France on a Quiet Volcano

May 5, 1947

PARIS—Some experts here tell you that the key to France’s economic problem is coal; others insist that the real key is currency. Certainly, both problems strike the visitor on his first day. Shortage of coal means shortage of electric power. At night the streets of Paris are dark. The currency chaos is equally evident in the bundles of ill-assorted bills one is forced to carry in denominations ranging from five to one thousand francs each. An unpretentious restaurant meal costs around 500 francs; a really good meal, 1,000 francs and up. At the official exchange rate, this means from about $4 to well above $8, Even translated at the present black-market rate of slightly less than 200 francs to a dollar, meals and most items of clothing soar far above New York levels.

The franc has an internal purchasing power on official indexes of less than one-eighth its value in 1938. Allowing for black-market prices, foodstuffs are more than thirteen times as high as in 1938. Today, the franc is worth only one-fortieth of what it was in 1914 in terms of dollars, and perhaps only one-hundredth in terms of goods. This long-term decline has meant the steady erosion of the French middle class, with its conservative capitalist psychology and traditional habits of thrift.

The budget continues unbalanced. The volume of money in circulation continues to mount. Prices, especially of foodstuffs, mount with it. The Blum orders for a 10 percent reduction in prices caused a momentary arrest in this upward movement. But for the most part French price controls are ignored or evaded. Where some of them are seriously enforced they disrupt deliveries and distort production. Farmers are called upon, for example, to deliver all their wheat above certain deductions for seed and farm consumption to authorized agencies at official prices. But the price of wheat is fixed too low in relation to actual prices received for meal or other cereals. The result is that farmers have been wastefully feeding wheat to livestock. This reduces the amount available for direct human consumption and adds to the difficulties arising from the destruction of one-third of France’s sown wheat by last winter’s frosts.

The great official overvaluation of the franc has made many imports cheap in terms of francs, but French exports, including tourism, are very high priced in terms of foreign currencies. This reduces and discourages French exports. It makes France more dependent on outside loans, principally from the United States, to continue its imports.

Despite such policies, some lines of production have recovered astonishingly. Iron and steel output in February are 85 percent of the 1938 average, but 180 percent of the output in February 1946. Automobile output in February was 80 percent of the 1938 average and almost double that of the corresponding month in 1946. Production of coal in February was actually 108 percent of the monthly average in 1938 and is now around 115 percent. But France normally imports about one-third of its coal, and coal imports in February were only 34 percent of the 1938 figure. Coal is still the chief bottleneck in French production.

High hopes are placed by the French in a plan drafted by Jean Monnet, which was approved by the Blum Cabinet in January. It calls, among other things, for a balanced budget, a 48-hour week, and modernization of “key resources”—coal, electricity, steel, cement, agricultural machinery, and transport. But the political obstacles to its serious application are great, particularly as concerns the budget. It depends also on substantial credits from the United States.

The fate of French economy rests today mainly on political factors. The chief of these is the strength of the Left, above all of the Communists. Communists occupy key posts in the government. They dominate the most powerful labor union, Confédération Générale du Travail. For reasons of international policy, Communists now play “conservative,” work for increased labor output, restrain wage demands, discourage strikes, sometimes even break strikes; but these tactics may be reversed at any moment. The French are no longer defeatist in spirit. But they live like inhabitants of a town built on the sides of a volcano, speculating uneasily in sidewalk cafes on the meaning of the rumbles beneath their feet.