THE STATE AFTER STATISM:
FRENCH ECONOMIC AND SOCIAL POLICY IN THE AGE OF GLOBALIZATION
Jonah D. Levy
Associate Professor, Department of Political Science
University of California Berkeley
Tel.: (510) 642-4686
E-mail: jlevy@socrates.berkeley.edu
Paper prepared for presentation to the Thirteenth International Conference of Europeanists
Palmer House Hilton, Chicago, March 14-16, 2002.
THE STATE AFTER STATISM:
FRENCH ECONOMIC AND SOCIAL POLICY IN THE AGE OF GLOBALIZATION
France has long been paired with Japan as the archetypal state-led political economy
(Shonfield 1965; Cohen 1977; Katzenstein 1978; Zysman 1983; Hall 1986). For decades, French
planners aggressively manipulated an array of policy instruments – from trade protection, to
subsidies, to cheap credit, to exemption from price controls – in an effort to accelerate the pace of
economic modernization. French authorities channeled resources to privileged groups, favoring
investment over consumption, industry over agriculture, and big business over small. They also
“picked winners,” both specific sectors, such as coal and steel in the reconstruction era and
nuclear power and telecommunications in the 1970s, and specific firms, the so-called “national
champions,” multinational corporations anointed as France’s standard-bearers in the battle for
global economic leadership. When “national champions” did not exist, French planners
constructed them through a series of state-sponsored mergers; when “national champions” lacked
capital, the planners financed them through cheap capital and guaranteed state markets; and when
“national champions” were deficient in technology, state-run labs performed research for them,
transferring cutting-edge solutions in computers, nuclear power, high-speed trains, and digital
telecommunications switches (Cohen and Bauer 1985; Cohen 1992).
In the early 1980s, French dirigiste practices appeared to be in for a period of rapid
expansion. The election of François Mitterrand as president in 1981 brought France’s first
Socialist-Communist government since the Liberation era. The left pledged to intensify dirigiste
policymaking in order to pull France out of its economic crisis. Toward this end, much of
industry and the entire banking sector passed under state control; ambitious objectives were
established for all manner of industries from coal, to machine-tools, to toys and
2
telecommunications; domestic demand was stimulated through heavy social spending; the hand
of labor was strengthened (or so it seemed) by the Auroux laws; and the government pledged to
revive the celebrated French planning system. “Socialism in one country,” it appeared,
represented the highest stage of dirigisme.
Just two years later, however, appearances in France had changed. Confronted with
double-digit inflation, rising trade and budget deficits, stagnant investment, and a currency crisis
that threatened to push the French franc below the minimum exchange rate allowed by the
European Monetary System (EMS), President Mitterrand reversed course. A government elected
to intensify dirigisme began instead to dismantle dirigisme.
Today, virtually nothing remains of the institutions and practices associated with the
dirigiste model. Planning, sectoral industrial policies, and ambitious grands projets have been
abandoned; the vast majority of nationalized companies have been privatized; credit, price, and
capital controls have been lifted; restrictions on lay-offs and temporary and part-time
employment have been eased; and a macroeconomic orientation emphasizing inflationary growth
coupled with large devaluations has given way to one of the lowest inflation rates in Europe and
a strong franc, culminating in European Monetary Union (EMU). By all accounts, France has
become a much more market-oriented political economy, whose performance rests on the
calculations of profit-seeking businesses, as opposed to state technocrats.
To proponents of the globalization hypothesis, France offers the clearest illustration of the
triumph of international constraints over national sovereignty.1 All the vast resources of French
authorities and all the determination of the left were of little consequence in the face of
1 The clearest statement of this view is offered by Michael Loriaux (Loriaux 1988; Loriaux 1991). Peter Hall also
privileges the role of international pressures (Hall 1990), as do Philip Gordon and Sophie Meunier (Gordon and
Meunier 2001). Helen Milner argues that growing international integration transformed the preferences of French
firms, thereby undercutting support for state intervention to protect domestic markets (Milner 1988).
3
international competition and European obligations. In just two short years, the "strong" French
state had been overpowered by stronger international forces. What is more, since 1983, history
has repeated itself not just once, but twice. In 1995, Gaullist Jacques Chirac invoked the
constraints of the Maastricht Treaty -- the need to rein in budget deficits in order to qualify for
EMU -- to justify a retreat from the spending promises that had helped him secure election as
president less than six months earlier. In 1997, Socialist Lionel Jospin performed essentially the
same flip-flop after becoming prime minister. The thrice-confirmed lesson seems clear:
globalization and European integration leave no place for France’s free-spending, statist ways.
The rollback of dirigisme is only part of the French story since 1983, however. French
governments have also launched a number of expensive new programs, notably in labor markets,
social protection, and the promotion of small business. French authorities may not be pouring
billions of francs (or euros) into industrial policy, but they are still spending plenty. As Figure 1
reveals, government revenues, which totaled 42.6 percent of GDP in 1983, at the height of
Socialo-Communist voluntarism, have continued to rise in the ostensibly less interventionist
post-dirigiste period, reaching 46 percent of GDP in 1999 (OECD 2000; Ministry of Finance
2001). Thus, not only has the post-dirigiste French state failed to shrink; by some measures, it
has become bigger than ever.
The evolution of the French state presents a puzzle, then. The core features of the stateled model of economic development have been dismantled, and French leaders on both sides of
the political spectrum regularly blame the constraints of European integration and globalization
for limiting their ambitions. Yet through it all, state spending and taxation have actually
increased somewhat. To understand the evolution of the French state in the post-dirigiste era, I
argue, we must look not only to external constraints, as emphasized by the globalization
hypothesis, but also to the domestic factors that have fashioned France’s response. More
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specifically, the emergence of new kinds of state intervention in France has been driven by a
combination of political and institutional factors. Politically, the dominance on the French right
of a Gaullist party whose founding ideology is statism, along with frequent national elections and
a system of quasi-primary elections, has placed tremendous pressure on French politicians of all
political stripes to propose statist solutions. Institutionally, the underdevelopment of associations
outside the central state has deprived French authorities of alternatives to state coordination, so
that new economic and social needs have generally been refracted into the state arena.
This paper analyzes the French state after statism, the evolution of state intervention in
the post-dirigiste period. Section 1 traces the elimination of the key features of the dirigiste
model following the 1983 U-turn. Section 2 describes some of the most prominent new state
initiatives in recent years. Section 3 identifies the political and electoral forces driving the
expansion of state intervention, while section 4 points to the institutional forces. Section 5, the
conclusion, considers the implications of the new state activity for France’s political economy
and for our understanding of the place of the state in the age of globalization.
SECTION 1 – THE DISMANTLING OF DIRIGISME
The 1983 U-turn touched off a range of reforms that struck at the core of the dirigiste
model (Cohen 1989; Hall 1990; Schmidt 1996; Levy 1999; Levy 2000). These changes,
inaugurated cautiously by the Socialists from 1983 to 1986, were amplified when the right
returned to power under a neo-liberal banner from 1986 to 1988, and confirmed and completed
by subsequent governments on both sides of the political spectrum. Four sets of changes figured
most prominently.
