COPT NO..I On THE PRESIDENTHE UNITED STJltS
POSTWAR INDUSTRIAL RECOVERYN FRANCE
Mm-
ublished August8
CENTRAL INTELLIGENCE AGENCY
Jjarry-S. Truman tlbrarv Papers of Harry S. TruLn2
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DISlftlbUnOK: Oftki of lh* PresentSceurtlj CountO National Security Resource! Board Derailment o*lDefense Department of the Army PeitarlmentoltheKivy Department of the Air Fore*
eutc-Anrvy-Nsvr-Alr Force Cowdlnillfu; Commlllee
lolnlua
Alom* BtStn CwwnUaton
INDUSTRIAL RECOVERY IN FRANCE SUMMARY
The basis for French economic planning6 has been the Monnet Plan, designed to jnodernto and expand, existing Jndustrtal and agricultural equipment
0emnt aWye_thefhe
"of 'capital" goodsi'cicferrinVany attempPl
plan emphasized the productlorTofully the demands for consumers' goods until the basic industrial goals Iiad been
Dy theoyever, attainment of the^riglnal annual goals was 1
WlyJlLM^arXbec^^
tofalldane.erously.ln ajrear?becauseombjHaijon^cj'faiew Government, realizing"
"oTthe plan, had not only been too ambitious but was also Impossible of reali/ationeriod of monetary instability, reduced the Investment goals and puteries of bold anti-Inflationary measures.
yjLiiUfidvjy^tad
UlJ^if eotn outstanding achievement was the breaking of thewhich in turn hasapid Increase In steel production. Production in the other Industries considered basic to France's plan for Industrial recovery hasIncreased.
The ECA. meanwhile, byteadily Increasing volume of goods available in France and by Improving the Government's budgetary position, will help solve France's basic problem of Inflation. The Government will have difficulty in stabilising prices and wages during critical prc-rumest months, but Its chances for ultimateare enhanced by Increasing domestic industrial output and the prospectsumper crop.
Aside from this immediate task, however, the Government will continue to be faced with the problems of harmonising Its various modernization and expansion programs, of Improving standards of living without allowing consumption expenditure to expand too rapidly, and of Increasing exports, all with Its still limited resources.
A
The Information In this report li aa ofune
The Intcllleenee organisations ot Ui< Department! of Slate, Army, Navy, and the Air Fore* hate concurred In thti report.
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POST WA It INDUSTRIAL KfcCOVEftY IN FRANCE
The basis for Flench economic planning8 has been the Monnet Plan, designed to replace capital equipment eoniumcd during the depression of the ItJO'i, the war. and the occupation of thes. and to modernlie and expand the existing Industrial and agricultural equipment The plan contemplated the achievement0 of an over-all level or Industrial output CO percent above thatft. orercent above thathe peak >ear of French industrial production.
The general objectives were derived from the annual goals set up for the70 for the six basic Industries: coal, power, steel, cement, sgricultursl machinery, and transport Production goals for other Industries and for agriculture-were outlined with less detail, being primarily designed to indicate the relative rate of growth drslred so that allocations of scarce materials, manpower, and foreigncould be made with the optimum effect on the whole economy.
The plan placed the emphasis on production o! capital goods in order lo permit modernization and reconstruction of the French economy while reducing dependence on foreign supplies of capital equipment. Not until after the alUinment of these goals would It have been possible to attempt to wllsfy fully the demand for consumers' goods. Ftirlhermorf, because prewar agricultural production was fairly adequate, an Increase of onlyercent8 in output0 was deemedincrease to be effected mainly through expanded use of agricultural mschlnery.
The Monnet Plan targetsowever, proved to be more ambitious than could be realized within the original timetable. Production did not recover8 levels untilhough originally It had been expected that these would beby the endhe crop failure7 and the resultant depletion of the French food supply; the acceleration of inflationaryh their adverts effects upon labor and the whole economy; unexpected shortsges of power caused by the, drought; continued coal shotlages and consequent restriction of steel production; the critical foreign exchange position; and the November-December strikes; all widened the gap by which France missed the target.
