America’s China Policy Is Not Working
The Dangers of a Broad Decoupling
FRENCH reconstruction should be considered in relationship to France's population problem, geographic location and natural resources, historical background and political psychology. This approach may appear ambitious and will be distasteful to a friend of mine who advocates a "League for the Promotion of Lack of Knowledge Between Nations," because, he contends, the more the people know each other, the more they quarrel. However convincing his argument might sound, the main objection to it is that systematic use of a lack of knowledge has been tried over and over again, even in recent times, but the results have not always given full satisfaction.
The population of France has increased relatively slowly during the last century, with a consequent decrease in relation to other countries. At the beginning of the nineteenth century the French population, around 25 million, was about equal to the population of the German Confederation, only slightly smaller than that of Russia, about twice that of Great Britain, and twice that of Italy. In 1940, the French population of 41 million had become smaller than the population of either Great Britain or Italy, had dropped to about one-half of Germany's and about one-quarter of Russia's. And for each 10 French births there were 17 Italian, 27 German, 80 Russian.
French hegemony in Continental Europe, which had been conceivable in the Napoleonic era, became inconceivable in the twentieth century. If French and British officials had pondered over these fundamental facts of demography immediately after the First World War they would have neither hoped nor feared French hegemony in Continental Europe; and the two countries in coöperation might have been able to erect a dyke against German and Italian aggression.
French demographic conditions have been interpreted in certain quarters as a sign of decadence in the French race. But the causes of the relative decline in the birth rate are not physiological. They are chiefly economic. There are good reasons to believe that proper economic and legislative measures could reverse the trend. Careful analysis shows that different causes operate in the cities and in the countryside to lower the French birth rate. In cities, the decline is due largely to cost of living and to lack of housing facilities; a well-known French industrial firm, through family support and home-building, substantially increased the birth rate of its employees. In the countryside the chief cause is probably the extreme division of French agricultural property. A peasant reasons that if he has a large family none of his children will have sufficient land. Remedies have been sought in recent years through modification of inheritance laws, but the efficacy of such remedies depends ultimately on fundamental economic conditions, that is, on the possibility of finding means of livelihood for children of large agricultural families.
Since 1940, the French population trend has again moved downward; a decrease in population of about two and a half million had been registered by the end of 1942. Excess of deaths over births accounts for about 600,000,[i] emigration for 400,000, prisoners and workers in Germany for 1,500,000. The last-named will of course return, but many of them in a poor state of health, temporarily or permanently ill-fitted for work; and in any event, their protracted absence is affecting French natality. The average age of the French population, already the highest in the world, is increasing still further. Its health has also deteriorated. Child tuberculosis has made alarming progress. However, the gradual disappearance of alcoholism seems partly to have offset the ill effects of food deficiency among adults.
Another important element of the French demographic situation is the immigration problem. France is more sparsely populated than her eastern and southeastern neighbors and so has attracted immigrants during several decades. There were about two million foreigners in France around 1930. A large part of them were in process of assimilation, due to France's favorable climate and the friendly character of her population.
The influx of foreigners was the result of normal trends, not of a deliberate policy. French opinion in general did not realize how great a contribution foreigners make to national wealth, for they arrive ready to work, sometimes with valuable knowledge, and with the costs of their upbringing and education already met. When France was belatedly struck by the world depression a large number of foreigners were expelled, especially between 1932 and 1936. French policy in this respect was no more shortsighted than that of other countries. Between the two wars almost every nation practised what Professor Jacob Viner has called "topsy-turvy economics," which means considering the admission of goods, services and men a plague instead of a blessing.
When France is free again, a carefully considered liberal immigration policy would be the most speedy and effective method for increasing the French population. Population is the most vital French problem. The solution of it requires a coördinated plan of economic and legislative measures to increase natality, improve public health and favor immigration.
France is located at the west of the small cape of Asia called Europe. Her geography is characterized by extended coastlines along the Channel, the Atlantic and the Mediterranean. Northeastern France, a flat country linked to the great Asiatic steppes, has for centuries been the road of eastern invasions. France belongs to three civilizations: the North Atlantic, the Mediterranean and the European.
French natural resources are well balanced, favoring both agriculture and industry. The country has a fertile soil. Several sections are well suited either to mixed farming, cattle raising, fruit growing -- particularly in vineyards -- market gardening or wheat growing and sugar-beet cultivation. Attempts to grow wheat in unsuitable districts in order to achieve self-sufficiency -- at a high cost to the consumer and therefore to the whole French economy -- originated in political motives.