The first change concerned macroeconomic policy. For much of the postwar period,
French authorities stimulated the economy through a combination of deficit spending and lax
5
monetary policy, with much of the money flowing to industry (Zysman 1983; Hall 1986; Loriaux
1991). The effects of the resulting inflation on competitiveness were negated by periodic
“aggressive devaluations” that not only compensated for price differentials with France’s trading
partners, but also conferred a temporary advantage on French producers, albeit at the expense of
worker purchasing power. The Socialists broke with this strategy in 1983. Under the so-called
franc fort policy, the French franc was informally anchored to the Deutschmark. Since
devaluations were no longer an option (let alone "aggressive devaluations”), France would gain
the edge through "competitive disinflation," that is, by running a rate of inflation lower than that
of its trading partners. Toward this end, Keynesianism demand stimulus gave way to austerity
budgets, wage indexation was abandoned, and most important, monetary policy was tightened,
with real interest rates ranging from 5 to 8 per cent for over a decade (Fitoussi 1995). Since the
early 1990s, the French inflation rate has been among the lowest in Western Europe, while the
balance of trade, after nearly twenty years in the red, has registered steady surpluses.
The second set of reforms pertained to France's public enterprises. In 1982, the left
nationalized twelve leading industrial conglomerates and 38 banks. When combined with the
Liberation-era nationalizations carried out by General de Gaulle, this latest program, costing 47
billion francs, placed thirteen of France's twenty largest firms and virtually the entire banking
sector in state hands (Stoffaës 1984). Public enterprises received tens of billions of francs in
subsidies, but were pressured to expand employment and invest in areas deemed strategic (if not
profitable) by the government.
The 1983 U-turn brought a fundamental shift in the government’s relationship to the
public enterprises. Nationalized companies were released from their planning targets and
instructed to focus instead on profitability. While slashing capital grants and subsidies, the left
offered no resistance when public enterprises closed factories and withdrew from strategic
6
sectors. This shift in public-sector management set the stage for the right to launch a campaign
of privatizations upon its return to power in 1986. Before the privatization process was
interrupted by the 1987 stock market crash, thirteen financial and industrial groups had been sold
off, netting 84.1 billion francs to the French treasury (Zerah 1993: 183). Since 1993, a second
round of privatizations has been conducted by governments of both the right and the left,
reducing the once-vast holdings of the French state to little more than energy production, public
transportation, and some weapons manufactures.
The third major policy shift after 1983 was the abandonment of state efforts to steer
private industry. The guiding spirit of this change was that firms would receive less government
assistance, but would be subject to fewer restrictions, so that they could raise the necessary
resources by their own means (Hall 1990). The hefty budgets for bail-outs of loss-making
companies, sectoral industrial policy programs, high-tech grands projets, and subsidized loans
quickly dried up, triggering a wave of bankruptcies. As a counterpoint, however, French
business gained a number of new freedoms. The deregulation of financial markets, initiated in
1985, enabled firms to raise funds by issuing equity, reducing their dependence on state-allocated
credit. The removal of price controls in 1986 allowed companies to reap the full benefits of
successful competitive strategies. The elimination of capital controls in the late 1980s facilitated
the expansion of production abroad and gave managers an "exit" option if domestic conditions
were not to their liking. Taken together, these and other reforms helped boost corporate
profitability from 9.8 per cent of value added in 1982 to 17.3 per cent in 1989 (Faugère and
Voisin 1994: 32).
The revival of corporate profits was also fueled by a fourth set of developments, the
reform of France's system of industrial relations (Groux and Mouriaux 1990; Howell 1992;
Howell 1992; Labbé and Croisat 1992). State authorities de-indexed wages and lifted a number
7
of restrictions limiting managerial prerogatives, most significantly, the administrative
authorization for lay-offs (the requirement that lay-offs of ten or more employees for economic
reasons receive the approval of an inspector from the ministry of labor). They also expanded the
scope of workplace bargaining. In a context of high unemployment and weak and divided trade
unions, French employers were able to use this new bargaining arena to introduce labor market
flexibility largely on their terms. Studies of initial firm-level deals revealed that most accorded
no compensation to employees in return for acceptance of greater flexibility and that up to onethird of these agreements actually violated French labor law. Not surprisingly, much of capital's
gain in the post-1983 period would come at labor's expense. From 1982 to 1989, the share of
value added received by capital increased from 24.0 per cent to 31.7 per cent, surpassing the
levels of the early 1970s (Faugère and Voisin 1994: 28-29).
The reforms since 1983 have left no dirigiste stone unturned. Looking across the wealthy
democracies, one would be hard-pressed to find any country that moved so far away from its
postwar economic strategy as the France of François Mitterrand and Jacques Chirac. But there is
more to the French story than the rollback of dirigisme. State authorities have also launched a
number of new programs.
POST-DIRIGISTE STATE INTERVENTION
If the practices and institutions associated with dirigisme have been dismantled with
astonishing speed and thoroughness, the same cannot be said of the French state. On the
contrary, state spending and taxation have increased somewhat in the post-dirigiste period, as
new initiatives have been launched in such areas as labor market policy, social protection, and
the promotion of small- and medium-sized enterprises (SMEs). This section describes each of
these new state activities in turn.
8
Labor Market Programs
French labor market policy has developed in a number of directions. State intervention
centered initially on early retirement, a strategy designed to square the circle of "job loss without
unemployment" (Daley 1996). French authorities recognized the need for companies to be able
to restructure in order to restore profitability and competitiveness, but such restructuring would
not come at the expense of the workforce. Rather, government programs would permit
employees over the age of 55 -- or, in some cases, 50 -- to retire at close to full pension.
The expansion of early retirement to accommodate and humanize restructuring began
under the Giscard presidency. Between 1974 and 1980, the number of early retirees more than
tripled from 59,000 to 190,400 (DARES 1996: 100). The left tripled the figure again to over
700,000 workers in 1984. Such measures were expensive, costing as much as 1 million francs
per retiree, but they were assumed to be temporary. Officials expected that once French firms
restructured and the economy recovered, job creation would begin anew, and early retirement
programs could be wound down. Employment creation has remained sluggish, however, and
early retirements have continued at a rate of 450,000 to 600,000 per year since the mid-1980s.
The effects of early retirement on the French labor market are striking. Today, fewer than one
worker in three is still employed at age 60, and France's labor force participation rate for men
aged 55 to 64 is among the lowest in Western Europe, at just over 40 percent (Scharpf and
Schmidt 2000: 350).
With the return to recession and rising unemployment in the early 1990s, center-right
governments deployed a second labor market strategy. The right’s efforts focused on the
reduction of labor costs, particularly at the low end of the wage spectrum, where a relatively
generous minimum wage (6,800 francs per month) and heavy social security charges (roughly 50
9
percent of wages) are said to dissuade job creation. In 1994, Gaullist Prime Minister, Edouard
Balladur attempted to create a sub-minimum wage for youths 20 percent below the legal
minimum, before retreating in a hailstorm of protest. Subsidies and tax breaks for low-wage
hires proved less controversial. Under Balladur, employers hiring low-wage workers were
exempted from family allowance contributions, while a program inaugurated in 1995 by
Balladur's Gaullist successor, Alain Juppé provided subsidies of 5,000 to 15,000 francs for jobs
paying less than 1.3 times the minimum wage.
The center-left government of Lionel Jospin has added two further labor market
initiatives since coming to power in 1997. The first is a youth employment program, the
Programme Emploi Jeunes (PEJ), which is occupies some 350,000 young people. The PEJ is
targeted at youths with no significant work experience. In contrast to previous state-sponsored,
make-work projects, the PEJ provides full-time employment for an extended period (five years).
The government hopes that this extended tenure will enable participants to acquire the skills and
experience necessary to secure permanent employment once the subsidies run out. Under the
highly generous terms of the PEJ, the state pays 80 percent of the minimum wage and all social
security contributions, leaving only 20 percent of the minimum wage to the charge employer.
