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E. Varga

Economics

Survey of the World Economic Situation
in the 1st Quarter of 1923

(May 1923)

From International Press Correspondence, Vol. 3 No. 40 [22], 31 May 1923, pp. 379–381.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

V. France

During the period of this report, French economics have been dominated by two main questions; the Ruhr question and the budget question. We dealt with the Ruhr question in the introductory section, and shall here only treat of the economic effects on French economic life.

In 1922 French economics showed a decided tendency towards improvement. This improvement however, was much retarded by the poor wheat crop, which rendered it necessary to import about 25 million double cwt. In spite of this shortage, there was increased activity in industry, especially in heavy industry. We here give a few figures illuminating the improved state of the markets towards the end of 1922.

The rising prosperity was brought to an abrupt close by the occupation of the Ruhr area. The iron and steel output suffered severely from the cessation of supplies of Ruhr coal and coke.

In the introductory section the local conditions of the Rhenish-Westphalian-Lotringian iron industry were dealt with, and it was pointed out that while the iron ore of Lorraine can be exported to great distances, it is impracticable to obtain a supply of coal or coke from a long distance. Appended we give the iron and coal output of France (as per Economist of January 13th the output figures for 1922 are not final).

From this we see that not even the possession of Alsace Lorraine has enabled either French coal output or iron production to regain its pre-war level. How far actual production is behind possible production is even more plainly shown by the iron and steel production.

This has been as follows:

Blast furnaces working:

The unfavorable situation in the French iron industry is ascribed by the French to the inadequate production and supply of coal and coke. The Ruhr occupation, and the various plans for the ‘‘internationalization” of the Ruhr valley, for “cooperation” with Rhenish-Westphalian big industrialists, have all one and the same aim – to secure for the iron industry of eastern France and Lorraine a supply of coal and coke from the adjacent Ruhr area, and at prices enabling the products of French industry to compete on the world market. Thus the interests of French heavy industry coincide with the “pledges” demanded by French militarism.

In the much quoted ar tied from the Figaro – the German press supposes Poincaré himself to have been the writer – we read as follows:

“... The possession of Lorraine, its ore beds and smelting plant, is valueless to France without Rhenish-Westphalian coke. The peace treaty sends us the bride without her dowry, and what we must do now is to fetch this missing dowry!” It is true that the German government and the German collieries have frequently expressed their readiness to take the needs of the Franco-Lotringian iron industry, into account. But the gentlemen of the Comité des Forges cannot be content with the fact of coke supply from Germany. They want it – and this is the main point – at a particularly cheap price. France’s excess production, exceeding her own consumption by 5 million tons yearly can only be sold on the world market when French industry can produce and sell at low prices. France has therefore to insist that the coke be delivered at a very modest price ... Germany is willing to supply us with coal, but France must insist that it is supplied on the reparation account (that is, for nothing!). Even should Germany be placed under the obligation to supply on these terms, the mere imposition of an obligation is no longer sufficient, for the day of empty promises is past. The sole means for securing our necessary supplies is the final possession of a number of German collieries, and participation in a number of others.”

Poincaré appropriated this standpoint of the Comité des Forges with amazing candour in December 1922, when he asked the German industrialists whether they were willing to supply coal and coke as reparations, and, on receiving a negative reply, broke off negotiations.

The method chosen to force security of coal and coke delivery, as is well known, resulted, in an almost complete stoppage of supplies from Germany, and in causing a severe crisis in the French iron industry. The blast furnaces in the east of France and in Lorraine have mostly had to be damped down or stopped. Workmen have been discharged or put on short time, the prices for coal and iron are rising rapidly.

The attempt to gain possession of the Ruhr coal by simply occupying the Ruhr area encountered unexpected resistance. But this has by no means deterred the heavy industrialists and militarists from continuing their project It has merely shown them that some understanding must be come to with German heavy industry, with the German big capitalists, the German trade union leaders and the German social democratic leaders. [1] We might formulate the actual program of French heavy industry as follows:

Extension and intensification of the military measures, in order to force German heavy industry to enter into an agreement advantageous to French industry, and in order to enable the latter to dictate the conditions of economic co-operation.