France has the largest aluminum ore deposits and iron ore deposits in Europe. It has potash deposits in Alsace sufficient for world requirements.[ii] French coal mines, which are relatively poor, supply only about two-thirds of normal requirements. The coal is in thin layers; and there is a lack of "fat coal" for coke, which French metallurgy, in normal times, imports mainly from the Ruhr. France has large reserves of hydro-electric power, fairly well developed and interconnected. French North Africa has important phosphate deposits.
Metropolitan France lacks most of the essential raw materials: copper, lead, zinc, tin, nickel, manganese, oil, cotton, rubber, silk. Thus more than two-thirds of French imports before the war were raw materials, chiefly imported from overseas. If Laval had given due thought to these fundamentals he would have realized the fallacy of attempting to integrate France in a European "New Order." France must be on friendly terms with the Powers which control the sea lanes. France cannot sever her American and British ties without choking from a lack of vital supplies; but neither can she sever her Mediterranean or her European ties without disintegration.
France's long agricultural tradition is part of her historic background. The development of industry and the concentration of population in large cities are barely two centuries old. Even today the French population remains almost equally divided between country and cities. French agricultural policy has frequently been based on social and political rather than on economic grounds, for most French Governments have considered the peasant class the mainstay of social stability. And today certain elements in the Vichy Government, looking with suspicion upon industrial growth and wishing to see the whole of France revert to the traditional family life of the peasant and the craftsman, watch with a certain satisfaction how the Nazi conquerors ruthlessly crush French industrial power.
The French Revolution of 1789 did not affect French economic policy deeply. Indeed, the French Revolution did not bring the "people" into power. It displaced one ruling class, the nobility, in favor of another ruling class, the bourgeoisie, which has in fact governed France from 1789 through 1943.[iii] Athough the bourgeoisie includes less than ten percent of the French population, it has held its power for two reasons: it controlled all high and medium civil and military permanent offices, and the bulk of the press; and it has maintained an unwritten political alliance with the peasant class. The leaders of French industry and trade have acquiesced in the maintenance of agricultural tariffs, notwithstanding the resulting increase in their own cost prices. They themselves did not suffer. They shifted the burden of the increase to the public by means of tariff protection for French industry, obtained with the help of agricultural deputies. The general efficiency of French agriculture and industry, as well as the general standard of living, suffered from the deal.
French internal politics are a puzzle to most foreigners. When they hear that there are about two dozen different political parties in the French Chamber they decide that they can never learn so many names and simply give up. But when a French elector decides to vote for a candidate, he usually thinks in terms of only four groups: right, center, left, Communists. Often he thinks in terms of only two groups: right and left.
Widely-held opinion to the contrary, the political convictions of the French electorate, as expressed every four years, have shown a remarkable stability for three decades. The figures indicate a slow trend toward the left, with slight intermediary movements forward and backward. Between the wars the swings of the pendulum became wider in both directions: a mildly rightist house after the First World War, followed by a mildly leftist one; a rightist reaction, followed by a "Radical"[iv] success; then, between two elections, after a financial scandal, a conservative government with a tinge of Fascist tendencies. The shortsighted financial and economic policy of the conservatives brought the Front Populaire into power at the next election, and the economic mistakes of that group caused a swing of public opinion toward the center.[v]
With the French military collapse, the right came into power under Pétain for the first time in more than 60 years -- without elections, under duress. French public opinion now links this régime to German oppression, hunger, cold and national humiliation. It is fairly safe to predict that the next swing, at the first elections after liberation, will be strongly toward the left. Those who are flirting with former Vichy enthusiasts converted to the Allied cause are betting on the wrong horse.
Another puzzle to foreign observers was the frequency with which Prime Ministers changed under the Third Republic. This was due to faulty parliamentary methods. Undoubtedly this lack of stability was a great weakness, and every thoughtful Frenchman feels the necessity of reforms in the postwar Constitution so as to attain greater stability. But the contention that French parliamentary instability was the real cause of the French defeat is biased. The same parliamentary situation which existed in 1940 prevailed before the war of 1914, which was won; it did not prevail before the war of 1870, which was lost.