Employers in the private sector are barred from participating, however. Fearful that private
companies would substitute subsidized hires for existing personnel, the government restricted the
PEJ to non-profit and public organizations. The PEJ is expensive, costing some 35 billion
francs, although some of the money has been recovered from other youth employment programs
that were terminated.
The second high-profile measure by the Jospin government has been the reduction of the
workweek from 39 hours to 35 hours. Although conservative critics and the national employer
association denounced the reform as a job-killer that would force companies to lay off workers as
10
a result of higher labor costs, the government took a number of measures to assuage business
concerns. The reform was phased in over a five-year period, giving employers time to adjust and
to extract wage concessions from employees as the price for shorter working hours. Employers
were also allowed to introduce considerable flexibility into work schedules, which can now vary
considerably from week to week. Finally, the government tendered significant subsidies to
companies that signed collective bargaining agreements reducing work time. The subsidies are
greatest at the bottom of the pay scale (21,500 francs per year for a minimum-wage hire),
declining gradually to 4,000 francs for jobs paying more than 1.8 times the minimum wage. The
cost of the reform is estimated at 110 billion francs, although again, part of the money is being
shifted from other programs, notably the Balladur and Juppé government’s subsidies for lowwage hires.
Looking at labor market policy globally, Figure 2 reveals that the number of French
workers enrolled in some kind of public labor market program has expanded two-and-one-halffold in the post-dirigiste period -- rising from slightly under 1.2 million in 1984, at the height of
industrial restructuring, to nearly 3 million in 1999 (DARES 1996; DARES December 2000).2
This total is in addition to the 2 million French workers who are formally unemployed.
Aggregate spending on labor market policy has shown a similar increase, expanding from slightly
over 2 percent of GDP in the mid 1980s to 4.2 percent of GDP in 1999. Today, France spends as
much as on labor market intervention as Sweden, the Mecca of active labor market policy.
2 Figure 2 also suggests that French labor market expenditures have become more “active” over the years,
encouraging recipients to work (“active”), rather than to withdraw from the labor market (“passive”). Whreas the
number of employees in passive early retirement programs declined slightly from just over 700,000 in 1984 to less
than 600,000 in 1999, subsidized jobs in the private sector expanded from 320,000 to 1.6 million, subsidized jobs in
the public sector from 8,000 to 509,000, and positions in training programs from 143,000 to 298,000.
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Social Protection
The French state has been equally prominent in the social policy arena (Levy 2000).
Once classified as a “welfare laggard,” Figure 3 reveals that France has developed the largest
welfare state outside Scandinavia, exceeding even Germany laboring under the costs of
unification. As can be seen in Figure 4, French welfare spending rose from 21.3 percent of GDP
in 1980 to 26.5 percent in 1990, to 29.5 percent in 1998 (OECD 2002). The two largest welfare
programs, pensions and health care, have both experienced significant growth since the early
1980s. Spending on pensions increased from 7.7 percent of GDP in 1981 to 9.8 percent in 2000
(Ministry of Finance 2001: Statistical Annex, Table VII.2). France’s pay-as-you-go pension
system is among the most generous in the world and, in contrast to most other countries, it has
experienced only limited retrenchment measures in recent years (Charpin 1999; Myles and
Pierson 2001). French health care spending increased from 7.4 percent of GDP in 1980 to 9.6
percent in 1998, as France passed Austria, Belgium, Denmark, Holland, and Sweden to become
the number two spender in the EU, behind Germany (OECD 2000: Table A7). The French health
care system is not without problems, but thanks in part to this increased commitment of
resources, the French system was rated the planet’s best by the World Health Organization.
French authorities have not only expanded existing social programs; they have also
launched new ones. In 1988, the Socialist government of Michel Rocard, established a national
social safety net or guaranteed income, the revenu minimum d'insertion (RMI), for all adults over
the age of twenty-five. The RMI replaced a patchwork of local and targeted social assistance
programs that had left large segments of the population uncovered, notably the long-term
unemployed and persons suffering from psychological problems, alcoholism, and/or chemical
dependency. Benefits are available on a means-tested basis to all citizens and long-term
residents over the age of twenty-five. The RMI provides a monthly allowance of 2500 francs
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along with the promise of support services to help "insert" (the "I" in "RMI") recipients back into
society and, in some cases, into a job.3 Claimants are also eligible for housing allowances and
free health insurance. Although the "insertion" dimension of the RMI remains underdeveloped,
the program does provide non-negligible financial assistance to some 1 million of France's
neediest citizens, at an annual cost of 25 billion francs.
The Jospin government has launched two new social programs. The couverture maladie
universelle (CMU), which began operating in 2000, makes health care available free of charge to
low-income groups. The CMU originated with a pledge by the Juppé government in 1995 to
extend public health insurance to the 200,000 French citizens (0.3 percent of the population) who
lacked such coverage. The Jospin government honored Juppé’s pledge, but also addressed the
far greater problem of access among those who actually possess heath insurance. France's public
health insurance reimburses just 75 percent of the costs of medical treatment on average (JoinLambert, Bolot-Gittler et al. 1997). Although 85 percent of the population reduces co-payments
by subscribing to a supplementary insurance, for the remaining 15 percent, low reimbursement
rates tended to place all but emergency medical treatment out of reach. The CMU greatly
attenuated this problem by providing free supplementary health insurance on a means-tested
basis to an estimated 6 million people at a cost of some 10 billion francs annually.
In 2002, the Jospin government established a new welfare entitlement, the aide
personnalisé à l’autonomie (APA), which helps defray the costs of in-home assistance for the
elderly. Like the RMI, the APA replaced a locally variable program, the prestation spécifique de
3 Although job placement is one of the objectives of the RMI, the program has no employment search requirement.
For many recipients -- older, unskilled workers or persons suffering from psychological problems, alcoholism, and/or
chemical dependency -- employment is a remote possibility, at best. In addition, the RMI has been criticized for
creating poverty traps. A claimant who accepts a low-wage, part-time job can lose as much in benefits as s/he earns
in wages. Even for a full-time, minimum-wage position, the effective tax rate is estimated to exceed 60 percent
(Bourguignon and Bureau 1999).
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dépendance (PSD), which had been established by the Juppé government in 1997. The APA
provides up to 7000 francs per month, depending on the severity of the incapacity and the
financial resources of the claimant, for home-assistance expenses. Some 800,000 elderly citizens
are expected to benefit from the APA, as against 135,000 for the PSD, at a cost of 23 billion
francs per year.
The commitment to expanding France’s welfare state extends beyond partisan lines. The
RMI was established by a unanimous vote of the French parliament. While it is true that
governments of the left enacted the CMU and APA, in both cases, the left built upon earlier
initiatives of the right. Moreover, Gaullist President Jacques Chirac was elected in 1995 thanks
to a campaign that stressed the need for heightened state intervention to heal France’s “social
fracture” and renew the “Republican pact” between state and citizen.
An interesting feature of French political discourse is that the same distrust of market
forces and faith in state guidance that animated dirigiste industrial policy can now be found in
social policy. Jacques Chirac would have never dreamed of calling for a new round of
nationalizations or a revival of sectoral planning. Yet it was entirely legitimate, even electorally
savvy, for him to call for intensified state intervention in the social arena. This kind of
redirection of the sphere of legitimate state intervention can be seen in the third area of
intensified activism, the promotion of small- and medium-sized enterprises (SMEs).
