriculture is certainly pros
porous. Many. many thousands OF
Spanish and Italian farm laborers
have come and are coming into France
and not a few are actually taking up
abandoned farms in the center and
south, where depopulation has taken
place. The last census of France.
taken this last Winter, showed a gain
of million and a quarter in nVe
years and also marked the presence
Of 5000, 900 foreigners twothirds of
whom had come since the end of the
war.
Contrastpd With Britain.
One can say. to begin with. then,
that none Of the major difficulties
which confront Britain. Germany and
even italy complicate the French out
look. To live. Britain must sell from
about one half to two-thirds OF what
she manufacture and buy feed and
raw materials. Her main sources of
income to balance her enormous out
lay for foreign goods and raw mate
rails were before the war threetold.
namely. the earnings of her foreign IN
vestments. the sale of coal and the re-
turns from her merchant marine en-
gagged in the carrying trade of the
world.
And her main troubles al the mo-
ment arise from the fact that the IN
vestmcnts have been greatly reduced
BY the war. the foreign market Tor
coal has enormously contracted ana
Is still contracting and the supply OF
foreign freiShts is vastly inferior to
the capacity Of her merchant marine.
There is q fourth circumstance in
the British case. which also touches
the French The stahiiZins of the
mound sterling greatly increased the
cost of British production, While the
decline in value of the franc enabled
the French to produce more cheaply.
France has been dumping ali sorts of
things notably iron and steel and tex
tiles. not alone in markets once British
but In the British Isles themselves.
This explains something of the British
unemployment and something of the
boom In French industry.
II is, however. a fact that In the
nrocess oe initiation the moment ar
rives when the advantage due to
cheaper production is lost by the in
creased cost of materials abroad. For
o. time one tnderSellS abroad because
one has the raw materials and labor
Is cheaper. but as the home currency
declines In value purchases abroad be-
come so expensive that in the END not
only is the advantage lost, but the
country sellins cheaply is actually
selling for less than cost and thus Is
diminishing its capital 1t Is at this
point that France has now arrived.
Self-ContAined Country.
Yet. economically, France is sound
for the simple reason that she is a
self.contained country. whose indus
try Is mainly occupied in filling the
domestic market and depends only
slightly on foreign sales, and whose
exricultura is almost sufficient to feed
the country and does not leave any
large deficit to be supplied by foreign
purchases In addition, France has
very large return alike from produc-
lions which are non-competltlVe ana
have world market to themselves
and from the vast tourist trade which
comes annually.
Now to understand the difference
between the British and French sit
hation, the fundamental difference, a
kirnple figure may help. The British
ARE in the position of great manu-
kacturing establishment which cannot
barn the costs of operation because II
kannot find a market for much or It's
hroduction and in addition cannot
compete with foreign rivals because
bf it's cost. 1t cannot pay its opera
Hives enough to live and yet compete
hnd It cannot find markets FOR what
4 produces at any cost.
The French situation is quite oil
eerent. There is no trouble in finding
markets. there Is no problem with re-
spect of paying the employees a NV
ang wage, the problem lies wholly III
Che fact that the concern is overcap-
Rtalized, It cannot earn return on us
eapital stock.
Let me illustrate what l mean. Be
fore the war the French debt was In
Round terms $4,000, 000, 600. 1t was
2he largest debt in existence, but II
WAS carried by the country without
ANY great difficulty. In the war
FRANCE borrowed at home and abroad
vast sums of money and continued TO
borrow for reconstruction OF the deV
kstated area after peace came. II Is
Rerhaps approximately exact TO say
THAT the total of this borrowing
Reached the sum of S24.0O0. oo0,oe
and that together with the pre-war
debt the French obligations now
amount to $50. 000. goo 900, and that
khis value represents the gold value
1t the time of the borrowing.
Debt Expanded Five Times.
The French debt has then been eN-
handed TO a sum FIVE times as great
a. before the war. and where the cost
annually of the debt burden was per,
haps $3.50, 900. 900 in 1918. il would
now be almost $3.50 0eo,00 were the
gold sta ndard maintained. But this
burden is beyond the capacity OF the
country TO carry. What has hap
pened? Tie frame has fallen from
fittle less than 20 cents TO just s.