Free Trade?

In three days and nights of aggressive debate, the Senate and Chamber of France finally authorized the radical Cabinet of Premier Leon Blum to reduce the value of the French franc 30% last week, but at every stage of the debate Socialist Blum was served notice that Parliament had given him no monetary free hand such as the U. S. Congress gave President Roosevelt at the time the dollar was devalued (TIME, Feb. 12, 1934).

Devaluation and "alignment" of the franc at about 21 to the dollar and at about 101 to the pound sterling was only a fraction of what Socialist Blum, who was strongly pressed by the Communist Deputies among his supporters, had sought to obtain from Parliament. Ignoring the peasantry, the numerous artisans and small shopkeepers and the French middle classes, the Communists got the Premier to write into his bill a measure which would automatically have raised the wages of proletarian factory workers and other small-salaried employees on a sliding scale in exactly the proportion that French living costs rose--as they are sure to rise--in terms of the devalued or "Blum franc." This attempt by the Communists to exempt the proletariat, in which they have their main following, from the sacrifices other French classes are being asked to bear, brought down on Premier Blum the greatest outburst of Parliamentary wrath in months. Representatives of other classes showed not the least embarrassment in rebuking the presumptuous proletariat, and cheers greeted a resounding slap at Premier Blum by famed old Senator Joseph Caillaux, many times Finance Minister. "It is, as you say, the duty of every Government to hear both the employers' and the workers' sides," roared M. Caillaux at M. Blum, "but you Monsieur le President du Conseil, have shown preference for the predominance of a class --the proletariat--which has the right to our solicitude but which is not the only class in the country!"

Premier Blum on his Cabinet's front bench grew visibly more and more nervous as the proletariat-pampering section of the bill was belabored by M. Paul Reynaud, long the chief advocate in France of devaluation and last week riding the crest of acclaim. Deputies and Senators who used to scoff at his ideas showed strong inclination to regard him as an expert pilot in the difficult monetary channel France must now navigate. Deputy Reynaud dismissed as of minimum importance the stabilization agreement Finance Minister Vincent Auriol had verbally obtained from U. S. Secretary of the Treasury Henry Morgenthau Jr. and British Chancellor of the Exchequer Neville Chamberlain (TIME, Oct. 5). It was scarcely worth the breath in which it w.as spoken, M. Reynaud indicated, but it was also harmless since neither Washington nor London for the moment is financially at odds with Paris.

"We must play devaluation--which is France's last card--and we must play it well!" cried Deputy Reynaud,( attacking the Communist's pet clause. "Is France going to be the only country in the world in which devaluation fails to promote a return to Prosperity?"

With scowls spreading on Communist faces, Premier Blum finally reached for a scrap of paper, wrote on it that his Cabinet would drop the proletariat-pampering clause, and passed it to M. Reynaud There was much bouncing of the bill back and forth between Chamber and Senate but the final result was straight defeat of the Communists and refusal by Parliament to place in Socialist Blum's hands any wide financial powers. His prestige suffered sorely. Once he bleated, "I know that I am not a weak man and that I do not lack courage." He was bolstered by a vote of "affection and confidence" wangled through the Chamber by its radicals. Conservatives had the satisfaction that Premier Blum, during the debate, was forced to retreat from the rabble-rousing attitude which he struck recently at Poissy, addressing throngs of French workers beneath an enormous banner poster of himself remindful of those unfurled at Moscow to glorify Stalin (see cut). With his Communist supporters highly approving the stay-in-strike technique, Premier Blum felt constrained to tell the Chamber at 6 a. m.: "Occupation of factories by strikers cannot continue and shall not continue. The confidence which the working class has in the Government dispenses with the necessity of employing any methods other than those of conciliation and arbitration."

If this meant anything, it meant to Frenchmen that the next time proletarians try to seize a factory by "folding arms" inside it and locking out the owner, they will be turned out themselves by French police. Whether or not Premier Blum would stick by this seemed more than doubtful, but with the "Blum franc" established last week he next took the most drastic step of his career. Ever since the World War nations have upped their tariff walls while they talked about downing them. Acting instead of talking this week, Leon Blum slashed French tariffs more deeply than has been done in any country since the War and at the same time swept away more than 100 of the even more vexatious import quotas which have long blocked much trade with France. Blum decree was complex and selective, but in general French tariffs were lowered 15% on manufactured articles,17 1/2% on semi-finished goods, and 20%, on raw-stuffs.

This was enough to make U. S. Secretary of State Cordell Hull and other Free Traders generally shed tears of joy. It may mark the end of the post-War craze for excessive Nationalism and usher in a hopeful period of world economic appeasement, freer trade and resultant Prosperity.

In France the immediate effects of the measure remained in greatest doubt. Any reduction of tariffs of course treads on certain toes with resultant squeals. While one school of economists hailed Blum this week, another considered the Premier to be taking the risk of snatching away from French producers by his tariff slash benefits which he had just conferred by devaluing the franc. Apparently the Premier's idea was to keep prices in France from rising by letting in cheap foreign goods. He thus played the card of Devaluation in a manner exactly opposite to that of President Roosevelt whose objective was that prices should be made to rise.

Meanwhile amid catcalls and cheers, Premier Blum had gone to Geneva full of plans for a new World Economic Conference, but he found British Foreign Secretary Anthony Eden disinclined to listen. Mr. Eden's entourage gave out that the Foreign Secretary, "weakened by chicken pox," was going to spend a week "regaining his strength" on the Riviera.

Schacht Won't? Mussolini Will? Switzerland and The Netherlands quietly joined France off the gold standard last week, Dutch Prime Minister Hendnkus Colijn declaring by radio with masterly understatement: "Practically nothing has been changed as everyone will very soon realize!"

In Berlin the Nazi press jubilantly blamed "the Jews" for what had happened, pointing with specific accusation to M. Blum and Mr. Morgenthau as undoubted Jews and rehearsing at length the names of other Jews in official Washington and Paris. "The world cannot be cured with a restabilization of currencies alone!" barked German Reichsbank President Dr. Hjalmar Schacht.

This was interpreted as meaning that Dr. Schacht would not for the time being devalue the mark which in any case has been for years a purely artificial currency. But what about the lira? Would Premier Benito Mussolini, who placed the lira on gold in the days when Calvin Coolidge was President and the Gold Standard sacrosanct, recognize that a page of economic history has turned and the entire world must seek readjustment?

Astonishingly the Fascist Dictator, after cogitating with Italian economists in closest secrecy for a week, adopted exactly the same procedure as had the Socialist French Premier. Il Duce decreed 40% reduction in the value of the lira, bringing it to approximately 19 lire per dollar, and he also sweepingly reduced Italian import duties. Thus Fascist Italy, ordinarily considered a super-Nationalist State, was the first to follow the French lead to tariff appeasement and a better economic world. To Washington and to London was presented a supreme opportunity to join in for international economic peace and increasingly Free Trade. "It is necessary," declared Benito Mussolini, "to abandon temporary settlements and enter the field of permanent adjustment!"

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