FINANCE-PUBLIC AND PRIVATE
THE FRENCH CRISIS
BY ARTHUR W. KIDDY.
Ix considering the present political and financial crisis in France it might be well, perhaps, to recall the. story of the individual in the past century who it is reported, whenever witnessing the tragedy of an execution, was wont to say: "There, but for the grace of God, goes John When one considers the cause of the present downfall of the French Government, there springs to the imagina- tion a realization of what might have been the position here if a few years ago the Treasury and the financial authorities had not been of one mind in determinedly reducing the great volume of floating debt. Soon after the Armistice, for example, our own total of floating debt stood at over .11,500,000,000, of which the greater part was in Treasury Bills. To-day, however, the total has been reduced to the more manageable though still formidable dimensions of £770,000,000.
•
POST-WAR DIFFICULTIES.
For, while the causes of the French financial crisis are many, and have operated over a great many years, the culminating point has been reached in the predicament in which the French Government finds itself in meeting maturities on the 8th proximo of short-term obligations amounting to something like - 2,700,000,000 francs. Some few months ago it had been hoped that this par- ticular difficulty could be met out of the proceeds of a -gold -loan which was to have the effect of steadying the exchange and of dealing with the more imminent short- term debt. Either lack of resources or lack of confidence, however, has prevented a sufficient response to tha loan and, inasmuch as the process of inflation in France has practically never ceased, it is probable that want of confidence-quite as much as want of resources may have been responsible for its poor success. Having regard to the acknowledged difficulties of France by reason of the ravages of the Great War, it would be an unbecoming task to indulge in criticisms of the manner in which French finances have been handled since the Armistice. Obviously, France had certain difficulties to meet after the War which had no counterpart in this country. There were large devastated areas to be repaired and it was, perhaps, only natural as a result of the Paris Conference. and the Versailles Treaty. imposing a colossal indemnity,: upon Germany, that the French authorities should have felt themselves to be justified in raising the loans for reconstruction on the idea that repayment could be effected out of Reparations. It was not France alone who took the view that Germany: was 'to-pay; the costs of the War, for, one seems to remember certain Politicians here who assured the people that the pockets of the:Qermang.urere to be searched for the wherewithal to meet the War losses of the Allies !
• - DALLYING -Willi INFLATION.
can be admitted that both during and after the Wai Most nations failed to meet the situation with a sufficient imposition . of taxation, but, just. as the annihilation of . the. mark was due to the failure of Germany to .impose sufficient taxation, electing instead to pursue a course. of flagrant inflation, so in France the same errors were committed, Iliemigh in less degree; That large- loans would have been necessary- in any case to quicken the work of reconstruction after -the War and to provide employment there can be little doubt, and, indeed, France Might even be inclined to say that herOwn system of providing work rather, than doles had its advantage aver the course pursued here. Nevertheless, the fact remains that throughout this period the financial -authori- ties here had a wholesome dread of the effects of prolonged inflation, whereas, in France, the danger was dallied with as is always the case, it became - increasingly difficult for successive Governments • to bring home to the French people the- actual position. CURRENCY EXPANSION.
If, however, we compare, for example, the latest Return of the Bank of France, not with the pre-War figures, but even with the, figures at the date of the Armistice, we find- that the Note Circulation has risen from about 24,000,000,000 francs to 48,000,000,000 francs. In addition there has -been an enormous piling up of internal Government Debt, and even after the passing of seven years no real equilibrium has been established in the Budget. It is quite true that. during this period and partly even, it can be admitted, as a result of the policy pursued, there has been very little in the way of unemployment in France, but once again - it has been found that the stimulus to industry _and employment supplied by inflation not only has its limits; but ultimately brings results reacting disastrously upon both financial and social order. It is the old story of the slippery path of. inflation, and no better proof of the predicament in which the Painleve Government found itself can be furnished than the fact that while the Government was apparently defeated on its proposal to postpone payment of maturing debt by -three years, admittedly the only alternative was still further to inflate and repay the Bonds out of increased paper currency. At the time of writing, a new French Government has yet to be formed, but. already the .necessary powers have been taken to expand further the Note Issue of the Bank of France. And in this connexion it is not, perhaps, altogether unimportant to remember that quite apart from the French Govern- ment War Debts . to this country a great many millions are due during-the- next 'few years by the Bank of France to the Bank of England.
POSITION NOT HOPELESS.- But while the City is justly concerned with regard to the serious situation in France, and while the week has seen a fresh low record established-in the value of the franc, it must not be supposed that the City regards the French financial position as a hopeless one. Such are the natural resources and such, it might be added, is the volume of the hidden savings in France, that it only requires courage and a Government strong enough to inspire confidence to bring about a gradual improvement. Moreover, if, at the present juncture, America should show a more accommodating disposition with regard to the French External Debt, and advantage were taken_ of it by the French authorities to fund their external obligations, we might conceivably be at the beginning of better things. Courage, however, be required, because the establishment of a, Budget equilibrium must involve direct sacrifices on'the part of the corrimunity, while the curbing of inflation and the stabilizing of the franc, even at its present level, may -occasion' Some temporary slackening of trade. The point is, however, that those unfavourable conditions would ultimately arise in any case, but if the policy of drift is pursued the situation will be even more hard to deal with than it is to--day. ..-
Previous page
