French Economic System since 1981 until now France had a comparatively fragmented capitalist economic system prior to the Second World War which normally operated under the classical economic principles of laissez-faire. The small family owned companies were not sometimes as dynamic and productive as that of the large industrial groups of Germany and United States. The Second World War devastated French infrastructure through aerial bombardment and sabotage. The Nazi Germany had seized the industries, for a long period of time the population had to live with rationing. Such a prelude necessitated quicker reconstruction of the French economy. The French governments during the post war periods, irrespective of their political affiliation aimed at rational, efficient, economic development with the long-term objectives of highly developed, technologically advanced economy of the United States. (Dirigisme)
The indicative central planning was taken to be their major device devised by Commissariat au plan in contravention to the governments of Soviet Bloc. Irrespective of this the French Government had never seen to own more than a few industries and never strived to enforce its economic directions in an authoritarian way. Rather it applied several incentives. On the other hand France never ceased to be a capitalist country in a broad sense. However, the two areas where the French government sought more regulation were the infrastructure and the transportation system. Government owned the national railway company, the national electricity utility, the national natural gas utility, telephone, postal services, autoroute — the motorway.
The emergence of the French dirigisme is seen along with the development of meritocratic technocracy: the www.economicexpert.comecole Nationale d’Administration with high level administrators. During the period 1945 to 1975 the France experienced unprecedented economic growth of 4.5% on average and a demographic boom giving rise to the term Trente Glorieuses. Dirigisme signifying a system with strong governmental directive influence has been flourished under the center-right governments of Charles de Gaulle and Georges Pompidou. The election of Francois Mitterland to the post of President during 1981 promised more state intervention in the economy marked by nationalization of industries and banks. The bad economic performance during 1983 compelled the government to abandon dirigisme and began the era of rigueur. (Dirigisme)
The demographic features of France ranks it twentieth in the World having 60,424 million people in 2004. The density of population is 111 persons per sq. km. In 2004. Life expectancy of France is comparatively more about 79 years. As per the UNDP report of 2004, about 8% of population of France lives below poverty line. In terms of human development index France is ranked 16th among the 177 countries of the World. France and Britain claim for the fourth rank in the world’s largest economy category. Since the Gross National Income of the France fell short of the income of UK by $1,523,025, it was placed at 5th position during 2003. The per capita Gross National Income in 2003 was about $27,460 during 2003. During 2003, the average growth rate of Gross Domestic Product was estimated to be at 0.1%. (Economy of France)
The economic structure of France is characterized by considerable agricultural resources, a large industrial base and a highly skilled labor force. The contribution of service sector in the GDP was closer to 71% in 2003. The economy is exceptionally diversified. The Agriculture and the agro food industry have comparatively a larger contribution in the economic activity than that of in many other west European nations. In manufacturing sectors France excelled primarily in the field of motor vehicles, pharmaceuticals, transport equipment and aerospace. The construction sector accounts for about 5% of GDP. During the past two decades significant reforms have been introduced into the regulatory governance system in France. The influence of the State in the economy has been declined considerably and the State ownership of companies has also reduced prominently. Free market forces played intensely and many products are subjected to fierce competition.
Irrespective of continuous reforms and privatization during the last two decades government continues to regulate a large portion of economic behavior. This is no more confined to the field of health care and education but also economic activities like banking and energy generation and distribution. Railways are apparently state monopoly and the telecom sector is having maximum state equity.
