France

on the World Today

THE Communist offensive in France, so widely advertised for February, failed to take place on schedule. The government took serious, specific measures to counteract insurrection. New maps and charts were collected of public buildings, bridges, tunnels, and other points that might have to be defended. A new system of mobilization was devised. In the past, French soldiers had always been sent to regions far from their homes. Now, because of the possibility of transport strikes, they were assigned to places about twenty miles from their mobilization centers— far enough for them not to be serving among their friends and families, but near enough for them to get there on foot.

The Communists did plan a new offensive but. they had to call off the movement because of a combination of influences favorable to the government. The winter, the mildest in many years, remained warm to the end. The shortages of food and fuel were felt less sharply than in any other winter since the war. Abundant rainfall increased the supply of hydroelectric power, ending the irritating interruptions in electric heat and light. The crop prospects were excellent. And the Communists lost the clement of discontent on which they had counted.

Moreover, the defeat in the November-December strikes and the split in the General Confederation of Labor (CGT) left the organization weakened. The Socialist section of the labor movement withdrew from the Communist-dominated CGT and created formally its own Force Ouvrière.

The fundamental cause for the divorce was politics, the Socialists insisting that the trade-unions should confine themselves to labor matters. A basic reason for the Communist failure in its last outbreak was the opposition of French workers to political strikes. The CGT, with a large part of its membership now lost, was unwilling to embark on another political campaign. It had to wait for legitimate conditions that would justify strikes.

The strength of the Communist Party and the CGT, however, should not be underestimated. They remain a major party and a powerful movement. In the by-elections, which are held nearly every Sunday in some region of France, the Communists showed recent gains. Their advance was particularly evident in farming areas, where the government’s financial measures were unpopular and the new moderation of the Communist Party worked to its advantage. In the cities, the Party appeared at least to be holding its own.

The CGT could also boast of election results. During the first two months after their separation, the original Confederation and the new Force Ouvrière issued conflicting, confusing claims of strength. A clear, objective test finally came in the mines, which constitute one of the most important, sectors of the nation’s economy and labor movement. The miners, voting to choose their delegats, elected 230 from the CGT, 4 from Force Ouvrière. ’Fhe elections could be challenged as an over-all indication of labor sentiment, especially since they were confined to underground workers, many of whom are foreigners, and the CGT had the advantage of holding all the previous delegates’ posts. But here was a sign that the CGT was still capable of exercising profound influence.

The Mayer Plan

Financial and economic reform was contemplated by the non-Communist government of Premier Robert Schuman from the moment of the creation of the Cabinet in November. It was for this reason that René Mayer, a Radical-Socialist with a reputation as a liberal economist, was given the port folio of Minister of National Economy. The program was delayed for about a month, until order could be restored. From then on, it became the principal effort of the government.

The components of the Mayer Plan came out one by one, each distinct from the others, but all fitting together like newly recruited soldiers formed into one regiment to march toward a common objective. First appeared the new super-income tax of 20 to 40 per cent, which could be avoided by subscribing the amount due in taxes to ten-year reconstruction bonds, yielding 3 per cent interest. Since any logical citizen would prefer the bonds, providing some return, to outright tax payment to the state, this amounted in reality to a forced loan.

Then came devaluation of the franc, reducing its value from 119 to 214 to the dollar, for purposes of import and export trade, but providing also for free trade in dollars and gold in purely financial exchanges. This was designed to bring the franc closer into line with world values, thus stimulating French exports and tourist trade, and at t(he same time, to coax French capital from hoarding and the black market back to official channels.

The next step was cancellation of all 5000-franc notes, amounting to 330 billion francs, more than one third of the total banknote circulation of the Bank of France. This action, a gesture to the Socialist Party in exchange for its political support of the other measures in the National Assembly, was intended to deflate the swollen currency and to provide an exposé of hidden wealth for taxation.

Finally, the government presented its bill to prohibit any increase in prices not justified by a corresponding rise in cost of production. This was directed at stabilizing prices and stopping any new race between the cost of living and wages until the reforms could take effect.

Devaluation saves France

The need for most of these measures, particularly devaluation, had long been felt. With the franc pegged, since the war, first at the military rate of 50 and later at 119 to the dollar, French prices were so high in official dealings that exports were virtually stopped and the black market flourished. But no French politician likes to take responsibility for cutting the value of his nation’s currency. In the past such measures have usually been covered by international agreements for monetary stabilization. Mayer not only dared to devalue, but he did so over the strong objections of the British, who feared that free trade in currency would result in an attack on the pound.

The final impulse that made devaluation compulsory came from ihe complete paralysis of the national economy. The government’s supply of foreign exchange was exhausted. The administration was committed, under the Marshall Plan, to avoid inflationary means of meeting its expenses — in other words, to stop drawing on the Bank of France. The halt in exports meant no more money in view from abroad. American interim aid had already been allocated, but further items of raw materials and machinery were absolutely necessary. Without them, post-war France was at the point of economic strangulation.

The bold devaluation was calculated to make French prices attractive to buyers abroad and to tourists. As an example, when Secretary-General Trygve Lie was looking for a meeting place for the United Nations General Assembly next September, he inquired about hotel prices in Paris. He was told rooms could be found between 120 and 1600 francs daily. At the old rate, that meant about $1 to $13. At the new free rate, the price became 40 cents to $5. Devaluation was one consideration that won the assembly for Paris. The French expect that meeting alone to bring them eight to ten million dollars of foreign exchange.

The march of francs

The French are notorious hoarders. Some idea of their reaction to the cancellation of the 5000-franc notes can be gained by imagining what would happen in the United States if all twenty-dollar bills were declared invalid and called in, a few being repaid in five-dollar bills, the rest being held for restitution in some indefinite manner at some vague future date.

Modern legend has it that the Frenchman hides his money no longer in the small, old-fashioned sock, but in the big lessiveuse, the covered metal kettle in which clothes are boiled. Two young men, in fact, turned up at a post office in the Rue du Four, on the left bank in Paris, disconsolately carrying a lessiveuse supposedly full of 5000-franc notes. The people already waiting in the long queue to t urn in their money felt so sorry for the young men that they let them pass to the head of the line. There the fellows opened the kettle, reached down to the bottom, extracted one note each, for which they received full payment, and went on their way, cheered by the good-natured victims of their hoax. But there were many other lessiveuses fuller than theirs, and emptied with animosity.

The unusual opportunity afforded by the banknote conversion to study French hoarding proved what had always been suspected: that the farmers were among the richest citizens. They turned in almost one third of the total number of 5000-franc bills, averaging more than ten per person. The national average was 1.43 per person.

Having adjusted the franc and reduced the currency, the government was confronted with the necessity of restraining price rises, lest they nullify the Mayer Plan. Here a neat combination of price control and free trade was adopted to meet the complex circumstances. As of December, the wholesale price index for food was 1432 and for industrial goods 1001, compared with 100 in 1938. By retaining the controls on food required by the short supply, but freeing products in more normal supply, the gap between prices was narrowed in January to 1566 for food and 1345 for industrial goods.

As long as demand exceeded supply, the government felt compelled to maintain artificial restrictions, but where freedom was possible, it was granted. The fundamental theory was that controls could not be fully effective in a non-police stale. The objective was a normal market, guided by the law of supply and demand.

The criticism could be made that the Mayer Plan was neither one thing nor another, neither control nor liberty, but its hybrid nature could be justified. As long as the French state is free to conduct its own experiment, without foreign interference, the program will work toward eventual liberty.