Promotion of SMEs
While winding down industrial policy programs for the “national champions,” state
authorities have developed an array of instruments to promote SMEs (Levy 1999). The guiding
principle of these programs is to encourage SMEs to "make leaps," to accelerate the pace of their
development. State subsidies of up to 50 percent or success-conditional loans are available for a
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variety of risky ventures, including: integrating composite materials or electronics into existing
products; developing new products; computerizing production operations; and hiring managers
and engineers. All of these actions are designed to usher SMEs to a new stage in their
development, whether in the form of new products, new production processes, or a new
management structure.
State authorities see no contradiction between their claim to have moved beyond
dirigisme and the multiplication of public programs and tax credits, costing some 100 billion
francs annually, in support of SMEs. Part of the reason is that they regard SMEs as more needy
than the national champions, as more susceptible to various forms of market failure. Large firms
and conglomerates possess the financial and managerial resources to think strategically; they do
not require government programs to assist them in these tasks. By contrast, many SMEs lack the
resources or know-how to act strategically. The various measures proffered by state agencies
have been devised with the idea of addressing traditional weaknesses or problems confronted by
SMEs: a limited awareness of new process and product technologies; underdeveloped
managerial structures; a lack of capital and access to bank loans. French officials believe that
small, well-targeted programs can help SMEs overcome these obstacles, bolstering what has
traditionally a weak segment of France’s economy.
State authorities reject the dirigiste label for a second reason. In their view, the character
of SME promotional policies is very different from past dirigiste methods. State officials are no
longer picking winners and forcing firms to merge; they are merely trying to create a supportive
environment for private managers. They are not imposing competitive strategies or planning
targets, but rather underwriting the strategies developed by small businesses. Moreover, many of
the tools of intervention operate through private consulting companies, as opposed state
15
technocrats. Thus, the new SME policies are more market-conforming, more respectful of
private initiatives than traditional state intervention.
For all these changes, though, the underlying assumption behind the policies toward
SMEs is that the heads of small firms do not fully understand their own interests and that the
state must encourage (and, in the process, become quite involved in) such desirable practices as:
investment in risky innovation; improvements in quality control methods; the introduction of
new materials into products; modernization of plant and equipment; use of sophisticated
software; hiring of managers and engineers. Nor is coercion entirely absent from the
relationship. While state officials are not telling private managers what to do, they are paying 20
to 50 percent of the costs for them to do certain things. Ironically, it could be argued that at no
point in French history has the state meddled in so many firms and in so many prerogatives of
management as under today's ostensibly post-dirigiste regime.
This section has shown that despite the discrediting of France’s postwar dirigiste model, a
number of expensive new state interventions have emerged in the years since 1983. The French
state may be different from the past, but it is not smaller. The next two sections seek to explain
why state intervention has proven so resilient in France. Section 3 looks at the political and
electoral factors driving state intervention, while Section 4 analyzes the institutional factors.
SECTION 3 – POLITICAL AND ELECTORAL PRESSURES FOR STATE INTERVENTION
France’s political system has proven very receptive to state intervention, even in the years
since the 1983 U-turn. As noted above, many of the new state policies have been the product of
governments of the right, not just the left. Two characteristics of France’s political system have
tended to push politicians of all stripes toward statist solutions: 1) the nature of the dominant
16
party of the right, the Gaullist Rally for the Republic (RPR); 2) the rules structuring French
electoral competition.
Gaullism and Statism
For the Communist and Socialist parties, the break with dirigisme has been a wrenching
experience, and it should come as no surprise that left governments have sought new ways of
coordinating the economy and assuring social solidarity. Perhaps more surprising is the fact that
the French right, particularly the dominant party of the right, the Gaullist party of Jacques Chirac
and Edouard Balladur, has often behaved in the same way. Three features have pulled the
Gaullists in a statist direction.
The first feature is the party’s founding ideology. Scholars have often noted that outside
Great Britain, Western Europe does not possess strong liberal parties. Certainly, France is no
exception to this observation. The French politician most clearly identified with a neo-liberal
agenda, Alain Madelin, will be lucky to poll 8 percent in the upcoming presidential election, and
Madelin’s Liberal Democracy party rates perhaps 10 percent in the opinion polls.
To say that the French right is not neo-liberal is something of an understatement,
however. The dominant party of the French right, the Gaullist Rally for the Republic (RPR), is
not only not neo-liberal; it is statist. This is a striking departure from most European countries,
where Christian Democrats are generally the main conservative party. Christian Democracy
shares to some extent the neo-liberal aversion to concentrated state power. While acknowledging
a place for government in preserving social cohesion, the Christian Democratic doctrine of
“subsidiarity” maintains that challenges should be addressed at the lowest level possible, ideally
through the family, the church, or community and social organizations, with the state intervening
17
only as a last resort (Kersbergen 1995). For French Gaullists, by contrast, the state has tended to
be the first resort, arguably the only resort.
For nearly a quarter century prior to Mitterrand’s election as president in 1981, it was the
French right, not the left, that ran France’s dirigiste model, and it was the Gaullist party that gave
the clearest expression to the dirigiste vision. The party’s founder, General Charles de Gaulle
saw the state as the agent of modernization and the general will. An enlightened, interventionist
state would lead French business where markets feared to tread, overriding France’s cautious,
traditional elites to restore the country to greatness. When de Gaulle came to power in 1958, he
established a new political regime, the Fifth Republic, that was designed to concentrate power in
an elected president, who could modernize the economy over the objections of self-serving,
particularistic interests. De Gaulle’s reign as president from 1958 to 1969 marked the heyday of
dirigiste policymaking -- of voluntarist industrial policy, “national champions,” and advancedtechnology grands projets. For many Gaullists, even today, an activist state is a core component
of their ideology.
A second feature of Gaullism that has fueled statism is the identification of state
intervention with resistance to American hegemony. De Gaulle’s central objective was to restore
France as a great power in the international arena, reducing its dependence on the United States.
In de Gaulle’s mind, challenging the international status quo required an activist state. France
would gain its military autonomy by forging an independent nuclear deterrent, the force de
frappe, and ending its military participation in NATO. In foreign policy, de Gaulle forged an
independent line, criticizing US positions on a range of issues, notably the Vietnam War and the
Arab-Israeli conflict. And in the economic arena, resisting American hegemony meant building
“national champions” to beat back US multinationals. It also meant freeing France of
18
dependence on US technologies by developing and promoting the use of indigenous
technologies, a strategy that Elie Cohen has aptly labeled “High-Tech Colbertism” (Cohen 1992).
In the post-dirigiste period, Gaullists no longer embrace industrial policy, but the
equation of state intervention with resistance to American hegemony continues to shape policy,
especially in the social arena (Levy 2000). Where once French authorities railed against
predatory US multinationals, now the threat is said to come from US-led “globalization” and
“Anglo-Saxon liberalism,” which are blamed for placing downward pressure on wages and social
benefits. Once again, protecting France from pernicious US influences, from a race to the bottom
in social standards and convergence on a neo-liberal minimum, requires state activism. It is,
therefore, no coincidence that a Gaullist, Jacques Chirac campaigned for president in 1995 on a
program of intensified state intervention to heal France’s “social fracture” and restore “social
cohesion.” From a Gaullist perspective, the expansion of state intervention is not merely a social
imperative, but a geopolitical imperative, a measure of France’s capacity to preserve its
sovereignty and identity in an increasingly integrated, interdependent, and US-influenced world.