French statesmen have recently lacked character. This was not due to a general lack of character of the French people, but to the way politicians were recruited. The French parliamentary system made it in fact impossible for any man to obtain a ministerial position unless elected to Parliament, and in order to be elected a man had to go through such ordeals that many people of standing and character preferred to keep aloof.
This was not new in French politics, but it became tragically important when it was accompanied by the sharp decline in the quality of the French Civil Service. As a result of the first war inflation, the best civil servants left to take business jobs. The permanent high officials, who exercised the effective power, lacked vision. The French General Staff believed in the methods of warfare of 1914, not in mechanized forces or aviation. The civil servants from the Inspection des Finances caused loss of war potential and created social unrest by submitting French economy to an irrational deflation between 1932 and 1936. These civil and military officials were the power behind the scenes under the Third Republic. And both became the profiteers of the disaster under the Pétain régime.
As both were typical products of the French bourgeoisie, it is hardly possible that the power of the bourgeoisie will remain unscathed. What form will the change take? There are too many unknown factors for a positive answer. But after the protracted sufferings of the French population it may be prophesied that the Revolution nationale of Marshal Pétain will be followed, after the liberation, by another type of revolution coming from much deeper inside the people.
What are the prospects and what are the immediate problems for the postwar reconstruction of the French economy? France will lack every essential -- food, fuel, fats, soap, oil, lubricants, fertilizers, seeds, plumbing, rolling stock, medicine, shoes, clothing -- the list is almost endless. Yet if it were not for the suffering caused by the shortages they would be the lesser tragedy in the French situation; for they can be remedied in fairly short order.
What of capital goods and productive capacity? For three years, French industry has been systematically disorganized to make it a subsidiary of the German war machine. French industrial production is less than half of prewar output, and only a small part of even this goes to the French population. Notwithstanding fictitious paper profits,[vi] the bulk of French industry has consumed its inventories, used up its machines, and has been unable to renew or even to maintain its equipment.
The French peasant has been comparatively privileged. He has usually been able to sell part of his production on the black market at great profit, and even those products which are ultimately delivered to the German authorities are paid for at satisfactory prices, for the Germans have francs in superabundance. Peasants are experiencing difficulties in obtaining shoes and clothing, but at least they have food. They are accumulating cash. Agricultural land prices are more than five times higher than in 1940. But agricultural production has considerably decreased owing to manpower shortage and the lack of fertilizers -- especially since North African phosphate is no more available -- seeds, insecticides, transportation and agricultural equipment. Wheat and sugar-beet production has decreased by one-third, vineyard production almost one-half.
The livestock situation may be even more dangerous. Except for hogs, which seem practically to have disappeared, there has been until now no catastrophic decline in livestock. The number of sheep and cows has been reduced by about one-fifth; the number of oxen and calves has been maintained, although their weight has been considerably reduced; the number of horses has been reduced by about one-sixth. But the growing scarcity of animal feed, and unpredictable German action at the time of retreat, may change the situation drastically before liberation.
Only two things are available in France in larger quantities than ever before: currency, which has trebled in volume since 1940; and bank deposits, which have doubled. They are the products of scientific German looting. German authorities receive a credit of 500 million francs a day from the Bank of France, an equivalent, for a year, to about three times the French prewar budget. As it is much larger than the actual occupation costs, it enables the German authorities to purchase all kinds of goods and services, including industrial shares, control of French concerns, real estate, jewels and works of art -- even the consciences of some Frenchmen. Billions are thus thrown into circulation, with the usual inflationary consequences, especially when goods are so scarce. One of the great dangers threatening French reconstruction is the moral and psychological deterioration which results. Black markets and frauds are prevalent, the more so as many Frenchmen are glad to infringe regulations dictated by the German oppressor. But the bulk of workmen and employees have to put up with wages and salaries which barely enable them to obtain their share of rationed food: about 1,100 calories against normal requirements of 2,500. They starve and see their children starving.
Even the daily loot of 500 million francs was not sufficient for the Germans. They manipulated the Franco-German clearing account for normal commercial transactions so that in 1942 it piled up a deficit in their favor of 30 billion francs. The expenses of the French Government, including its own budget, amounted in 1942 to about 300 billion francs against receipts of 80 billion. The substance of France is being sucked by Germany.
