The Struggle For Financial Order In The Western World
May 1, 1981

Lewis E. Lehrman

Twice Jacques Rueff saved the French franc. The first time was in the 1920's, after the military and financial catastrophe of World War I. The second was in 1958, after the collapse of the Fourth Republic, when President de Gaulle called on the philosopher-economist to end inflation and reform the currency. Both times Rueff was successful, by restoring the franc's convertibility into gold, and by balancing the budget.

In 1958, after 12 years of withdrawal, De Gaulle had been called to power from his home in Colombey-les-deux-Eglises. He quickly summoned Rueff to restore financial order. Inflation was raging; the balance of payments was hopelessly in deficit; and there were only 45 days of foreign exchange reserves. The French franc was the sick man of Europe, and the immobilized government was virtually bankrupt.

Out of chaos De Gaulle created the Fifth Republic. But it was Jacques Rueff who restored the French economy. His Plan was simple. Rueff knew that the causes of stagflation and financial disorder were unbalanced budgets, central bank credit expansion, and an inconvertible currency. So he reformed financial and monetary policy to balance the budget and reestablish convertibility. And he deregulated and opened up the overPlanned and insular French economy.

Thanks to the Rueff reforms, France has had one of the most rapidly expanding economies in the world since 1959, with a rate of growth exceeding Germany's.


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