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As the French Government is acting in close contact with the) Treasury. authorities of Great! Britain and the United States America it 1s probable that every effort will be made to avoid the unfortunate incompatibilities which partly. contributed to the failure of last September's devaluation of thr frane, If the present devaluation' is to be successful it is essential that, the burden of public debt should be reduced and that a rise' in revenue should be facilitated enhanced prices and a revival of trade, In carrying his devaluation Jast September "M, Blum was twelve months late in the selection of the margin for the operation, The sharp. rise of French commodity prices, dating from the middle of} "1935 had been far in excess of the world level and had been accentrated by the social legislation and wages agreements sanctioned by the new Socialist Government The 30 per cent. devaluation was barely sufficient in the most favourable conditions to restore equillbrim; it would have been easily effective a year earlier, but as, things were it was considered by good judges that a 40 per cent devaluation would have given M. Blum the margin of safety required. Apart from that purely technical question the new Government heavily handicapped itself by associating its monetary policy with vindictive measures which antaganized capital and thus. made it dimeult to encourage repatriation and dishoarding, Belatedly in December the Government attempted to regain the confidence of tha capitalist by. issuing a new loan for which subscriptions from holders of gold certificates: were accepted "on advantageous terms. This was not completely successful because the wold was not accepted at its full market value and holders were reluctant to take a Government! bond in payment instead of cash. Moreover in its efforts to finance rearmament the Government was compelled to resort to disguised inflationary arrowing, its position being further prejudiced by its own action in bringing the Bank of France under state control.
Pres-ure from the extreme left wing of a-left-wing administration led to the Government's adoption of a policy which fatally took @ middle course. It was willing to wound but afraid to strike the capitalist system. This measures which required for "their success the cooperation of capital were obstructed by. other measures which were designed to penalize the very interests ".whose. assistance—was essential, The result has been seen In the revival of a serious fight from the frane, on which Me Vincent Auriol's statement has been vividly Muminative—between June 1. and June 28 Frs, 7,700 millions. worth of, gold outflowed; Treasury Funds, which stood at Frs, 2,459. millions on June 15, fell to Frs. 1,483 millions fon June 23 from which date a mass flight of capital" began. M. Chautemps has now obtained wide powers 10 check. the deterioration His success in restoring the position will depend mainly on the extent to which the British and American Governments can continue to support the franc and that probably @epends In turn on the new French Government's ability to avoid further disastrous concessions. to anti-capitalist prejudice.
'The present situation may be fairly summed up as connoting the' complete loss of ground which was. expected to be gained by the devaluation of last September. M.. Chautemps will, no doubt, appre-date the: lesson thus taught. "His successful tackling of the crisis wi depend on his adoption of a percentage which will be adequate to restore equilibrium between the frane and the dollar. M. Blum made the mistake of looking to a minimum percentage and thus was unable to secure the full advantage of the operation, apart altogether from his other self-imposed handicaps. 'Those were unfortunately conclusive in destroying all chances of success for they involved the as~ sociation of political prejudices with monetary policy. 'The Incompatibility of ideological theories with financial operations has thus been' clearly exposed. The recent abandonment of the British Government's National Defence Contribution scheme afforded a minor example of the truth of that principle. No doubt profiteering on the straits of the nation's finances, is a highly discreditable manoeuvre, and should be checked by, such means as are open to the administration, but if for that purpose, vindictive disabilities are imposed on capitalism asia whole the direction of monetary. policy is subord~ inated to purely political aims. The. success of monetary reform depends tultimately.on the judgment applied by the world market which takes no account of political theories but is severely limited in its observation to financial and economic realities. The object of devaluation is to confer certain recognized benefits on the community. as a whole and to that issue the possibility that a few speculators will make an unjustifiable, yet perfectly legal, profit through appreciation of their exchange holdings Is really irrelevant.
Text read from the printed page and cleaned; old type leaves the occasional error.