WAR FINANCE

Dominion, Volume 12, Issue 282, 25 August 1919, Page 5

WAR FINANCE

PROTECTION AND FREE TRADE FRANCE AND BRITAIN (Melbourne "Age" Correspondent.) ■ London, June 21. Throughout the deliberations at the ,- Peaco Conference the attitude of th 3 *■ French representatives has been mora unlorgiving and more uncompromising v towards berniany than that of the representatives of any other Allied country. To those' idealists who iooked forward to the creation of a new world by r ??P ,ce Conference, a world of brotherhood into which the new Germany would be admitted on a footing of equality with the nations the old Germany had tried to destroy, it has seemed that the French contribution to the peace terms forced on Germany has been dictated by the spirit of revenge. Where they looked for the display of a (Jenerous spirit of forgiveness on the part of the Allies, there has been on the part of the French delegates a demand for, punishment, which to the idealists seems to overstep the demands eveij of just severity. France will not admit that there is any 'cal difference between • the unrepentant German Republio of to-day and the militarist Imperial Germany of 1914. France regards tho German request that t.im nations Imperial Germany tried to destroy shall forgive and forget, and extend the hand of good fellowship, as tho limit of national impudence. There are two. things which account for the French attitude of uncompromising unforgivoness and the demand for the just punishment of Germany. ? nß 'i ™e\fact that France is Germany's territorial neighbour; that for her there is no relief from the nightmare of German aggression, France has no faith in an idealisho peaco which would admit Germany as an equal, for she believes that would but hasten the day of German revenge for her defeat in 1914. France believes that, the only real guar- ' ontee of her national security is the l suppression of German militarism, Hit *ho does not believe that tho abolition of German militarism oan be safely left in the hands of the democratic |6pirit of 'ie new German Republic. She believes .at the only secure way to crush German militarism is to im pdcq oh many peace conditions which will pre- , it rearing ,its head. The second reason foi tho uneomproEiiaing French attitude to Germany is that the war has almost ruined Franco financially. She emerges victorious but she emerges financially worse off than defeated Germany. It will be many years before the northern districts of France recover from the devastation and ruinbrought, about by four years of German occupation. German industry will recover from the effects of the war before the industry of France. From the industrial point of view, defeated Germany whose territories have-escaped the 'horrors -and destruction of invasion, will reap the reward of viotory, victorious, invaded France will pay'the Industrial penalties of defeat. / In a. Bad Way.

Financially, Franco is. in a very bad way. _ She is much worse' off than Great Britain, because she. has not grappled with her financial, difficulties in the same courageous spirit as Great Britain. To the British free-traders tho contrast between the financial" position of the two countries at the close'of' the struggle emphasises the virtues of free trade over protection. The financial , policy c(f Great Britain, based on free'trade, has borne an enormous strain, under whioh tile financial policy of protectionist France has broken down.' Before America entered the war British free-traders were contending that it was Britain's free- . trade policy which enabled her to help her Allies financially, and therefore that free trade was the essential basis of vie. torv. Eventually tho financial strain of the colossal struggle became so great that it, threatened to exhaust British resources. It was the entry of protectionist America into the war, with unlimited Asources in-'nion'-and money that"made victory certain. :

Tho claim tihat free trade has saved Great Britain from financial disaster is amusing. It would 'bo much nearer the truth to Bay that the income tux and thß excess profits tax have saved Great Britain. The small basis of truth on T.'hioli the free trade claim rests is that income tax is a necessary corollary of free trade j that if a country foregoes revenue from indirect taxation ■ through Customs and excise duties it mu§t have direct taxation in the form of income tax. Prance has indirect taxation in the form of high • Custoir-e duties and exciss duties, but virtually no income tax. Under war conditions, with import and exW>rt trado reduced to a minimum, and thousands of millions of pounds spent in creating an artificial state of internal prosperity based on the manufacture of materials of war, the British policy of direct taxation has yielded far more revenue than the French policy of indirect taxation. Owing to tho largo increase in taxable income under the artificial prosperity created by the war, and the increases imposed .in the incomo tax rates, the British revenue from income tax has increased from 000,000 in tie year before tho war to ,£304,000,000. On the other hand, French revenue from Customs duties has 6hrunk enormously, owing to the fact that tile importation of foreign goods was- restricted durine the war by shortage of shipping ana other causes. Until protectionist America entered the war and imposed an income did not occur to the -british free trade mind that a weaStthv country can stand both direct and irairect taxation.

French Don't Like Taxes. Tho temperament of the French people has always been opposed to direct taxaBeforo ihe war efforts at introducing in France a mild form of income tax were resisted so strongly that th'ey had to be abandoned. 'During .tho war tho financial position in France was allowed to drift, in tho hope that victory would provide the means of adjustment in tho form of indemnities from tho enemy. The requirements of tho war were met by loans; but the special provision in tho form of war taxation was not sufficient to meet .the interest on the war loans. "Of all the great belligerent countries/ states the "Manchester guardian, "none has done less than A ranee to meet her war expenditure by taxation. France's pence expenditure, without taking into account naval and military estimates, will be nearly four times as great as her pre-war expenditure. Her tax revenue to-day does not cover the interest;on her loans. What does she intend to do? The politicians talked as though Germany would havo to make good the deficiency; others hoped that the Allies would sharo the buiden. the truth as that in France, as elsewhere, taxation will havo to make good tho bulk ,of tho deficit, and taxat'fn* ""popu'ar idea with the J. rcnch middle classes/' ■ In future France will have to raise rnroni a year in revenue, compared with .£200,000,000 .before the W, Spe °!?i taxation imposed durJi2o CflooofT TV y " ld i in nonnal J ' oar3 <£ 120,000,000. fh s is less , than a third of the normal yield of tho special taxation imposed in Great Britain. In (MflM W a f""i lal of ovei ' ■ £50 °.- 000,00(1 has to ho provided for by new ' : \ a dcs c P (,ratl} situation, which Frances share of the German in demnihes will do little to alleviate. This financial burden has been placed on Iranco by German militarism, in addition to tho sacrifice of .over 1,500,000 lives and the rum and devastation of hundreds of Frenili towns and villages Is it any wonder that the French altitude towards the Germans is not that of forgiveness and brotherhood?