The third feature of the Gaullist movement that has fueled state intervention is an
obsession with social order. This concern was not a founding feature of Gaullist ideology, but
rather a legacy of the near-revolution that rocked France in May 1968 and led to Charles de
Gaulle’s resignation from the presidency the following year. Many leading figures in the Gaullist
party, including Chirac and Balladur, were junior government officials in May 1968. This
scarring, formative political experience has made both Chirac and Balladur extremely reluctant to
confront popular protests. In a country with a relatively new and contested constitution and a
long tradition of revolutionary politics, concern for social order has invariably trumped concern
for fiscal prudence. Time and again, French leaders (to be fair, leaders from all parties, not just
the Gaullists) have responded to protests with policy concessions – new spending programs,
19
protection from competition, or the withdrawal of proposed liberalizing reforms (Berger 1981;
Cohen 1989; Levy 2000).
Gaullism, then, is not a garden-variety conservative party. Its founding ethos emphasizes
state intervention as the key to rapid economic development and the breaking of American
hegemony. Its transformation, stemming from the events of May 1968, has made Gaullist leaders
willing to pay almost any price to limit protest and preserve order. The orientation of the French
right toward statist solutions is reinforced by a second set of factors, the rules governing French
electoral competition. Two features are especially important: the dual executive and the tworound voting system.
Electoral Competition in the Fifth Republic
France's Fifth Republic incorporates elements of both a parliamentary system (a prime
minister who can count on a disciplined parliamentary majority to pass legislation) and a
presidential system (a president elected directly by universal suffrage, with power to name the
prime minister and to dissolve parliament). This "dual executive" arrangement was devised to
strengthen the Fifth Republic's founder and first president, Charles de Gaulle. It gave de Gaulle
the advantages of both American presidentialism and European cabinet government. On the one
hand, because the French president names the prime minister and possesses the power dissolve
parliament, de Gaulle was able to bend the legislature to his will. On the other hand, because the
president is answerable to the electorate only, parliament had little recourse against him. It could
not vote de Gaulle out of power; it could only sanction the prime minister, who served as a kind
of buffer, keeping de Gaulle above the fray of day-today politics and policy-making. Backed by
this powerful institutional arsenal, de Gaulle was able to dominate French politics and the
nation's fractious political parties throughout the 1960s.
20
Ironically, though, a set of arrangements that was widely seen as contributing to the
cohesion and "strength" of the French state ultimately proved to be a source of weakness. The
president was indeed all-powerful as long as he commanded a majority in parliament. But once
de Gaulle departed from the political scene and the Communist and Socialist parties joined in a
powerful “Union of the Left,” French elections became hotly contested. In this context, the dual
executive evolved into a dual threat to the government. With parliamentary and presidential
elections usually held in different years, there were essentially twice as many opportunities to
change the government as under a pure parliamentary system. If the opposition won a
presidential election, then the new president could immediately dissolve parliament and appeal to
the voters for a majority to implement his program; if the opposition won a parliamentary
election, then the president would be reduced to a figurehead, required to submit to the will of
the new legislative majority.
Nor were these mere hypothetical situations. Each of the last three presidencies has
included one period of “cohabitation,” that is, of a president and parliament from opposite sides
of the political spectrum (1986-1988, 1993-1995, 1997-2002). Indeed, since 1986, France has
experienced cohabitation more often than not (nine years out of sixteen). What is more, the
sitting prime minister has lost six consecutive national elections dating to 1981 (1981
presidential and legislative elections, 1986 legislative, 1988 presidential and legislative, 1993
legislative, 1995 presidential, 1997 legislative). With France engaged in almost perpetual
election campaigns and governments being repudiated regularly by the voters, leaders of all
political stripes have felt keen pressure to respond to popular demands for state protection and
resources.
The pressure on politicians is accentuated by a second constitutional feature, the tworound majoritarian electoral system. Under French electoral rules, if no candidate secures 50
21
percent of the vote on the first ballot, a run-off is held between the top two candidates.4
Typically, a number of candidates compete on the first ballot, followed by run-off between the
top candidate of the right and the top candidate of the left. On the second ballot, unsuccessful
left candidates support the candidate of the left (with greater or lesser degrees of enthusiasm),
while unsuccessful candidates of the right support the candidate of the right. Thus, the first
ballot chooses the standard-bearer of the left and right respectively in a kind of rough analogue to
an American primary election. In these primaries, statists on the French right, appealing to the
core values of the Gaullist majority, have generally been able to outpoll candidates of a more
liberal persuasion. The clearest example comes from the 1995 presidential election.
Just a few months before the 1995 election, Jacques Chirac trailed far behind his longtime-friend-turned-rival within the Gaullist party, Edouard Balladur. The prime minister from
1993 to 1995, Balladur had gained popularity for his cautious, low-key approach to liberalization.
Balladur would nudge France in a liberal direction, but not if confronted with any kind of serious
opposition. The combination of Balladur’s tactical skills and public fatigue with Chirac, who
had already lost in two presidential elections and who struck many as impetuous and irratic,
placed Balladur so far ahead in the polls that many Chirac loyalists had defected to the prime
minister’s campaign. Yet in the final months before the election, Chirac was able to overtake
Balladur as the candidate of the right, before capturing the presidency in a run-off with Lionel
Jospin. Chirac’s campaign began to turn around when the former admirer of Reagan and
Thatcher embraced a statist agenda. Chirac denounced Balladur’s alleged subservience to liberal
dogma (la pensée unique), while pledging to expand state intervention to restore the “Republican
4 In presidential elections, only the top two candidates may stand on the second ballot. In legislative elections,
candidates receiving more than 12.5 percent of the vote may remain in the second round. This provision has led to a
number of “triangular,” three-cornered races recently, as National Front candidates have refused to step aside for
candidates of the mainstream right.
22
pact” between state and citizen and heal France’s “social fracture.” Thus, in a primary election
on the French right, a candidate pledging to intensify state intervention proved more attractive to
conservative voters, notwithstanding his erratic personality and opportunistic ideological
repositioning, than a cautious, moderate liberal.
France’s two-round electoral law bolsters statism in a further way, by lowering barriers to
entry for new political parties and fringe candidates. Under the French system, there is no
penalty for voting for an uncompetitive candidate on the first ballot, since the victor is almost
never chosen until the second ballot. Consequently, little parties and non-mainstream candidates
find it relatively easy to enter the political fray. Indeed, if they fare well in the first round of
voting, they can then demand programmatic or other concessions in return for their support in the
run-off election.
The ease of fielding new parties and presidential candidates has made it difficult for the
Gaullists on the right and the Socialists on the left to move away from statism. In elections to the
European Parliament in 1999, the Gaullists tried to move in a more liberal direction, forming a
single electoral list with Alain Madelin’s neo-liberal followers. In response, former Minister of
the Interior, Charles Pasqua declared that Chirac had betrayed the RPR’s principles and fielded
an independent list, the Rally for France (RPF). Despite the novelty of Pasqua’s party and the
RPF leader’s rather unsavory personality, the upstart RPF outpolled the Gaullist list 13.1 percent
to 12.8 percent (the worst showing ever for the RPR), forcing Chirac to rethink his strategy.
Chirac’s Socialist rival, Lionel Jospin has been under similar pressure. The Socialists
have always had to embrace a degree of state intervention in order to maintain their electoral
alliance with the Communists. With the decline of the Communist party, which now represents
less than 8 percent of the French electorate, one might have imagined that Jospin would be less
constrained. But in the 2001 municipal elections, new constraints emerged. Several newly
23
created or long-marginal left parties – Motivated, Trotskyists, Revolutionary Communists -made significant inroads on the first ballot, and many of their supporters stayed home on the
second ballot, leading to a surprisingly poor showing for the left. Several of these parties are
fielding candidates in the 2002 presidential election, so that Jospin will have to demonstrate his
leftist (i.e. statist) credentials if he is going to outpoll Chirac on the second ballot.
