Evening star., 1936-10-01

Nations. On Uisit to the United
. States a fen months ago, he deltp-
cred the Jonathan Peterson Foundd-
! tion lecture for 1886 under the aus
pices OF the League OF political
(, education In Ne,D York City.
BY SIR ARTHUR SALTER.
1y Radio to The Star.
: LONDON, October 1.-Devalua-
: ton of the franc is the most impor-
tant economic event since that OF
the dollar, nearly three years ago. II
Il is carried through successfully. 1t
NAV prove the best thing that has
1 happened of any kind in that period.
For the history of the postwar
world, political as we'll as economic,
might be written in terms OF the
, changing values of currencies, flrst
imitation and then deflation. in
turn. spreading economic distress and
bringing inflammable political pas
sions near the fash point OF eXplo-
sion.
1t was in 1880. after the onset OF
the world economic depression. that
international relations, which had
been improving since 1925. began to
. deteriorate, and it was in 1925,
, after the world financial crisis. that
. the more dangerous political forces
developed their full strength. And,
in these events, we are certainly right
70 see a relation of cause and effect.
Broke System in U. S.
It would indeed be true to say that
, sdefiation" has been the principal
agent in the most important events OF
recent years. 1t broke the banking
system in the United States, it trans
formed the political situation there
and in Great Britain and it brought
German economic distress to point
at which it provided the material for
the Nazi revolution. 1t has been the
main cause not only of economic trou-
bles but political stress in France.
When, as an alternative to chaos
and wild fuctuation in exchange or
the rigors of deflation, great coun-
tries have chosen new gold parity
for their currencies, their choice OF
new parity has not hitherto been well
made. In 1925 the pound was GER
tainly overvalued at s483 and con-
seouent defation caused a general
strike and, in the end, a fall OF
the pound in 1881. The franc was
undervalued by Poincare and new
external dislocation followed. SO,
too, the dollar was certainly under
valued at the beginning of 1884 and
all gold" countries were adversely
affected as they had been by the de-
probation of sterling.
Corrective DevaluatiOn.
Will the present French operation
be more successful? There are, hap
PLY, strong reasons for believing So
The range within which the new
gold parity will be fixed has been
indicated, although the exact point
has not yet been fixed, and it Is
clear that the French government
has carefully decided upon "correc-
tive" devaluation, which will merely
remove the previous disharmony be-
tween prices and the gold value and
Is not attempting to snatch COM
petitive advantage il external trade
by putting the new parity too low.
Even more important is the fact that
this has been recognized by the
American and British treasures and
that the three equalization funds will
cooperate to mitigate and, if possible.
prevent disturbance arising from
operations inspired by either fear or
greed.
Assurance of this cooperation will
greatly assist Premier Blum in what
is still a difficult task, that of bring
ing the franc safely to anchor at ite
new parity Until few months ago.
orthodox economic and financial
opinion, the renters and most of the
forces constituting the right were Bit
terly opposed to devaluation. They.
however, have been converted. More
serious now are the fears of those who
have recently secured Improvements
in their wages and hours Of work that
devaluation will rob them Of their
gains by causing an increase in the
cost Of living.
Has Effective Weapon.
These fears we're at first reflected
In the proposal to make wage slid
ing scale legal obligation. This pro-
vision has been deleted, but renewed
pressure must be expected If the cost
of living does, in fact, rise greatly.
Some prices, for example those Of
manufactured articles for which the
franc cost of raw material will be
higher, must rise. But the govern
ment has an effective instrument for
keeping down the price of necessities,
especially food, in its power to reduce
tariffs and increase quotas.
Cooperation in the use of the equal
ization funds of course requires some
understanding between the American
and British authorities as to the ratio
between the dollar and the pound to
be aimed although it may allow
certain elasticity and be subject to
later variation. There may be some
difficulty about this, although this
should be comparably less than it
would have been some years ago.
The pound has recently been pushed
above its natural level because many
who anticipated a devaluation of the
franc used sterling to make a profit or
to avoid loss. But for very long
period the actual rate has, with rare
exceptions, been fairly stable. And,