Political report

With reference to your minute 19/37 B. of the 3rd inst.¹ I have the honour to inform you that the main heads of national policy likely to be pursued by Mr. BLUM are as follows:

1) Increase of salaries and wages and amelioration of working condition.

2) Prevention of increase in the cost of living.

3) Maintenance of the franc.

4) Internal loans to meet budgetary deficits and to provide for extraordinary expenditure.

5) Nationalisation of armament factories.

6) Suppression of the Leagues.

(1) The increase in salaries and wages, the forty hour week, the system of paid holidays and collective contracts have now been passed into law by the Senate and Chamber and the number of strikers still dissatisfied would not exceed 100,000 and this number will according to present indications quickly reduce.

To what extent French industry in general will be able to bear those changes remains to be seen. It is stated that the big industries such as Renault's will be able to carry on with a reduced margin of profit. The smaller industries, it is claimed by various Chambers of Commerce and by the industrialists concerned, will be reduced to bankruptcy very shortly. Several deputations representing the smaller industrialist have pointed out the absolute impossibility of firms, which formerly were barely able to keep going, being able to bear the new conditions which are now imposed on them. The General Chamber of the Chambers of Commerce of France made a particularly strong appeal, supported by facts and figures, on behalf of the small industrialist, but received no satisfaction whatever. Already indeed, according to Press reports, a number of small factories have closed. The Communist party would undoubtedly like to have such factories handed over to the workers but, at the moment, Mr. BLUM is not prepared to go that far. The result that is envisaged from the closing of the small factories is that the big factories will be the only persons to profit, which is ironical enough when it is considered that they are the very people whom the Government desired to hit.

Mr. BLUM cannot go back on the concessions already granted. Indeed, the only question is what other concessions he may be forced to give. He has issued a plain warning that he will not tolerate any further stay-in strikes and will use force, if necessary, to effect the evacuation of factories. The Communists do not take this warning too seriously, thinking that Mr. BLUM would not last 24 hours if he used force against the workers. The method by which the shipping strike in Marseilles was settled would seem to bear this out.

In general, the workers had a very easy victory and are now fully conscious of their strength. In any event, they may make more demands shortly, but what is likely to bring things to a head is the probable increase of the cost of living. If the cost of living increases to such an extent as to negative the benefit of increased wages, the workers will certainly make fresh demands and it is difficult to see how Mr. BLUM completely dependent as he is, on the Communist vote, can refuse demands backed by the Conféderation Générale du Travail and by the Communist party.

On the other hand, if certain sections of industry are forced into bankruptcy, the effect on the general finances of the country will be serious.

(2) Increase in the cost of living is generally expected. It is felt to be inevitable that the employers who have been compelled to increase salaries and wages, reduce hours and guarantee paid holidays will, as far as possible, try to recoup themselves in increased prices. The Government is fully conscious of this and has discussed it at several meetings of the Cabinet. So far, however, no measures to prevent the increase have been disclosed.

From personal enquiries, I have ascertained that so far, the cost of ordinary foodstuffs has already risen by from 10 to 12 per cent wholesale and by from 15 to 20 per cent retail.

(3) The continued maintenance of the franc has always been the avowed policy of Mr. BLUM in opposition and in Government, although it is rumoured in certain circles that he is now inclined to waver. There is no doubt that there is not unanimity in the Cabinet on the point, as Mr. DALADIER at least favours a controlled devaluation. It is also said that the Communist party is beginning to share that view.

The present value of the franc is artificial and if the present limited public confidence is further shaken by industrial bankruptcies, increasing unemployment, Communist excesses, budgetary deficits and inability to float an internal loan, it is difficult to see how devaluation can be avoided. And besides, there is a large body of French public opinion in favour of devaluation.

(4) It would appear that the only means by which the Government can balance the budget and defray extraordinary expenditure is by borrowing. The efforts of previous Governments to float loans on foreign markets, notably London, were so unsuccessful that any loans now floated will be internal. It is difficult to see how the Government can, on the one hand, create in the capitalist mind, the confidence necessary to permit of the investment of money in State loans and, on the other hand, placate the extreme left element who desire capital levy and nationalisation of banks and industry. Again, it is unlikely that anyone will invest any money in such ventures until the internal position (strikes, riots, etc.) is greatly improved. It seems that the Government, however socialistic minded it may be, must place a limit to the bounds of its ambition if it is going to maintain financial equilibrium.

(5) Nationalisation of armaments producing factories has always been a plank in the Socialist platform, and the Communist party are now urging that this policy should be put into effect. There are, however, three objections: 1) the effect on the money market of such a step, at a time when confidence is necessary for the flotation of loans, 2) the fact that there is already a great measure of state control over factories which supply armaments to the State and 3) with certain exceptions, such as the Etablissements Edgar BRANDT, the firms which manufacture armaments also manufacture articles for purely civilian uses and it is difficult to separate the two productions. For example, the firm Hotchkiss supplies practically all the machine guns and light automatic guns to the French army. At the same time, it is one of the best known motor car producing firms in France. The firm Renault supplies the army with tanks, armoured cars, lorries, tractors and aeroplane engines, but it also manufactures private cars and aeroplanes in large quantities.