The government economic policy has the objective of fostering investment and growth in a stable monetary and fiscal regime. The government of France has effectively declined unemployment rate from 12% to 9.7% in 2004. The structural revolution in France has undergone severe transformation paving the way to the foreign trade. The main exports of France are machinery and transport equipment, agricultural products and wine. About 75% of the export is constituted by manufacturing and exports constitute about 27% of the French GDP. (Economy of France)
France ranks as the second largest exporter of services and farm products and fourth largest exporter of goods. Primarily France has the trade relationships with Germany, Italy, the UK, Belgium and Spain, including United States. During 2004, the French exports amounting to Euro 341 Billion increased by 5.6%, the imports constituted about Euro 349 Billion enhanced by 8.6% that showed a negative balance of Euro 7.8 Billion. The trade deficits have never called upon to counterbalance the dynamism of its exports that has reached the pinnacle during 2004. The economic success at the end of 1990s has also revealed a gloomy picture in terms of recent slowdown in GDP growth rates. The per capita growth of GDP was not sufficiently stronger to narrow down the gap in comparison to United States. Besides, France also confronts the problems of an ageing population as with the other western nations.
Irrespective of the fact that the reforms essential to confront this problem have been initiated additional measures are felt essential to sustain the progress of the French economy and assist in strengthening its growth prospective. Creation of more jobs and more employment opportunities is felt to be another problem. Irrespective of the enhanced employment rates, unemployment remains to be higher. In comparison to the OECD nations the minimum labor cost in France is more in comparison to the average cost. This has an adverse impact on demand for labor particularly for certain groups like young and low skilled workers. (Economy of France)
The key requirement of the French economy among others is to bring down obstacles to entry in network industries that generate higher prices and limit choice. Infusing competition in rail transport and secure non-discriminatory third party access in telecommunications and air transport can perform this. Moreover, the necessity to effectively address the pollution, organize the natural resources and biodiversity remains to be a major problem. France has adhered to a successful environmental policy and progress has been made with regard to the legislation and management in respect of natural and technological risks. Moreover, effective water management in terms of a basin-level strategy has attained considerable achievements. (Economy of France)
France appeared to have fully integrated into the global capitalist economy however; it still does not appear similar to capitalism. The inherent philosophy of the liberty of the Market must be confined is widespread through out the whole political spectrum, right-wing parties incorporated. The French economic system is much influenced by the formula once applied by former socialist Prime Minister, Lionel Jospin, ‘Yes to Market Economy, no to Market Society’. In one direction the free private economic initiative, competition and the liberty to personal enrichment is acknowledged as the basic mechanism of wealth generation. In another sphere there is an intense refusal of Market as a prospective hegemonic path of living and acting together. If this mood is to be recognized as seriously, the risk is not only to solve the inequalities generated by the Market, but also to safeguard social interaction and in a broader sense the marketing society from its inherent adversities. (Which French Third Way? Administrative and Social Empowerment: Lessons from the Second Left in Power)
The philosophy of Market containment is more often split into first, an economical regulation agenda and secondly an equity agenda that is fight against poverty, exclusion and inequalities. Thirdly, there is an ecological agenda sustainable development. These are key concerns however, required to be dealt with in a more radical and systematic way. Against this background it is worthwhile to firstly to comprehend the real nature and reasons of the crisis of Social-democracy, in association with the crisis of the Fordist socio economic coherence secondly, the way this crisis places on the agenda the question of the new collective action models, formulated here in terms of empowerment, thirdly, the second left governmental action between 1988 and 1991 have been suggested to have brought some valuable elements of response to the crisis of the French State centered social model and some milestones on the road toward a French Third way.