Both Jospin and Chirac are under pressure to allow a greater role to the state from yet
another source, former Socialist Minister of the Interior, Jean-Pierre Chevènement.
Chevènement has become the “third man” in the 2002 presidential campaign, with as much as 14
percent in the opinion polls, drawing from both sides of the political spectrum. Chevènement’s
central campaign theme is a call for the restoration of the traditional statist-Jacobin model. Thus,
statist policy is underpinned by more than the preferences of French politicians. Even if French
political leaders were shown to be more “pragmatic” and less statist than the median voter, the
French electoral system provides numerous opportunities for the median voter to rein in those
leaders: twice as many national elections as under a typical parliamentary system, two rounds of
voting, and low barriers to entry for new political parties and fringe candidacies.
The dynamics of political competition in France have tended to bolster statism in two
ways. The first way is in the pledges that politicians make to secure election. The fact that the
main party of the right was founded on statist principles, that parties of the right ran the dirigiste
model for most of the postwar period, and that state intervention continues to be linked with the
very appealing theme of resisting American hegemony means that it is almost impossible for
politicians of the right – let alone the left – to run a successful campaign without some kind of
statist agenda. This pressure is intensified by the two-round ballot system, which allows upstart
parties and candidates to siphon votes from mainstream candidates who move too far in a liberal
direction.
24
The second way in which the dynamics of French political competition bolster statism is
in the policies that politicians pursue once in office, even self-styled liberal politicians (Berger
1986; Levy 1999). Again, the experience of Jacques Chirac – this time, in the mid 1980s – is
revealing. When Chirac became prime minister in 1986 under a then-fashionable neo-liberal
banner, his campaign included a pledge not to touch the welfare state. For a leader whose
formative political experience was May 1968, social cohesion trumped tax cuts. Nor was this
Chirac’s only deviation from neo-liberal orthodoxy. His high-profile privatization program was
very much marked by dirigiste habits.
Although the Chirac government privatized a large swathe of French industry, its strategy
– drafted and micro-managed by Minister of Finance, Edouard Balladur – was anything but freemarket (Bauer 1988). In a time-honored Gaullist tradition, foreigners were barred from holding
more than 20 percent of any company. The price of the companies was set by the government,
not by auction in the market. Finally, through a series of backdoor bargains, Chirac and Balladur
forged a system of mutual cross-holdings and interlocking directorates that enabled a small
coterie of Gaullist loyalists to gain control of the privatized companies at low cost, to be
insulated from hostile takeovers, and to be responsible to each other, rather than to the market.
The Chirac government’s commitment to neo-liberalism was further undermined by the
pressures of the dual executive system. Although the right won the parliamentary elections of
1986, the real prize was a presidential election just two years later. Under the French system, if
Mitterrand managed to defeat Chirac for the presidency in 1988, he could dissolve the parliament
and count on winning a Socialist majority to support him. Consequently, Prime Minister Chirac
was running for president almost from day one. Despite a pledge to shrink government spending
by 1 percent of GDP annually, Chirac began to prime the pump after his first year in office,
expanding infrastructure and labor market programs to reduce unemployment. As a result, when
25
Chirac went down to defeat in 1988, total government levies had decreased under his tenure from
43.4 percent of GDP to …. 43.1 percent.
The lesson of the Chirac government is that for a variety of political reasons – concerns
for social order, lingering statist proclivities among Gaullist figures who ran the dirigiste
machine for decades, and a very short electoral cycle – the commitment of French authorities to
liberal economic principles, on the rare occasions when such a commitment is voiced, is honored
mainly in the breech. Indeed, much the same story could be told of the more cautiously liberal
Balladur government from 1993 to 1995 and the Juppé government from 1995 to 1997. Thus,
France’s political system tends to favor statists over liberals in the competition for public office
and to dissuade even self-styled liberals from implementing their preferred policies in the
(unlikely) event that they gain office.
SECTION 4 – INSTITUTIONAL PRESSURES FOR STATISM
The roots of statism in France are institutional as well as political. Part of the reason why
the demands for social protection or new forms of economic coordination have been directed
toward the state is that there is no obvious alternative in French society. As Tocqueville
lamented over 150 years ago, French authorities have long concentrated power in the central
state, while weakening or, at least, neglecting societal and local institutions. This orientation
figured especially prominently in the postwar dirigiste model. Under the logic of dirigisme, state
authorities needed to be free to pursue the general will, unimpeded by conservative, self-serving,
particularistic interest groups. The “strong” French state rested upon a “weak” set of societal and
local organizations.
In the post-dirigiste period, this strategy has come back to haunt French policymakers –
an outcome that I have labeled “Tocqueville’s Revenge” (Levy 1999). Time and again, French
26
authorities have attempted to devolve economic and social functions to actors outside the central
state, who were deemed more flexible, efficient, and democratic. Yet in each instance, the
organizations in question have been too weak and divided to handle these new responsibilities.
As a result, pressures for intervention have bounced back into the state arena, spawning new
forms of state activity. We can see this pattern in a number of areas, including industrial
relations, business finance, the promotion of SMEs, and health care.
Aside from the brief and unsuccessful neo-liberal experiment of Jacques Chirac from
1986 to 1988, French authorities have been extremely uneasy about embracing the market. Their
preference has tended to run toward Germanic solutions, toward economic and social
coordination by institutions located between the state and the market. As the state withdrew
from detailed industrial relations, French authorities hoped that unions, employers, and works
councils would work together to upgrade training, launch apprenticeships, and expand flexibility.
As the state withdrew from industrial policy, French authorities hoped that investment banks
would nurture long collaborative relations with industry, what the French call banque-industrie,
taking an equity stake, providing capital in hard times, and financing risky long-term
development. As French authorities became less enamored of “national champions,” they looked
to provincial policy networks to nurture local districts of SMEs with guidance, technology, and
capital. And as French authorities sought to move away from micro-managing the health care
system, they hoped that the medical profession could organize responsible cost control.
The case for the Germanic approach was bolstered by a number institutional reforms in
the 1980s that seemed to point France in a teutonic direction. France’s 1982 Auroux laws
mandated firm-level bargaining, a process that could conceivably evolve into something like
Germany’s celebrated system of codetermination. The rigged privatizations of Chirac and
Balladur laid the foundation for German-style investment-bank strategies, as the main banks and
27
insurance companies in France acquired substantial equity holdings among industrial enterprises.
The Defferre decentralization laws gave new powers and resources to local authorities, who were
expected to promote small business in the manner of Germany’s decentralized support for the
Mittelstand. And the government’s formal recognition of MG-France, a doctor’s association
representing general practitioners, fueled hopes of German-style, corporatist agreements to rein
in health care spending, while safeguarding public health priorities (la maîtrise médicalisée).
The Germanic, associational approach confronted two central difficulties, however. The
first was historical. The domination of state authorities throughout the postwar period had
marginalized, weakened, and distorted the strategies of the very institutions called upon to
assume critical responsibilities in the 1980s and 1990s. As a result, these institutions tended to
be ill-prepared for weighty coordinating functions.