For these reasons and perhaps for other reasons which are not so apparent the Government are not too hasty to give effect to their formerly announced policy. In fact, beyond vague expressions as to what might take place in the future, nothing has been done in this matter.

(6) Suppression of the Leagues has always been kept in the foreground of Government policy. The Leagues in question are the Croix de Feu, composed of: 1) Croix de Feu, 2) Briscards, and 3) Volontaires Nationaux. Croix de Feu are ex-soldiers who served at the front and received decorations or citations. Briscards are other ex-soldiers who served in the war. Volontaires Nationaux are those who were too young to serve in the war. There is also the Franciste League which, unlike the Croix de Feu, wears a uniform consisting of a blue beret, a blue shirt, a Sam Browne belt and black trousers. This body has been characterised by the Government as definitely paramilitary. The various leagues attached to the Action Francaise movement were, of course, already suppressed by the Sarraut Government, as a result of the attack on Mr. BLUM on the occasion of the funeral of Mr. Jacques BAINVILLE.

The above Leagues, from the Extreme-Left point of view, have always been grouped under the heading 'fascist', and during the Government of Mr. LAVAL intense pressure was brought to bear on the Radical-Socialists by the Extreme Left to compel Mr. LAVAL to suppress the Leagues. When the matter finally came before the Chamber, it was temporarily settled in a rather unusual way. Mr. YBARNEGARAY, a deputy of the Right, speaking on behalf of the Croix de Feu volunteered dissolution, if the Extreme-Left parties would, on their part, promise dissolution of the Leagues which they fostered, such as the Jeunese Popularie and the Faucons Rouges. Mr. BLUM, on behalf of the Socialist party, and Mr. THOREZ, on behalf of the Communist party, undertook to do so and for the moment there was, at least, a nominal peace. The undertakings referred to above were, as was generally expected, respected on neither side and the regular campaign against the Croix de Feu and the Francistes began again in the Populaire and the Humanité. Mr. SARRAUT, however, who succeeded Mr. LAVAL, was not prepared to take any positive steps in view of the nearness of the general election. That the suppression of the Fascist Leagues would be one of the first steps of the new Blum Government was only to be expected. After heated debates in the Chamber and Senate, the necessary provisions were passed for the suppression of the Croix de Feu and Francistes, no reference being made to the Leagues of the Extreme-Left. On the surface, at least, the suppression was quietly accepted. Colonel de la Roque, Leader of the Croix de Feu, announced, however, that he was starting a new political party to be called the Parti Social Francais. There is little doubt that this party will consist largely of the suppressed Croix de Feu. Whether the Government will ban this new party in turn is a matter of conjecture. In the meantime, it is a matter of opinion as to what extent the Croix de Feu has really been disbanded. The riots which occurred last night on the Champs Elysées were undoubtedly a matter between the Croix de Feu and the Police. Also the present exhibition of the French National flag on private houses in Paris and in the provinces as a protest against the use and recognition of the Red Flag is organised as a result of the leaders of Croix de Feu asking that all sympathisers should exhibit the tricolore.

The most that can be said is that the Croix de Feu has been driven underground. It remains to be seen if the Government will take further and more drastic steps to give effect to its policy.

Mr. BLUM's foreign policy when in opposition had been clearly defined both as leader of the Socialist party and editor of the 'Populaire'. The main heads of his policy were:

1) Full support of the League of Nations as the instrument of world peace.

2) Strengthening of the powers and machinery of the League.

3) Progressive disarmament through the League.

4) Reconciliation with Germany through the League.

5) Full support of the Franco-Soviet pact and the policy of friendship with Russia.

6) Violent opposition to Italy in its campaign against Abyssinia.

With the exception of the last-mentioned, he adhered to this policy when he assumed office. With regard to Italy, he took on government at a time when the policy of the dropping of sanctions was well on its way and he had no choice but to fall into line with the general Geneva view of the matter. Besides he had to recognise:

1) The desirability of restoring the French market in Italy as soon as possible and

2) The desire of a large body of the French people for the restoration of a close Franco-Italian friendship for four reasons 1) economic relations, 2) possible military alliance or at least a pact of non-aggression which would leave the French army free to concentrate on the Maginot line, 3) to prevent an Italo-German alliance and 4) racial sympathy between two Latin peoples and former allies. Accordingly, Mr. BLUM was glad to follow the British line and drop sanctions. It is not clear what steps, if any, have been taken by the Government to improve relations and negotiations between the head of a Fascist State and Mr. BLUM, a Socialist supported by Communists and an avowed anti-Fascist, but they will hardly be as smooth as they were with Mr. LAVAL.

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Reconciliation with Germany seems very remote, and the recent speech of Mr. Greiser, the President of the Danzig Senate at the Council of the League, together with the manner of its delivery, and the way in which it was received in Germany have not tended to improve the position.