The philosophy behind Rocard’s social and administrative reform policy continues to inspire and also relevant in the present context. The regulation school French economists narrated socio-economic system of post-war western countries as the Fordist system indicating to Henry Ford. The Fordist system is dependent on the mutual interaction of a group of economic and social mechanisms. It is based on four elements firstly, of a particular consumption pattern, influenced by the increasing amounts of consumption of standardized manufactured objects which is liable to be produced in large series. Secondly, it is characterized by the allurement of Taylorism as the principal model of industrial work organization in maintaining with the consumption pattern. Thirdly, there is a Fordist social compromise. Fourthly, a Keynesian-interventionist State both in the economic and social field ensured the coherence of the system by means of a high and steady growth rate. (Which French Third Way? Administrative and Social Empowerment: Lessons from the Second Left in Power)
During the last three decades the system increasingly lost its consistency. Many elements of disturbance have been interacted weakening all the four elements. The weakening of Fordist coherence appropriately explains the double crisis of the Welfare State and Social Democracy. However, one could also mention the increasing significance of non-economic concerns like ecology, feminism and broadly the societal issues. As a challenge to the Fordist System crisis, left wing parties have to find out the terms of a new compromise between capitalism along with their philosophy of equity and solidarity. The reform policies carried out by the Second Left government under the leadership of Michel Rocard gives an idea about the French Third way that indicates less society empowerment than administrative empowerment. During the period 1997 to 2002 the Jospin Government represented a dismaying retreat to conventional French Left wing ideology. (Which French Third Way? Administrative and Social Empowerment: Lessons from the Second Left in Power)
Industrial policy may be indicated to be an attempt by government to shape the evolution of industrial structure. During the post war periods most of the governments obviously aimed at reducing inflation, curtailing trade deficits and ensuring fun employment that would entail an industrial policy. As a result throughout this period industrial policy has been considered a particularly efficacious component of general economic policy. However, irrespective of the French industrial policies have always been anticipated to have been general in perspective, they have sought different objectives and applied different tools in different periods. (Adams; Stoffa s, 13) the French policy in the South Pacific since 1981 has been practiced with a view to fostering economic development of the Pacific TOM. The French government has worked towards encouraging links with such territories and neighbors. The more advantageous aspects of the South Pacific policy of France during 1980s and 1990s apparently are in terms of trade, cooperation and aid. (French South Pacific Policy 1981-1996)
Irrespective of the repudiation of the dirigiste model and the growing obstacles of globalization and integration the state intervention in France has proven to be resilient. Since 1983 France has experienced considerably liberalizing reform. The dirigiste model has been dismantled the market unleashed and French competitiveness largely enhanced. The transformation towards market economy has not been accompanied by a shrinking of the state but instead by a redeployment of state energies to new arenas – labor markets, social protection and the promotion of Small and Medium sized Enterprises. The emergence of the French state since the 1983 U-turn maintains three important lessons. Firstly, the transformation of institutional paths necessitates a positive action along with a negative action – the forging of a new mode of economic and social regulation to replace the old one. Secondly, the state intervention can morph and migrate. Thirdly, the extent that globalization or European integration required institution reformation the national reaction may take the form of institutional redeployment as against institutional eradication. (the State after Statism: French economic and social policy in the age of globalization)
Adams, William James; Stoffa s, Christian. French Industrial Policy. The Brookings Institution. 1986. p. 13 Retrieved at http://www.questia.com/PM.qst?a=o&d=34316320Accessed on 18 June, 2005
Dirigisme. Retrieved at http://www.economicexpert.com/a/Dirigisme.htm. Accessed on 18 June, 2005
Economy of France. Retrieved at http://www.economywatch.com/world_economy/france/. Accessed on 18 June, 2005
Levy, Jonah. D. The State after Statism: French economic and social policy in the age of globalization. Paper prepared for presentation to the Thirteenth International Conference of Europeanists. Palmer House Hilton, Chicago, March 14-16, 2002. Retrieved at http://www.columbia.edu/cu/ces/conference2002/papers/h5_levy.doc. Accessed on 18 June, 2005
McCallum, W.S. French South Pacific Policy 1981-1996. 1996. Retrieved at http://www.venetic.com/FSPPchapter9.html. Accessed on 18 June, 2005
Which French Third Way? Administrative and Social Empowerment: Lessons from the Second Left in Power. Conference “Liberalism’s Return: French Social Thought since 1968″New-York, Columbia University. April 16-17. 2004. Retrieved at http://perso.wanadoo.fr/bernard.perret/New-York%20Liberalism2004.htm. Accessed on 18 June, 2005
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