It is a gloomy picture. But two factors give us cause for hope. The first is the nature of the French. Whatever it was that happened to the upper class of French society, it has not affected the fundamental thrift, steadiness and intelligence of the French people as a whole. The second factor is the nature of modern wealth. Modern techniques and mass production have considerably increased the ratio of wealth produced annually to total existing wealth. Although modern wars are more destructive than ancient wars, destroyed wealth can be more speedily restored than was the case in ancient times. The French should be able to take full advantage of modern techniques to recover prosperity. What are the conditions required?
The first, of course, is social order. Perhaps, as we have noted, there is a revolution brewing in France; but we must hope that it will take an orderly course, with a strong administration in power. Allied Governments can help by withholding support from any man or group whose political outlook is not in conformity with the wishes of the majority of the French people, and who, therefore, might sharpen the conflict. The second condition is assurance of peace -- "freedom from fear" -- without which no sound economic expansion can take place. It is essential for France, as for all other countries, that the United Nations solve this vital problem. The third condition is a program in harmony with modern techniques of production, transportation and distribution.
This condition is far-reaching, economically and politically. Every European nation west of Russia is, as a self-contained economic unit, too small for modern methods of production, transportation and distribution. Inability to realize this fundamental fact may have been one of the chief causes of the failure of the Versailles Treaty. Between the two wars the most elaborate methods were devised to prevent increased transportation facilities from carrying more goods, and to prevent increased production facilities from improving living standards. European nations could not afford such a policy without catastrophic consequences. New technical developments, in aviation for instance, make it still more dangerous today.
This does not mean that regional agreements or a European federation would be sufficient to solve the French economic problem. France, like every other country in fact, cannot advance toward genuine prosperity without the attainment of freer circulation of goods and services, of men and of ideas, not only on regional but on international lines.
But there are certain essential problems which France must solve as a member of the European community. Primary among them is the question of foreign trade controls. Undoubtedly such control will be continued. The magnitude and complexity of the task of European reconstruction will make it inconceivable that private businessmen, each acting independently, will be permitted to import foreign products without restrictions. For a while governments will have to control both the volume and the nature of imports. Ex-enemy countries will of course have to be subjected to strict foreign-trade and foreign-exchange control. The practical question is whether necessary controls should be established in terms of separate European national units, as generally contemplated at present, or within a framework of larger units, with United Nations coöperation.
There is one powerful argument in favor of centralized European controls: that they are now in actual operation. They are imposed by Nazi tyranny, of course, for the purpose of plunder and domination. But they do exist. Even unified destruction is unification and holds forth the possibility of unified reconstruction. Those who object to centralized European controls point out that the economic and financial situation in Western Europe will probably differ greatly from the situation in Eastern Europe. But the experience of the United States and Canada, where the economic and financial structure is vastly different in the East and in the West, suggests that such a difference does not prevent unity. As the East is mainly industrial and creditor in the United States and the Middle West mainly agricultural and debtor, the two regions are complementary and form an integrated whole. The second objection to centralized European controls is that the same rules cannot be applied to victims and to plunderers. But there is no reason why they need be. Enemy countries will be subjected to such special treatment as will be decided by the United Nations.
At the least, European foreign-trade controls should be imposed on a wider basis than that of single prewar nations. And they should be prepared now, without waiting for the actual liberation of the occupied countries. Once national controls have been allowed to dig in, the vested interests of both capital and labor will exert too strong pressure ever to be overcome.
There is no need of customs duties as long as strict foreign-trade controls are in operation; indeed, they would introduce senseless complications. Will it be possible not to reëstablish inter-European customs tariffs when controls are lifted? This problem should not arise for several years but is worth mentioning now, since a constructive solution would be a great step toward European unification. Certain Americans are suspicious of attempts at the unification of Europe. But surely it could not offer any danger half so threatening to peace (and hence to American interests) as the danger of European anarchy. Europe divided into "zones of influence" between the Great Powers would contain the seeds of war between these Powers. An organized Europe might be a bridge of goodwill between them. In a unified Europe the problems of railroad traffic, electrical interconnection, air traffic, postal, telegraph and telephone communications, and others in addition to the problem of tariffs, could be solved in a way to benefit all the people of Europe and of the world.
We should discuss briefly two other important decisions that France must make in preparation for resuming her own economic life: she must adopt a policy in regard to imports, exports and production, and she must take action to save her currency.
The most urgent needs of relief and rehabilitation will have to be filled by imports. French authorities have submitted a list of needs to the Interallied Committee for Postwar Requirements, and plans are being prepared under United Nations sponsorship. France still has important holdings in gold and foreign securities which will aid in the problem of financing these imports.
