12 APRIL 1935, Page 10



IT seems now to be pretty generally recognized in England that there are limits beyond which the economic self-devolopment so optimistically begun in 1931 cannot go. If one looks at the British situation from the standpoint of an observer in France, the very model of a self-contained country, one gets a curiously interesting view of the limits.- Broadly, what the policy of economic nationalism has done so far is to stabilize the situation on the basis of a quasi-permanent unemployment of about two millions placed on the Budget. A considerable part of the revenue required to meet the cost has been obtainable because production for the home market, protected by the tariff, has expanded, thus increasing taxable profits and income. So much may be set down to the credit of autarchy.

Now turn to France, where depression is acute. The total number of unemployed persons is certainly much greater than the 500,000 who are receiving relief from public funds. The funds are local and are not every- where set up. In February of last year the popula- tion of the communes in which- relief funds were operating amounted to 23,000,000, whereas the total population of France is nearly 42,000,000. It is impossible to estimate the extent of unemployment with confidence, but the true figure must be over 1,000,000 and may be 1,500,000 or more. Nor do the statistics of total employment completely represent the severity of economic depression. Other factors must be taken into account. In the last few years some hundreds of thousands of foreign work-people have returned to their own countries, voluntarily or involuntarily. A considerable amount of total unemployment has, moreover, been avoided by the widespread adoption of short-time working.

In face of this serious situation France has no doubt given full -consideration to the various possible remedies. But the Flandin Government appears to have ruled out - as impracticable the simple plan of accepting a certain amount of unemployment as quasi-permanent and putting the unemployed regularly on the Budget for an indefinite period. France, self-contained France, cannot imitate the Britiet policy. And one reason why she cannot do so is precisely that she is virtually a self-contained country.

There are, of course, other reasons. The cost to the State would be considerable. At present the grants from official funds are estimated to amount to about 150 or 160 million francs a month, the burden of which is shared between the State ,nd the local authorities. If unemployment grants were aciministered on a national basis and all qualified persons took advantage of them the amount required from the State would he more. It is also an objection to the plan that unemployment in France has not yet settled to a steady level and it would therefore be difficult to determine in advance how much to budget for. But the most significant objection is the difficulty of finding the money as Great Britain has been able to find it, by intensifying home production for the home market.

In a recent speech, which on this point has received less attention than it deserves, M. Flandin frankly explained the inability of the French to imitate the British " solution." To find the revenue needed for unemployment grants, said the French Prime Minister,

" England disposed of a means which we have not got, and she has found that means, it must be said, partly at the expense of the foreigner, by that Protectionist wall which she has raised, which has allowed her to re-create on her own territory activities which have assured her of resources compensating this definite incorporation of unemployment in the Budget. . . . As far as tariff Protectionism is concerned—autarchy, to use the fashionable word—we no longer have the resources which England had a few years ago in her own case. France has long been a country which is nearly self-sufficing."

Evidently, the resource which England had a few years ago, and which France has not got, is the possi- bility of imposing a Protectionist tariff where none existed before. That is to say—though M. Flandin did not say it—it is an advantage which England possessed as a Free Trade country. If M. Flandin is right, other inferences are permissible. Is it not fair to suppose that this resource of ours will ultimately exhaust its virtue ? It continues to be effective just so long as the home market remains elastic and can consume increasing quantities of British products. But saturation-point will one day be reached and the process of self-development will have attained its limit. M. Flandin implies that, as far as France is concerned, the home market cannot be expanded on the necessary scale by keeping out the foreigner, because the foreigner is already so largely ex- cluded. In our own case, as industry and trade adapt themselves to the Protective regime—as we become more nearly self-sufficing—the time will come when we shall be as impotent as France to meet the cost of unem- ployment by further appeal to the tariff.

Regarded in this way, the operation of self-develop- ment performed in the last few years surely reveals its true nature. It may be represented as a sort of realiza.- tion of some of the assets of Free Trade. England as a " going concern " is, or was. largely an exporting country. Under Free Trade her whole economy, was designed to favour exchange. A fraction of the home market which was thus opened to imports constituted, in some sense, a reserve which she could, if necessity arose, appropriate to her own use by closing the door against the foreigner. She has taken that step. She has reserved a great part of the home market for home producers. Trade has been stimulated. The Budget shows a surplus. Against the visible profits of self-development, however, we shall almost certainly have to set a loss of exporting power. Within the limits imposed on the operation of self- development England is still a going concern, but not on the old basis as an exporting country.

It is an essential characteristic of the whole operation that, as the French example shows, it cannot be repeated indefinitely. Its real efficacy consists, not in the mere increase of existing customs duties, but in the transition from no-tariff to tariff. The grand move can be made only once—unless, indeed, we return to Free Trade and build up our reserve again.