Shot in Democracy

Now that France has got rid of her first and only Socialist Premier, hectic Leon ("New Deal") Blum, the British last week were ready to give important financial aid to new Middle Class Premier Edouard Daladier. President Roosevelt was ready, too.

Mr. Roosevelt is the first U. S. President in modern times to speak really fluent French, and both his mother and his wife share his feelings for La Patrie. Last week, when London put to Washington the idea of permitting Paris to cheapen the franc, thus giving France a competitive advantage in world markets, while holding the dollar and pound at present levels, the hesitations of the President and Secretary of the Treasury Henry Morgenthau Jr. were brief. Nevertheless, these hesitations were agonizing to Premier Edouard Daladier, for, although most Frenchmen were convinced the franc must be again cheapened, some French fiscal experts believed Franklin Roosevelt would take this occasion to cheapen the dollar too, as he did four years ago.

After much waiting. Secretary Morgenthau, speaking by telephone to First Secretary H. Merle Cochran of the U. S. Embassy, Paris, dictated two precious paragraphs. After these were handed on Embassy stationery to Premier Daladier. confirming that what he was going to do was no violation of the Tripartite Monetary Accord of the U. S., France and Britain which was signed to keep their three currencies level with each other (TIME, Oct. 5. 1936), Premier Daladier was able to announce devaluation of the franc over the radio and to tell Frenchmen that the pound and dollar would not be devalued to compete with the cut-rate French money he was about to offer.

Alibi. Since it is unpleasant for any Great Power to have to offer its money at cut rates, the excuse of dire emergency is always offered in such cases, and Orator Daladier went on the air with this vibrant alibi: "The truth is that our economic life is in a very bad condition; that legitimate profit is tending to disappear; that partial unemployment is increasing in every branch of industry; that our trade balance is impoverishing us; that our production figures are a humiliation for all Frenchmen!''

"Can Only Improve!" After thus citing calamity and their justification, the French Cabinet cut the value of the franc about 9% last week. In terms of the Roosevelt dollar of today the French franc in 1914 was worth 33-c-, now is worth just under 3-c-.

This means that any French War widow who has kept her money stowed away in banknotes in the family sock since she lost her husband in Joffre's heroic defense of the Marne has now been thoroughly, almost completely, swindled--and yet France has never resorted to "uncontrolled inflation" of the kind Germany went through after the War.

Honest, orthodox M. Daladier last week, took a handsome "profit" for the French Treasury at once. This profit, obtained by "revaluing" the gold stocks of the Bank of France and the exchange fund of the State, totaled 47 billion francs.

Anyone who sold francs fortnight ago, buying another currency or gold (which is perfectly legal and easy in Paris or London), and then bought francs again last week made a similar "profit."

This kind of attitude by Premier Edouard Daladier, who might instead have started hunting gold hoarders, was promptly observed to "inspire confidence." With its huge new profit stowed away in billions, the Government found itself able to reduce the interest rate from 4% to 3 1/2%. The credit of the State had been "strengthened"; French security prices were marked up; Premier Daladier, who is his own Defense Minister, found he had billions more to spend for Rearmament; and the French Treasury was expected soon to do what has been impossible for months, float a large loan. French Finance Minister Paul Marchandeau blithely announced that the franc, now that it has been cheapened, not only will not fall farther but may even rise. Crowed Marchandeau:

"The franc can only improve and strengthen!''

Third Occasion. In the House of Commons last week Liberal Chancellor of the Exchequer Sir John Simon refused to answer when Sir Lambert Ward, M. P.. Conservative, asked: "Is this not the third occasion within three years that France has given assurance that no further devaluation of the franc is contemplated?"

Sir John contented himself with assuring the House of Commons that, "We are not contemplating any adjustment of the sterling exchange."

The Chancellor well knew, like everyone else in the House, that a competitive trade advantage had been given France last week by Britain and the U. S.. and this Sir John did not deny. He merely said the French have sent him "assurances" that they are not deriving any competitive advantage-- i.e., of course, the French may be wrong.

In fiscal and political circles on the Continent this week opinion was general that Roosevelt & Chamberlain acted as they did, and when they did, last week primarily to give France and therefore democracy a "shot in the arm" just in time perhaps to daunt Hitler & Mussolini (see p. 22).

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