ECONOMIC FRONT: Mouse & Lion

Dapper little Lawyer Paul Reynaud, 61, “Mickey Mouse” to French voters, is the most widely traveled of French statesmen. He is the only one of them who has both run a chain of department stores in Mexico and been successively France’s Minister of Colonies, Justice, Finance, who in 1938 yanked France’s economy out of the ashcan into which the Popular Front had stuffed it. Last week he jaunted over to London to see Sir John Simon, the cold, grey lawyer who is Prime Minister Chamberlain’s Chancellor of the Exchequer. As one of the few French statesmen the British really understand and admire and trust, he was most welcome. Since Great Britain and France are now, allied in a war whose severest engagements have been, and may continue to be, on economic fronts, no Frenchman could be more fortunately placed for the common cause than Paul Reynaud.

M. Reynaud, like many another European politico, believes that international economic collaboration, especially between Britain and France, is the only possible basis for a lasting peace when World War II is over. But Finance Minister Reynaud had come to talk about fighting the war before liquidating it, and in his conversations with Sir John Simon he got what he wanted.

They agreed on a general program, and on specific features of it, so significant that they made the week’s biggest war news. After they were through talking, the Allied Supreme War Council, headed by each country’s chief of State and chief of war, held a meeting to ratify the Simon-Reynaud agreements. Within three months, warring Britain and France had reached greater financial and trade solidarity than they reached in three years last time. * Gone was any German hope of splitting the Allies asunder.

The Plan. A Supreme Allied Economic Council will parallel and backstop the efforts of the Supreme Allied War Council. It will be divided into six component executive committees, for joint action with respect to aviation, munitions & war materials, oil, food, shipping, economic warfare. Much collaboration is already afoot by Allied commissions in some of these fields. Importance of establishing a Supreme Economic Council is to insure that certain basic principles are observed all down the line. As announced last week, three of these principles are:

1) The fullest use, in the common interest, of both Empires’ raw materials, production means, tonnage. Thus, if the French Army needs 6-inch shells worse than the British need anti-aircraft shells, British factories will hustle the former instead of the latter. Or if Britain needs bottoms for Canadian wheat worse than France needs them for Algerian mutton, to Canada they shall go.

2) Equal distribution of materials in the event of shortage or import limitation. Thus, if France needs copper and can get none and Britain has plenty on hand, Britain shall share the copper.

3) A joint import program. British and French foreign financial resources and bargaining power shall be pooled, so that the Allies buy together instead of competitively in neutral countries. Equally important, each shall buy in the other’s Empire so far as possible, so that the transactions can be on paper and the joint reserves of gold and foreign exchange husbanded. Those old allies, the pound and the franc, shall of course march together in international exchange till death doth them part.

M. Reynaud’s basic argument for France’s having closest economic collaboration from Britain and the support of her banking system and gold reserve was that France has called to the colors five men to Britain’s one. While she holds the Maginot Line, Britain should protect the inner front. M. Reynaud and Sir John also agreed that just because there is a war going on—especially a standstill war where the real fighting is economic, by blockade and the capture of Germany’s export markets—is no reason why business and commerce should not go ahead in both countries as normally as possible. Together they need as much foreign exchange as they can get. Working together they can help each other keep their places in the sun of world trade.

First fruit of the Reynaud-Simon agreement was resumption, last week, of telephone service for businessmen between London and Paris. Next fruit: restoration of regular mail schedules.

Another immediate result of the Reynaud-Simon performance was a bullish flurry on the Paris Bourse and the London Stock Exchange, where business-as-usual is the rule, and transactions now, though smaller than normal, are in larger volume than just before war broke.*

Stronger Than 1914. The wisdom of a cautious, controlled war economy, and the economic strength which Britain this time brings into the fight, were assayed last week by William Burton Burton-Baldry, London broker, in his lively Fortnightly Review:

“. . . Our financial experiences of the 1914-18 period are not likely to be forgotten and the fact that many of our mistakes arose from a failure to prepare for a long war is now acting as a brake on our overseas expenditure, where such expenditure involves the purchase of currencies standing at a premium to sterling; though from every point of view our economic position is far stronger today than it was in 1914. This applies to France as well. …”

Mr. Burton-Baldry laid side by side various British positions of 1914 and 1939, with the following results:

1914 1939 Improvement

Gold stocks 35.4 60 24.6 (in millions of ounces)

Empire gold production per annum 14 21 7 (in millions of ounces)

Empire copper production 40 583 543 (in thousands of tons)

Empire oil production 385 272,044 271,659 (in thousands of metric tons)

Broker Burton-Baldry further noted that British imports of Empire cotton have risen 300% since 1914. And that Britain in 1913-18 imported 52% of her wheat from the U. S., whereas today she need import none from outside the Empire.

“It looks, therefore,” said he, “as though we shall be able to finance our purchase from the United States without recourse to the type of borrowing that became essential [last time]. . . . Our expenditures in the United States can be controlled within the limits of our available and accruing dollar balances. For some time, if at all, it should be unnecessary to call on [Britain’s] reservoir of American securities which have been mobilized [estimated at $1,100,000,000], for the traffic in them can be only one-way traffic.”

One More Voice raised last week on the subject of war economy was that of Benito Mussolini (whose country is rapidly becoming a clearing house for the foreign trade of other neutrals, even as remote as Norway and Sweden). Boomed Benito:

“Now, above all, every one, even those with the thickest brains, can see that the division between the economy of peace and the economy of war is simply absurd.

“There is not an economy for peacetime and an economy for wartime. There is only a war economy, because historically, considering the number of years of war, it has been demonstrated that a state of armed warfare is a normal state of the people, at least of those living on the European Continent, because even in years of so-called peace other types of war are waged, which in their turn prepare our armed warfare.

“Therefore, it is the fact, or rather the imminent fatality, of armed warfare that ought to dominate and that does dominate economy.

“He who fails to reach this conclusion is an ignoramus who has not got the right to complain or be surprised at the catastrophe toward which he is going.”

*Not until December 1917 was the Allied Maritime Transport Council set up, and it did not start functioning until March 1918. Subordinate to it were a score of committees on food, munitions, raw materials. But all these bodies were purely advisory, had no authority to enforce their decisions.

* In Berlin, the vanishing of private business under totalitarian control is reflected by the index of the Bourse, which last week stood at 47-6, previous week 47.7, same week last year 47-Q-