Some of the needs can be met by French national production. The natural tendency of French producers will be to try to fill more domestic needs than they should, to the detriment of efficient distribution of world goods and of the standard of living of the French people. The avoidance of such an effort to achieve national self-sufficiency will constitute a challenge to French statesmanship. A plan should be worked out for agriculture and industry. It should have two elements: (1) National production should be scheduled according to two lists of goods, quantitatively established, one list for national consumption, one for export. (2) The requirements of national consumption which are to be filled by exports should be listed quantitatively.
France should not try to produce goods which can be produced more efficiently elsewhere. France should concentrate on productions fitted either to her natural resources or to the special qualities of her workers. For example, she should attempt to specialize in the export of all kinds of finished products in aluminium or iron. She should try to avoid exporting aluminium and iron in the form of ore. She should continue to grow wheat only in Brie, Beauce, Nord and Ainse, departments which are favored by nature and where cost prices are low. One of our best young economists, who writes under the name of Robert Vacher, has shown how agricultural production could, under certain conditions, be modified in order to improve living standards. The very extent of the present ruin of France gives her an opportunity to plan her future on a sound basis.
She must take immediate thought of her currency. The position of the franc is not as desperate as German-induced inflation makes it seem. A rate of exchange does not express a currency's relationship to a theoretically stable standard but to other currencies. If the franc has deteriorated, the purchasing power of the dollar and the pound sterling has also been affected. Francs have been printed and French bank deposits have been increased for the purpose of handing over things to the Germans; but dollars and pounds have been printed and American and British bank deposits increased for the purpose of hurling things at the Germans. The military and moral difference may be enormous; the difference in the resulting deterioration in currency is not so great.
Of course nobody can prophesy what the Germans will do in France before their departure, but up to now increases in French circulation, bank deposits and public debt, as well as in prices of rationed goods, are not considerably out of line with corresponding increases in the United States and Great Britain. (Black-market prices of goods in France reflect their present scarcity rather than the future value of the franc. Similarly, black-market prices of French banknotes reflect the present frantic desire of trapped men to flee the country rather than the future value of the franc.) Wages have not risen, in francs, more than American and British wages in dollars or pounds. Of course they are much too low; their purchasing power must be substantially raised, either by an increase in the number of francs, or by a drop in prices, or probably by both. The franc should not be considered a doomed currency. Its exchange value will have to be fixed in relation to several factors, including an estimate of future French productive capacity.
Should the franc have a special link with other European currencies? Under the international monetary plans presently under discussion among the United Nations, there would be a general although somewhat elastic link among the currencies of adhering countries. Under modern conditions of government interference, the financial status of each nation has become so integral a part of its economic and political status that no two currencies can be considered strongly linked unless the two nations are also strongly joined economically and politically. A centralized foreign-trade control established in a large section of Europe immediately after the liberation would be an important step toward economic unification and therefore toward real monetary unification.
This bird's-eye view of French reconstruction problems omits many important questions. But the central problem of French revival is a problem of a state of mind. The world is undergoing fundamental changes in structure. Techniques of distribution must be adapted to revolutionary progress in production and transportation. France, struggling out of her ruins, will be in the position of the owner of a good old serviceable car which lies by the roadside after a crash. Will she attempt to patch it up and rattle along in it? Or will she strain all her resources to acquire the new streamlined car which modern techniques can give her? France is confronted by a momentous choice and a great opportunity.
[i] About half of this excess appears due to increased mortality, and half to decreased natality.
[ii] Germany also has potash deposits sufficient for world requirements, so that a Franco-German potash cartel is practically unavoidable.
[iii] Even during the Front Populaire in 1936 practically all the members of the Government, even the Socialists, belonged to the bourgeoisie; so did virtually all the members of Parliament except the Communists.
[iv] The Parti Radical-Socialiste, whose chairmen were Herriot and Daladier, is neither radical nor Socialist in the American sense. It is in fact a liberal bourgeois party, formerly with anti-clerical leanings, and generally with a tendency toward government ownership of private monopolies.
[v] With Daladier and Reynaud as Prime Ministers.
[vi] In a well-informed article La France Libre of May 15 points out that in French industrial balance sheets amortizations are generally computed on the basis of prices much lower than present replacement costs. The Frankfurter Zeitung itself admits that a true balance would show a loss of more than five billion francs per year for the whole French industry.