In industrial relations, French unions were divided into five rival movements, who fought
each other as much as employers. Union strategies were geared toward influencing the national
political arena, as opposed to the workplace arena, since it was in the national arena that they key
levers influencing worker destinies could be found: hefty boosts to the minimum wage; the
extension of wage agreements from one sector to another; bail-outs of loss-making firms. Firmlevel bargaining, by contrast, received relatively scant attention. Thus, French unions entered the
post-dirigiste period with few members, many rivals, and little experience with workplace
bargaining.
In finance, postwar dirigiste policymaking had likewise done little to prepare France's
banks and insurance companies for the banque-industrie mission. The financing of
developmental or industrial policy priorities had been handled directly by the state, through its
special lending channels, not by the large deposit-taking banks. Indeed, under the system of
administered credit rationing, France's banks were actively discouraged from seeking out risky or
28
long-term projects. Consequently, they had neither cultivated close ties to industrial clients nor
developed a capacity for balancing risks against profit opportunities.
France’s provincial policy communities were also unprepared for the responsibilities of
the 1980s. Under the dirigiste model, local economic development policy was a state affair more
than a local affair, handled primarily by a high-flying national development agency, the
Délégation à l’Aménagement du Terrritoire et à l’Action Régionale (DATAR), along with stateappointed prefects in the provinces. Local authorities were legally barred from providing direct
aid to companies, and their budgets kept at modest levels. To the extent that provincial officials
were involved in economic policy at all, it was primarily as supplicants, pleading with Parisian
technocrats to locate factories in their community or bail out ailing local firms.
Finally, the French health care system displayed a pattern much like that of industrial
relations, with a medical profession divided into a number of warring organizations. Despite the
fact that the French welfare state is ostensibly of the “Bismarckian,” as opposed to
“Beveridgean” variety (Palier 1999), with the social partners administering the system in a
corporatist fashion, in practice, state authorities set the key parameters, such as benefit and
contribution levels. As a result, French medical associations had little incentive to behave
responsibly, lobbying instead for special privileges from the state (Hassenteufel 1997).
Along with the historical legacies of dirigiste policymaking, the second factor limiting the
Germanic or associational model in France was the relative modesty of institutional reforms in
the 1980s. The arrival of a leftist government in power for the first time in decades offered a
chance to shuffle the institutional deck, and as described above, several reforms did create new
opportunities for societal and local institutions. Still, most of these reforms were passed during
the initial ultra-dirigiste phase of the Mitterrand years and were geared more toward second-left,
autogestionnaire themes of participation and democratic expression than toward economic
29
coordination. As a result, the reforms did not tend to give societal and local institutions the
powers that they needed.
The Auroux laws mandated workplace bargaining, but left France’s anemic labor
movement without the capacity to negotiate with employers on an equal footing. Privatization
gave French financial institutions an equity stake in industrial enterprises, but the banks were
squeezed as both lenders and borrowers by policies of financial market liberalization and were,
therefore, in no position to engage in risky, long-term investments. The Defferre laws freed
French local authorities from heavy-handed state controls, but gave them little extra money and
failed to rationalize a distinctly un-Cartesian provincial landscape, marked by a proliferation of
overlapping local initiatives. Finally, the government conferred official recognition on MGFrance, but did little to bolster this organization against its rivals in the medical profession.
The weakness and inexperience of French institutions between state and market -whether historically predetermined or the result of the timidities and contradictions of the 1980s
– scuttled the Germanic, associational project. The weakness of French unions, who collectively
organize less than 5 percent of the private-sector workforce, meant that instead of codetermination and cooperation, French industrial relations reform was marked by one-sided
deregulation. In finance, instead of forging long-term, strategic alliances with industry, most
French banks avoided the kinds of high-profile, risky clients favored by the government, not to
mention small business. When banks did embrace the German banque-industrie strategy, the
results were uniformly disastrous, notably for the self-styled “Deutschebank of France,” Crédit
Lyonnais, which became the largest bankruptcy in French history. In local governance, instead
of policy networks united in the promotion of small business, French provincial authorities
offered a proliferation of competing, underfunded initiatives that held little interest to local
SMEs. Finally, in health care, instead of spearheading a negotiated containment of expenditures,
30
MG-France was denounced and bled of members by rival medical associations, while health care
spending continued to spiral out of control.
In all of these areas, the failure of the Germanic project has placed tremendous pressure
on state authorities to salve pressing problems. With neo-liberal deregulation politically
contested and German-style coordination institutionally unavailable, state authorities have found
themselves on the front line. In response, the French state has re-intervened on a large scale.
In industrial relations, to cushion French workers against a one-sided, employer-driven
deregulation, state authorities have both spent and re-regulated. Official unemployment, high as
it is, has been limited by massive spending on early retirement, subsidized hires, and government
internships. On the regulatory front, the government has imposed modest restraints on lay-offs –
more consultation, better severance packages – and a less modest requirement that firms move to
a 35-hour workweek. The Jospin government has also sought to bolster French workers by
blocking what it regarded as excessively one-sided collective agreements to implement the 35hour workweek in the metal and mining sector and to introduce job search requirements into the
unemployment insurance system.
The financial arena has likewise seen extensive state intervention. When French banks
neglected low-margin SMEs, the government created a series of specialized credit channels,
providing billions of francs of subsidized loans, which were eventually merged into a Bank for
the Development of SMEs. When French banks refused to assist troubled “national champions,”
the state injected 10 billion to 20 billion francs in Renault, Air France, Thomson, Bull, and the
SNCF respectively. And when Crédit Lyonnais, the leading proponent of the banque-industrie
strategy, experienced an un-German financial collapse, the government committed over 50
billion francs to a rescue package.
31
In the provincial arena, with local authorities unable to mount coherent, well-funded
programs in support of SMEs, the state has stepped into the void. As noted above, state
authorities have created a number of special lending channels, culminating in the SME
Development Bank, as well as programs that encourage SMEs to integrate new technology,
launch new products, or upgrade managements structures. State authorities have also bolstered
their organizational presence in the provinces, shifting personnel and resources downward, in
order to be able to respond quickly to the demands of local business. Most of the small-business
programs are administered by so-called "deconcentrated" agencies associated with the Ministry
of Industry: the National Agency for the Valorization of Research (ANVAR), the Agency for the
Development of Applied Production Technology (ADEPA), and the Ministry of Industry's own
field services, the Regional Directions of Industry, Research, and the Environment (DRIRE).
The French use the word "deconcentration" to denote a shifting of power within the state, from
Parisian ministries to provincial branch offices -- in contrast to "decentralization," which entails a
transfer of power away from the state, to independent, elected local authorities.
Finally, in health care, the failure of a negotiated approach to cost control has given way
to a decidedly top-down approach. In 1995, the Juppé government, a government of the right,
enacted what has come to be known as the “nationalization” of the French health care system.
Juppé’s reform, which required an amendment to the French constitution, subjects the health care
budget to a parliamentary vote. His hope was that by imposing an annual budget from above,
rather than accommodating a series of autonomous spending decisions from below, the
government would be able to better limit spending. The Juppé plan also tightened administrative
controls on hospitals and proposed to reward or punish physicians by adjusting fees annually,
from one region to the next, according to each region’s success in meeting government spending
targets. The Jospin government has continued along these lines, levying penalties on medical
32
professions and pharmacists who exceeded public targets. Recently, the French employer
association withdrew from participation in the health care administration, arguing that there was
no sense in participating in a system where the government called all the shots.