When in opposition, Mr. BLUM was always strongly opposed to the increase of the period of compulsory military service. Mr. DALADIER, the Minister for War, was recently asked if the period would now be reduced, but he replied that reduction could not be considered.

Certain sections of the French Press speak with alarm of the weakness of Belgium against invasion. It has been pointed out that Belgium has no defence comparable to the Maginot line and certain doubts have been cast on the sincerity of Franco-Belgian friendship.

All these indications tend to show that the policy of the present Government in respect of Germany is not materially different from that of previous Governments.

Relations with England show a tendency to improve, but so far as can be gathered from Press reports and a careful observation of recent happenings, the initiative in this matter has been taken by England. It would appear that England, discouraged by Germany's recent attitude and her absence of reply to the British questionnaire, has decided on a policy of closer co-operation with France. Mr. Duff Cooper's² recent speech in Paris, the number of friendly meetings between Mr. EDEN and Messrs. BLUM and DELBOS in Paris and Geneva, taken with Mr. EDEN's statement yesterday in the House of Commons that 'he was not prepared to ask Germany for an answer any more', would all tend to bear out this view.

The attitude of France will naturally be one of glad acceptance of closer relationship, but a certain element of caution will probably be observed until it is clear that the present British attitude is likely to be permanent.

The growth and development of Communism in France has been a noticeable phenomenon for a number of years, but particularly within the present year. The increase in the Communist vote in the last general election is an indication of this development. The increase was from 10 to 72 seats in the Chamber, a net gain of 62 in one election. In the political development of Communism in France, and to a lesser extent in Belgium, there is a striking resemblance to the recent happenings in Spain. In Spain, as you are aware, the original Communist idea was to unite all parties of the Left into one organisation called La Fronte Popular. Then, after the elections the Communists, having no further use for their less red colleagues, endeavoured to concentrate power into their own hands.

In France, the Front Populaire (the comparison with the name of the Spanish party will be noted), which was formed some time before the general election, consisted of the Radical-Socialists, the Socialists and the Communists. As a result of the elections, Mr. BLUM took in the Government the portfolios of which were distributed pro rata between the Socialists and radicals, the Communists promising to support the Government but refusing to participate therein. The Communist support being necessary to the Government, the Communists created the happy position for themselves of being able to exert pressure on the Government to attain their ends, without having to assume responsibility for the consequences thereof.

The Communist influence, outside the purely political sphere, is very noticeable indeed. The recent strikes, however justified they may have been by bad conditions and inadequate wages, were not a spontaneous outburst of the overtired workers. It is now generally admitted that they were the result of careful organisation arising out of a deliberate policy of erecting a condition of affairs in France similar to those which obtain in Spain. It was a significant fact, a fact which has been admitted by the Government, that many of the leaders, instigators and agents-provocateurs were not French. There is, in general, very little reason to doubt that there is at the moment in France a powerful organisation of the Komintern whose ultimate object is the Sovietisation of France. That such an organisation exists has been plainly stated time and time again by the Right Press and the Government has never denied it. This organisation, working with the French Communist party, is undoubtedly a grave danger.

Communism, in this country, has spread very largely and is continuing to spread. The general body of the workers having won an easy victory in the strikes, look on Communism as the doorway to ever better conditions and wages. They accept Communism, its flag, symbols and salute in a way which astonishes the impartial onlooker. The Red Flag, the singing of the Internationale, the Communist salute of the closed fist are now as common in France and in certain quarters much more common than the tricolour and the Marseillaise. Several of the recent riots, notably that of last Sunday evening, have had their origin in the carrying of the tricolour and the singing of the Marseillaise. The procession in the Champs-Elysées on Sunday was violently attacked by the Police when they started singing the Marseillaise. On the other hand, processions of Communists carrying the Red Flag and singing the Internationale have been sedulously protected by the police, some of whom, if the Right Press can be believed, salute the Red Flag 'à poing fermé'.

Even during previous Governments, certain districts of Paris and provincial cities were openly Communist. These districts, commonly known as the Banlieue Rouge, have greatly increased in number since the elections. The Mairies fly the Red Flag and have, in a number of cases, replaced the official photograph of M. LEBRUN, the President of the Republic, by a photograph of Stalin. In the Schools of these districts, Communist ideas and anti-God propaganda are taught to young children. If previous Governments, fully aware of all this, did nothing, it is very unlikely that the present Government will.

There has been talk of trouble on the 14th July from the Communists, but I am informed confidentially by a high official of the police that the Communist leaders are endeavouring to induce their followers to avoid trouble on the flag question and to display less of the Red Flag, for the time being at any rate. This is undoubtedly a matter of policy in the part of the Communist leaders who do not wish to damage their position by premature action, and is also ardently desired by Mr. BLUM who cannot deny that the tricolour is the national flag of France. In this connection, it is worthy of note that Mr. SALENGRO, the present Minister of the Interior, stated recently, upon being questioned in the Chamber, that the Red Flag was, in no way, a seditious emblem.

In general, Communism is rampant and powerful in France. It is growing in influence and in numbers and, from every indication, it would seem that it can and will exercise great influence on the present and future policy of the government.