The effects of the occupation of the Ruhr are not merely confined to a strangulation of production in heavy industry, but are felt in every sphere of French economic life. One of the chief results of the Ruhr occupation has been a great depreciation of the franc.

Appended are the prices quoted for an English pound in London:

There were some days when the rate of exchange exceeded 80 francs to the pound. The causes of this were: War danger decline of state finances as a result of Ruhr occupation [2] and purchases of English coal. The improvement in the rate of exchange is to be ascribed to the hojxe of an agreement over the reparation question advantageous to France, and to measures taken in support of the franc.

The prices rise in accordance with the depreciation of the franc. The following figures are given by the Statistique Genérale (1913 = 100):

These last figures have obviously been trimmed to suit the needs of the capitalists, as the statistics showing increases in prices are trimmed by the stale office in order to render them better adapted tor refuting the wage claims of the workers. The figures for March have not yet appeared, but the rise in prices has probably come to a temporary standstill, owing to the improvement in the value of the franc.

The figures relating to foreign trade (in million francs) are as follows:

The import surplus, though fluctuating, is falling; the amount of foreign trade increases. It is interesting to note the decrease of imports from Germany. As follows:

Unfortunately, French statistics are not very reliable. We do not know whether, the Deutsche Allgemeine Zeitung is correct, in stating that Germany’s reparation payments are Included, at their full value, in the French foreign trade statistics. Should this be the case, then France has a favorable trade balance, as French economy is not obliged to give anything in return for German deliveries.
 

The Budget Question

The French budget was discussed for more than a year, and was finally accepted, unsettled, in the third month of the fiscal year, with instructions to the government to cover the deficit by loans. The unending debates in parliament on the subject were a model of complete confusion; the proposals of the minister of finance were rejected, but he did not tender his resignation; the proposals made by the reporter for the fiscal committee, Bokanovsky, were also rejected; the estimates of revenue from various sources of taxation were arbitrarily increased in order to diminish the deficit; the budget accepted by the parliament was rejected by the senate as entirely unsuitable for negotiation – and a short time afterwards it was accepted, almost unaltered, by a large majority.

Le Temps, the government organ, characterizes the confusion in parliament as follows:

“It would be difficult to imagine a more confused discussion or more inaccurate speeches. It seems that the chamber, after occupying itself for more than a year will: the budget, and after having dealt with the most contradictory proposals, no longer knows what it is about, what is required of the chamber, and what decisions are necessary. Entirely contradictory proposals are applauded with the same enthusiasm.” – Le Temps, 21.2.23.

The cause of this confusion?

The elections! The Elections! In 1924 there will be a new election, and the members of parliament have not the courage to vote for any new tax whatever, for fear of losing some group of voters! Party confines are broken down; every member of the chandler keeps his eye on Ins own constituency, and decides the financial questions of the state accordingly. The remit is that every attempt to raise taxes, or to collect them more effectually, has been a failure.

It would be of little purpose to follow the debates in detail. The “French” budget – which does not include the expenditure for reparations, pensions, etc., to be reimbursed by Germany – shows a deficit of 3½ milliard francs. The minister of finance proposed an all-round increase of taxation by 20 %, but this was rejected. The budget was gone into again, the proceeds from some taxes estimated higher: But it was of little use, the deficit remained 3.2 milliards, the deputy Bonnelous proposes that 80 million shares at 50 francs each, to be redeemed at par, be issued, and bearing interest in the form of lottery winnings. Great applause. Rejected later! Bokanovsky proposes that the “carnet de coupon” be introduced: the attempt to collect the income tax at its source, as in England. All dividends only to be paid through a bank; payment only to take place in accordance with a list containing the whole of the bonds, etc. in the possession of the persons concerned, and serving at the same time as a taxation bass. Rejected with indignation, as “fiscal inquisition”. On March 6. a “socialist” modification is accepted, by 302 against 229, but “for consideration”; this provides that bearer securities bonds, etc., may only be sold when the sale is endorsed on the back of the document, and the sale is registered at the headquarters of the company. Immediate violent howls from the capitalist newspapers, protest from the minister of finance; the modification is discarded, lu the same manner another motion is rejected, which would have compelled bankers, and professional men to look their receipts, with name and residence of client, and to submit their books to the tax officials. “Fiscal inquisition” is again re-echoed on all sides. What an insane idea, to lay a finger on the money bags of notaries, lawyers, physicians, etc., whose influence is so great in the elections – and just before an election campaign! Thus everything has remained the same as before: the deficit is to be covered by fresh loans.

