Report

When effervescent Paul Reynaud became French Minister of Finance last November, France was fast slipping into an economic collapse that, following close after the Munich disaster, might have destroyed French democracy. Unemployment had increased 40,000 in a year (to 367,000) as production dropped to 25% below the 1930 level; one out of three dinky French freight cars was idle; sales of manufactured goods abroad had halved; industrialists said they saw no chance for profits under Popular Front reforms. Worst of all, the savings of millions of frugal Frenchmen were endangered by an unchecked flight of gold. Drastic measures, sure to be unpopular, were necessary if France was to be saved.

For years Paul Reynaud's Jeremiah-like prophecies of doom have earned him hatred from the Left and suspicion from the Right. In 1923 he pleaded for an understanding with Germany and opposed the French occupation of the Ruhr. An antiCommunist, he has long urged closer trade relations with Russia. Last September, before he switched from the Ministry of Justice to Finance, he almost broke up the Daladier Cabinet by his opposition to Appeasement.

When he became Finance Minister, the Daladier Government was at the height of its unpopularity with the Left, and smart Rightist Paul Reynaud had nothing to lose by promoting drastic measures for which the Premier would be chiefly blamed. He outlined a "threeyear plan" for return to "a liberal-capitalist economy" by stimulating private industry. The 40-hour week, darling of former Premier Blum's Popular Front, was abolished. The ordinary budget (exclusive of emergency arms expenditures) was balanced by increasing direct and indirect taxes ($265,000,000 and slashing expenses, 40,000 surplus State Railway workers alone being fired. To leave the capital market free to industry, M. Reynaud promised that the Government would float no long-term loans until May. The recovery program pinched almost everyone, but the most anguished cries came from the labor unions, whose protestant general strike failed.

Last week, M. Reynaud proudly claimed credit because production had increased 12%; the excess of savings deposits over withdrawals was $113,446,500; and, most important, France's gold supply had mounted from 55,808,000,000 to 87,266,000,000 francs. And last week when the Government went into the market for a six-billion franc defense loan, Frenchmen expressed their confidence in the nation's finances by oversubscribing it in a few hours, breaking all French records for an issue of that size.

Actually most of France's industrial recovery can be attributed to rearmament and to slightly better business conditions throughout the world. Unemployment in France increased by 53,000 from October to February. Foxy Paul Reynaud boasted: "That amid the international events of the past few months France has been able to rebuild and increase her forces proves beyond a doubt the robustness of her economic organism, the solidity of her social structure, and the suppleness of her institutions." A more dispassionate judgment was the London Economist's which saw in Paul Reynaud's recovery no vindication of "liberal capitalism" but a drive "towards a war economy," the limitation of consumption and other indications that French democracy is not too robust.

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