Evening star., 1937-08-22
The Financial Crisis
in France
BY FREDERIC J, HASKIN

e0S0i'ioh' AHe recent developments
there have been focus OF American IN
terest because some observers see in what
has happened possible foretaste of what
might happen in the United States should
the Treasury budget remain unbalanced.
the public debt increase, and tn. nolicv
of unbridled expenditure continue.
George E. Roberts, formerly director Of
the mint and now counted as one of the
wisest bankers in the United States, and
sound authority on governmental fiscal
| matters, recently remarked: There is no
science OF finance or economics that be-
longs exclusively to governments. They
must obey the rules of the humblest
household. The economic equilibrium is
| the basic principle Of all economic rela.
| tions."
The fiscal affairs of France have, dur.
ing most OF her history, been thriftily
| handled. Colbert, the great financial
| genius OF Louis X1V's reign, laid down
| rules which still are followed the mora
| Scrupulousy because of their abandon-|
ment Tor period just before the Begin
nlng OF the nineteenth century. 1t wasI
at that time that France resorted to infla
| tlon and issued the notoriotss Assigna.s
lhS paper currency, within a short
time, became utterly worthless. The bot
tom fell out of the French economic
structure. The lesson was so sternlv
taken to heart that not again did France
entertain the idea of imitation until the
emergency of the World War.
The genesis of the present French
nnanclal predlcament is TO be found IN
| the war and postwar financing. Unlike
IIni
reduce her war debt. 1t has been a part
OF the American fiscal policy speedily 10
pay of war debts. Study of the finances
of the Revolutionary War, the War OF
1872 and the Civil War reveals that the
public debts accumulated were retired
with almost flashing promptness. That
policy was continued after the World
War. Although the Treasury had ac-
cumulated the largest public debt in the
entire history Of the country to meet the
expenses Of our own forces, and also to
lend money to the European allies retire
ments began Immediately after the
armlstice. For 10 years the Treasur,.
retired the debt at the amazing rate OF
81 ,OOO,O 900 year accomplishing this
feat without the aid which would have
sprung from repayment of their debts to
us by the allies.
The contrast presented by France IS
striking. Instead of accomplishing a re-
ductlon OF her debt, it was found that
eight years after the armistice the French
debt was doubled and was nine times its
pre-War total. While no such fantastic
imitation occurred as marked the period
OF the aSSlgnats, the currency had In
creased hugely in volume and, as always
Is the case, declined in value. The nor
NAL value OF the franc was just under 20
cents in American currency Ten years
after the armistice, the franc was worth
but cents.
1t was at this period that Premier
Polncare made desperate effort to save
the franc. A sort of coalition save the
franc government came into Office Al
devaluation was found to be the only
method of preventing complete debace
and so new value equivalent to 1922
cents in American money was fixed. This
caused unavoidable disruption but had
the merit OF bringing a stable currency
The scheme worked but it required an
effort on the part of the French people
On the basis of 1918 representing lOO
French prices had touched peak in 1925
represented by the index figure sos. That
is, things cost almost seven times as
much as they had in 1913. There was
steady decline accompanying the defla
ton OF the currency, but as late as 1885
the cost OF living index rose above 500
The world depression did not touch
France as early as it did most other large
countries. Indeed, for a while it was
thought by some that France might man
age to avoid its worst effects entirely Id
| proved inevitable, however, that such a
| tremendous world phenomenon could not
be held of. Unemployment appeared,
| the flight of capital began, and all the
concomitant ills of hard times descended
| upon the French people Drastic efforts
were made to cut government expendi-
| lures. The effects OF an unbalanced
| budget and of the huge burden of the
| unprecedented national debt were felt
and the entire French economy was
| thrown out Of gear.
From July, 1929, to the 1896 election
which placed Leon Blum. leader of the
Front Populaire in power, France had nd
less than II premiers, one after another
being turned out of Office largely because
no solution of the economic difficulties
had been found. Price-flxing laws were.
enacted reaching almost everything II
was Premier Laval who said he would fix
the prices of everything from sardines to-
cement. The franc fell on exchange to a
low of 3.7lss cents.
1t was this disorganized situation which
resulted in the victory of the Front Pop
ulaire, which is regarded by the more
conservative elements as practically Com
munist. The unbalanced fiscal affairs of
the government thus have been blamed
as furnishing an avenue for the advance
to power of the radical elements in the
state. American observers of the French
developments have noted this and have
entertained the fear that prolonged un-
balance Of our own Treasury finances
might bring similar results.
The heavy overhanging debt and the
weight of the armament expenditures in
France have made necessary the imposi-
ton of more taxes. Nearly all commodi1
ties and business activities are taxed
There are particular taxes on specula-
tions. In an effort to check specuations
in foreign exchange, tax of 100 per cent
has been placed on such operations.
There Is strong pressure ON ths part OF
the semi Communist labor groups for
public measures to improve incomes
Direct subsidies have been voted to farm
ers. The pressure was 50 strong that
Premier Blum and his cabinet resigned