“In the end, common sense has carried off the victory. In order to provide the necessary funds to cover the 1923 budget, without resorting to fresh taxation, the chamber agreed yesterday to accept the original proposal made by the government on March 31, 1922 ... The motion of Brousse was accepted by 274 votes against 253; this motion provided for the covering of the deficit of the 1923 budget by means of the issue of treasury notes.” Le Temps of March 10.

How can such proceedings be justified? Those who defend this plunge into further debt regard the matter as follows: Up to the present, France has used about 80 milliard francs for restoration work; this sum she has advanced to Germany, who is bound to pay for the restoration. The interest on this sum corresponds approximately to the deficit of the “French Budget”, and Germany is of course bound to pay this interest. Thus the budget balances quite all right as soon as this sum is debited to Germany.

“Before we demand fresh sacrifices from the French people, it is the first duty of the government to employ every possible means at its disposal to force Germany to restore the ruin and devastation which it has causeJ. You may be assured that the government will devote every energy to this task.”

So states the introduction to the budget, submitted on March 31, 1922. We see that the French trend of thought is consistent. French financial and budget questions are closely bound up with the reparation question.

In our last report we published data showing that France’s financial position is improving, despite the deficit. These deficits are, as a matter, of fact due to France having expended enormous sums for restoration work; and she will have to expend 40 milliards more for the same purpose. But if the reparation payments suffice to pay the interest on this expenditure and when in addition, the inter-allied war debts are annuled, then France s budget can be made to balance with no particular trouble.

Here we see the foundation of Loucheur’s plan: Internationalization of the Rhine district as security; cancellation of inter-allied debts and guarantee of the reparation payments by means of an international loan; in addition: participation in Rhenish-Westphalian heavy industry, this to be the special booty of the Comité des Forges. The confusion of the French budget possesses its own sound logic.
 

Belgium

At the present time. Belgium’s economic life is developing along lines almost parallel to those of France. In 1922 Belgium’s economic life recuperated greatly. The improved prosperity has been retarded during the last quarter of a year by the Ruhr occupation, as in the case of France. Last year Belgium received 2 million tons of foreign coal, chiefly from Germany. Since the occupation of the Ruhr, there has been an increased demand in the coal market; the government has been obliged to prohibit the export of coke, in order that the requirements of the home iron industry may be covered. At the beginning of the year, 33 blast furnaces out of 50 were working. Shortage of Ruhr coal has caused some further blast furnaces to be damped down recently. This is the more disagreeable for Belgium heavy industry, as the state of the market is favorable at present. At the turn of the year, the steel output exceeded pre-war production for the first lime.

The textile industry is busy. The absence of German competition is an advantage to the home industry. On the other hand, the depreciation of the Belgian franc, consequent on the Ruhr occupation, throws difficulties in the way of receiving supplies of raw materials.

The situation of Belgian industry may be regarded as fairly favorable on the whole. There is little unemployment; but here it must be taken into consideration that a large number of Belgian workers are occupied in France.

The shrinkage of foreign trade may be observed here as well. In 1922 the imports, reduced to gold prices, amounted to 70% of pre-war imports, exports 63%. The value of the Belgian franc runs parallel to that of the French, the general economic course of the two countries running on the same lines. The prices quoted for the English pound have been as follows:

It is interesting to note here that in the month of March the Belgian franc recovered less than the French franc. This leads to the conclusion that the improvement of the French franc is partially due to artificial support.