In responding to the temptations and pressures for intervention, French authorities have
sought to fashion more market-conforming, light-handed methods. They have tended to be more
respectful of private initiatives, underwriting business adjustments to international market
competition, as opposed to trying to block such adjustments. Even when state intervention has
been motivated primarily by social considerations, some improvements can be detected. Early
retirement programs may be expensive, but they do allow French industry to restructure with
relatively little opposition. Bail-outs of French banks or loss-making nationalized companies
may not be the best way to spend public money, but at least, they have been framed as one-time,
transitional measures on the road to privatization, rather than new attempts at state guidance.
Thus, France has not come full circle. Post-1983 state intervention attests to a certain degree of
institutional learning and market sensitivity. Still, if France has changed, that change cannot be
equated with the eclipse of the state. Indeed, almost 20 years after the break with dirigisme, the
French state is absorbing a greater share of GDP than at any time in the postwar period.
SECTION 5 – CONCLUSION: IMPLICATIONS OF THE FRENCH EXPERIENCE
This paper has sought to explain why state intervention has proven so resilient in France,
notwithstanding the repudiation of the dirigiste model and the growing constraints of
globalization and European integration. My explanation has emphasized political and
institutional factors. Politically, France has been a case of liberalization without liberals. It is
not just parties on the French left that feel ambivalent about liberalization, but also a French right
marked by the Gaullist-statist heritage and a deep concern for social order. Moreover, the
33
combination of a very short electoral cycle (due to the dual executive system) and quasi-primary
elections has generated strong pressures for state intervention, whatever the feelings or
preferences of politicians. Institutionally, France has been a case of “Tocqueville’s Revenge.”
The inability or unwillingness of state authorities to rebuild long-neglected societal and local
institutions has left the French state on the front line. Lacking buffers to deflect demands for
economic assistance or social protection, French authorities have found themselves intervening
on a massive scale.
My point is not that France has failed to change in the years since 1983. On the contrary,
France has experienced significant liberalizing reform. The dirigiste model has been dismantled,
the market unleashed, and French competitiveness greatly enhanced. Still, the move toward the
market has not been accompanied by a shrinking of the state, but rather by a redeployment of
state energies to new arenas -- labor markets, social protection, and the promotion of SMEs.
Looking toward the future, it might be argued that the French state has not shrunk yet,
that the new forms of state intervention are part of a transition phase, and that once this transition
has completed, the French state will finally be downsized. Several developments augur for this
scenario. The pressures of globalization and a liberalizing European Union continue to mount,
while mainstream French politicians regularly express the need to reform and trim the state.
Equally important, one of the principal drivers of state intervention, the short electoral cycle, may
become a thing of the past with last year’s constitutional reform shortening the presidential
mandate to five years, the same as parliament’s.5 Perhaps of greatest significance, the emergence
of a militant employer organization, the Mouvement des Entreprises de France (MEDEF), which
is pushing hard for Anglo-American-style liberalization, may offer a solution to the as-yet-
5 Of course, were a president to call an early parliamentary election, as remains the president’s prerogative, the
presidential and parliamentary electoral cycles would again become decoupled.
34
intractable challenge of curtailing state intervention without triggering massive anti-government
protests.
In the past two years, MEDEF has played on the divisions and weaknesses French unions
to negotiate a series of very one-sided collective agreements. While the Jospin government has
used its power to blunt these initiatives, President Chirac has expressed great sympathy for
MEDEF’s approach. Indeed, several elements of Chirac’s campaign have been inspired by
MEDEF themes, and the French employer association is openly supporting Chirac for president
in the spring 2002 election. Thus, a scenario becomes plausible under which a newly elected
President Chirac, backed by a parliamentary majority and confronting no national elections for
the next five years, unleashes MEDEF to impose the reforms that prime ministers Balladur and
Juppé were unable to enact. Of course, this scenario depends on a number of outcomes that are
by no means assured: Chirac wins the presidential election; the right wins the legislative
elections; Chirac upholds his commitment to MEDEF, which contradicts many of his other
campaign promises; the unions fail to stand together to resist MEDEF in collective bargaining;
and most critically, those groups hurt by the reforms do not hold Chirac (as opposed to MEDEF)
responsible and take to the streets in protest.
More likely, though, French leaders will continue to confront powerful pressures for state
intervention. The Tocquevillean problem has not been resolved, leaving the state as the only
recourse for those in search of protection. The past year has witnessed the multiplication of
protests by various groups – public hospital workers, truckers, police, farmers, employees of
bankrupt companies, etc. -- demanding state assistance, and in the time-honored French fashion,
the Jospin government has largely accommodated these demands. Moreover, if the post-dirigiste
period has taught us anything, it is that French authorities stand all-too-ready to substitute new
state interventions for the old. Finally, it is by no means clear that the constraints of
35
globalization and European integration are incompatible with extensive state intervention. In the
last few years, Sweden, where the state’s share of GDP is even higher than in France, has
experienced very strong growth, large budget surpluses, and a return to quasi-full employment.
More fundamentally, if some of the French state’s activities appear wasteful and at odds with
competitiveness, other interventions have made a clear economic contribution, expanding the
resources available to French firms and facilitating the reorganization of the labor force.
France’s competitive position has improved greatly since 1983, and the country’s economic
performance has been roughly comparable to that of other leading European nations, like
Germany or Italy.
It is also important to gauge French intervention against real-world alternatives, as
opposed to a neo-liberal ideal-type. No country is without defects. The US under-invests in
public goods and over-invests in prisons (the worst of all passive labor market policies); Japan
has huge public debt, a bloated, inefficient service sector, and a banking system buried in
liabilities; and Germany has sky-high labor costs and an undigested East. The combination of
wasteful and effective interventions in France does not appear significantly worse than the
combination of wasteful and effective interventions in countries that are often held out as
“models” to emulate. If globalization can tolerate the dysfunctions of the US, Japan, and
Germany, then it can probably accommodate a good deal of intervention by the French state -- all
the more so if this intervention bolsters market players.
The evolution of the French state since the 1983 U-turn holds three important lessons for
our understanding of institutional change in a globalizing economy. The first is that shifting
institutional paths requires a positive action as well as a negative action – the forging of a new
mode of economic and social regulation to replace the old. In France, state authorities did more
to eliminate their own dirigiste interventions than to empower alternative institutions to intervene
36
in their place. As a result, the French state was quickly confronted with new demands for
intervention. In short, absent the forging of a new institutional order, there will always be
pressures and opportunities to resurrect elements of the old.
The second, related lesson of the French experience is that state intervention can morph
and migrate. Whereas voluntarist industrial policy is a thing of the past in France, labor market
expenditures have attained Swedish levels, and the French welfare state has become the largest
outside Scandinavia. For this reason, in gauging institutional change, it is important to examine
what is new, not just what is old. If we confine our investigation to existing forms of state
intervention, to the question of whether these forms are surviving or being undermined, we may
be committing the analytic equivalent of searching for the key under the lamppost. In the French
case, such an investigation would yield the erroneous conclusion that the state has become a nonfactor.
The third lesson of the French experience is that to the extent that globalization or
European integration necessitates institutional change, national responses may take the form of
institutional redeployment, as opposed to institutional eradication. This vision stands in contrast
to strong globalization claims about convergence, but also to path-dependent analyses
emphasizing the persistence of long-established arrangements. French authorities have not
perpetuated postwar dirigiste arrangements; they have dismantled these arrangements. There has
been real change. At the same time, the French state has not shrunk, as the logic of globalization
would anticipate. Between plus-ça-change continuity and globalization-driven convergence,
France may be on a third path -- where old forms of state intervention have been discredited and
cleared away, but new forms have emerged in their place. Borrowing from Schumpeter, we
might conceive of this third path as a kind of “institutional creative destruction.”
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