The Investment progi am, tho real heart of the Monnet Plan, had been deemed both necessary and sufficient to Increase the productivity of labor In order to achlevs the planned levels of output, simultaneously reducing production costs so that French products could compete In both the domcitlc and world markets. Tho plan had originally calledate of total investment (including housing)7 equal to approximatelyf the total snnuat national Income, This Is an extremely high rate at any time, but especially so when national Income and consumption are deprived. The so-called "Dslsnce-Shccteaded by Jean Monnet,of the plan, realised from tho experience of the year that as long as monetary stablUution wasact, it ass futile to count on voluntary savings to provide ede-quite funds for the Inmtmenl program. Although no general re-issuing of the Tlsn or adjustment of the individual Industrial goals have been made, the entire recon-
structlon and investment expenditure goals underwent Interulve screening at the endeconstruction goels have teen reduced byercent comparednd the varloui Investment programs have been cut byoercent. Withoutto predict the Industrial increase that would be realised In specific sectorst was estimated both in Fiance and the US that French Industrial production would rise during the yeareneral level ofercent abo.'e8 figure. The French Balance-Sheet Commission arrived at roughly the same conclusions It appeared, furthermore, that Instead ofevelercent higherndustrial output would probably not rise higher thanercent
Without US Interim Aid during the past fall and winter and without the current ECA allocations, economic recovery In France would have been even more seriously retarded. Even with US funds, however, little Improvement In the general economie situation could have been accomplished without the scries of strong anti-inflationary measures undertaken by the Schuman Government, after It came to powernor the first time In ten months, prices did not rise but declined slightly. Although these measures have not eliminated all basic causes of Inflation, the present government had, ad In all, courageously tackled the fundamental problem pointed out by Monnct's group -namely, the excess of total demand on the part of the State, business, snd consumers for the available resources at existing prices
During the first few monthswing In large part to an absence of labor atrife and lo an uncommonly mild winter, production In tho Six Industries considered basic to the Monnet Plan began toignificantomestic coolat the end of April stoodale surpassing the original goalhe coal bottleneck has been broken; Increasing home production and availability of foreign coal (US and Ruhr) have permitted an Increased allotment to the steel Industry. This boost to steel producers wss sn important fsctor In the rise of the oter-sll Indus!rial production level In Aprilercentercent higher than the revised Monnet Plan estimatehe present rate of ilctl productionillion tons (crude steel) annually, and the rale mayillion by autumn. The shortage of coke, which exists despite the generally satisfactory coal situation, however, will along with other factors, prevent the attainment of the original Monnet Plan goalinion tons Goals for the production ofcr are currently being metste spproximatelyercent above8 level. Total freight ton-kilometers performed by the French railways7 were estimated to0 millions. This wasercent higher than the figure The French estimate, which may be somewhat over-optimUtlc, Is that8 figure will beercent higher than that. In any case, more and more freight Is beingy truck and the Inland canal system Is functioning satisfactorily. Although there may be difficulties In tho next few months when the transportation system will have lo carry the burden of the expected good harvest, there probably will be nobottleneck.
The production of cement7 rose well above8 level, but owing In part to the strikes of November-December the level reached wasillion tons
1
asoatillion. Inement vas being producedateillion tons annually. Whether the original Monnet Plan targetillion tons8 will be reached depends largely on how much steel and coal can be allocated to this industry.
The production of aerfculftiral machinery, theellshoit of the goalnlygricultural tractors were produced, for example, as against an objective ofnowever,was already approaching sn annual rateealizing the Importance of making France relatively seU-sufflclent In food production ss soon as possible, the Government Is making the allocation of steel to thisatter of priority.
5 million program, which is France's share of ECA for the periodas already enabled the Government to raise the bread ration, therebythe present urban French dietalories dally. Afler the wheat harvest. It Is probable that the ration will be further Increased. Although total dollar Importsurrent decrease from7 level In some particular fields (forvehicles and metals, where French production increased or requirementsIt Is now estimated that the program will allow France sufficient coal and raw materials at least lo maintain Its present Industrial levelercent8 (already II percent higher than the peak attained. Consumption of coal, steel, and cotton fabric will increase over that7 byercent,ercent, andercent respectively. The ECA program will be the major element Inollar deficitlUc smaller than thst which existedver half the8 dollar payments1 million will be financed by ECA aid. Normal current French dollar receipts will0 million, orf the dollar payments. The remaining dollar deficit will be financed by existing French gold and dollars reserves, and dollar credits from ECA.
The ECA, therefore, by increasing the quantity of goods available In France and by improving the Government's budgetary position, will help solve France's basic problem of inflation. Increasing domestic French Industrial output and the pros-peelsood harvest enhance the chances for ultimate success provided the Govern* ment succeeds In holding prices back during the critical pre-harvest months..
Aside from this immediate task, however, the Government will continue to be faced with the problems of harmonizing its concurrent alms of industrialand expansion, of Improving standards of living, and of Increasing exports all with Its still limited resources.
If renewed Inflationary price rises are to be prevented, consumption expenditure cannot be permitted to expand rapidly. Current expenditures of the Stale,should not encroach upon the Monnet Plan's requirements for Investment of government revenue and private savings; on theurplus In the ordinary budget will have to be effected as soon as practicable. The entire Investment andprograms must continually be screened to assure both their essentiality snd the rapidity with which they yield an Increased flow of goods and services.
Private credit and savings must continue to be placed at the aervlco of the national investment program. This program, to be successful, will have to be limited to those sums which can be raised through private savings, the possible surplus in the ordinary budget, and that portion of localyet notwill be set aside ss counterpart of ECA assistance.
Original document.
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