The level of prices has risen in accordance with the depreciation of the franc. This has led to fairly extensive labor movements during the period of this report. The workers have, however, only been successful in obtaining relatively slight improvements in wages. The attempt made by the employers to lengthen working hours, by cancelling the law on the eight hour day, failed, thanks to the pressure exercised by the working class.
 

Italy

The economic life of Italy has altered but little during the period covered by this report. Up to now there is no prospect of the crisis being overcome. At the beginning of the year, official figures showed the number of unemployed to be 382,000, and lending to increase. With respect to unemployment Italy’s situation is similar to that of England. The artificial industries which sprang up during the war are no longer able to support the industrial workers. Emigration is regarded as the sole way out.

Emigration to the United States is, however, limited by the well-known immigration laws. Brazil and Argentine can accommodate but few Italian workers. Among European countries, Germany formerly played an important part in Italian emigration, many Kalians being employed, especially in the building trade; but at the present low wages it is not worth while lor the Italian to go to Germany. At present the idea of closer relations with France has been taken up. According to reports as yet unconfirmed, French heavy industry is going to participate with 1,500 million French francs in the re-organization of Italian heavy industry, which is at present completely inactive; in return, the emigration of 400,000 Italian workers to the coal mines and heavy industrial undertakings of eastern France is to be organized. We are not in a position to judge how much truth there is as to the plan. The fact remains, however, that unemployment threatens to become chronic in Italy, and that Mussolini’s government is intensely occupied with this problem at the present time.

The level of prices sank during the last quarter of 1922, reaching 523 in January. In February a fresh rise was observable, reaching 533.

The rate of exchange was almost completely stable during the period of this report.

The whole essence of Mussolini’s economic policy is to take all control of economics as rapidly as possible out of the hands of the state, and to surrender all that the state possesses in the means of production to the bourgeoisie. It has thus been decided to denationalize railways, telephones, etc., and to hand thtse over to the bourgeoise again. These measures have not been carried out yet, and they are encountering many obstacles, for the various bourgeois groups are inclined to quarrel over the division of the bootv. At the same lime, wholesale bribery is going on among separate political groups, by means of state money: thus, for instance, the Silva enterprise, belonging to the Gioliili group, has been placed on a sound footing by a state gift of 120 million lire.

This subsidizing of the bourgeoisie with state money is of no little importance, considering the extremely bad condition of state finances in Italy. At the end of December the Italian state war in debt to the following amount:

Il is however, not clear at what rate of exchange the foreign debts are calculated. The national debt has increased by several milliards during last year, and, when Italy’s comparative poverty is remembered, it seems to us that the whole burden of debt is larger than that of France.

The deficit in state finances (exclusive of the railway deficit) amounts to:

The actual financial position of the state has improved, but on the other hand the Fascist government has retarded this improvement by the greatly increased expenditure for armaments; a greatly increased standing army and forced building of warships and aeroplanes.

Although we have no exact statistical data on hand for the current quarter, still we obtain the definite impression that the economic condition of the country has not Improved.

*

Footnotes

1. How little French patriots and German capitalists shrink from doing business with one another is shown by the well-paid co-operation of the Baden Aniline Co. in the equipment of the French factories for the exploitation of the Haber process of nitrogen production, sold to the French.

2. Fr. Delaisi writes in Oeuvre:

“The prospect that the Ruhr occupation will render Germany less capable than before of paying reparations, has caused our foreign friends to throw large quantities of francs on the market. They should naturally have had more faith. But unfortunately, they do not read the official reports only: they have their own sources of information on the Ruhr action, and do not believe in the French success. And they consider that the franc will sink still further if the French and Belgian governments create the Rhenish thaler. The government does nothing against the emigration of French capital, or against foreign speculation, for it is of the opinion that those who have deposited their money in safety are the best patriots. He who has his lying safely in a London bank can say light-heartedly: We remain in the Ruhr! We must blockade! We must expropriate! We must punish!” Extract from Berliner Tageschau, 22.2.1923.

 
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