Nationalization in France
After World War Two, France was in ruins, and the post-war government of Charles De Gaulle nationalized critical sectors of the economy as part of a massive effort to reconstruct their economy. Through the efforts of a leader that many believed to be a conservative right-wing President, De Gaulle transformed the government into a major economic player in the French economy.
The French government controlled 98% of coal production, 75% of electricity, 58% of the banking sector, 38% of the automobile production, and 15% of the total GDP. (Cohen)
France through its economic reconstruction effort enjoyed over thirty years of growth and prosperity. From 1950 to the 1970s, France’s GDP grew 5% per year while during the same period, in one of the more prosperous eras in American economic history, GNP in the United States grew 3.6% per year. (Cohen) At the same time, unemployment in France was near zero and working-class men and women saw dramatic increases in their standard of living, but like the United States, the 70s brought globalization, stagflation, the exporting of their industrial base, and competition with cheap slave and child labor in countries with no environmental or labor regulations.
Conservative governments that came into power during this era began a process of privatizing the nationalized industries. The priests of neo-liberal capitalism preached open borders, a common currency for Europe, and a united economic system based on free market capitalism. In response to this right-wing surge and the fact that France had lost 700,000 jobs in the industrial sector during this period and the standard of living for your average French citizen was in decline, the socialist Francois Mitterrand was elected President of France in 1981, and he immediately moved forward on his campaign promises to nationalize seven key industries along with thirty-six banks. At the same time, he implemented Keynesian type economic policies of government spending and investment in order to stimulate the economy, create jobs, and put money into the hands of consumers through increasing government employment, the raising of the minimum wage, a guaranteed income for retirees, and the increased productivity that would cause the revitalization of its industrial base and the stabilizing of the banking industry. He planned to pay for these expenditures by increasing the inheritance tax and increasing the tax on the wealthy.
The response of the inheritors, the wealthy, and the vampires who controlled the blood banks in France, Europe, and the rest of the capitalist world was to turn off the flow of blood to the French economy, and that was it. The Bank of France raised interest rates causing the value of the French currency to raise. This hard money policy negatively affected industries that depended on low interest rates, i.e., consumers, the auto industry, construction, exports, etc. In addition, domestic and foreign financial institutions and businesses cut off investments in the French economy, laid off workers, and exported their money to foreign havens and investments outside of France. At the same time, the blood banks were making more money off money because the price of blood went up.
The French economy tanked, and the public blamed the Mitterrand government for the economic collapse. Mitterrand and his administration were at the mercy of the bankers; and in order for the economy to be bailed out by the vampire capitalists that caused the collapse, Mitterrand had to throw himself and his administration and all the reforms to capitalism that they had implemented on the Aztec alter of human sacrifice and watch, still alive and pulsing, the heart of his reforms being torn out as he was forced to implement an austerity program, reduce government spending, roll back the welfare state and government investment in the economy, and move forward in the trans-European negotiations that resulted in the 1992 Treaty of Maastricht, the creation of the European monetary union, an imposition of open borders and free market rules, and the subsequent EU treaties that committed member states to privatization.
The question now becomes, how efficient were the nationalized industries and how efficient are they today in France, and to what extent have they served the common good? Neo-liberal economists and pundits would like us to believe that the French nationalization program was a total failure. High priests of free market capitalism, like Milton Friedman, ridiculed Mitterrand’s plan, and at the same time, encouraged the head the United States Federal Reserve, Paul Volcker, to increase interest rates over and over again to combat stagflation, a policy that tanked the American economy in the same way that it tanked the French economy. It was this policy of hard money that enabled the Japanese to penetrate the American market with lower priced cars simply based on currency exchange and the value of the dollar versus the yen. Hard money affected the price of all exports, and the high interest rates effected consumer credit and all industries that relied on low interest rates, i.e., the building and construction industry. As noted earlier, the only winners were the banks, financial institutions, credit card companies, bond holders, and the possessors of money.
Quite simply, the facts do not support the perceptions of the free market faithful. Among the six largest industrial groups nationalized in France in 1982, several of which were losing money and going under, all six were turning a profit in 1985, and at the same time, the employees were experiencing more job security, better pay, and better working conditions. (Cohen) From a perspective other than efficiency, the significance of government ownership and its prime objective of serving the public good over profit was highlighted in the government’s takeover of the coal industry. The coal industry was being phased out for both economic and environmental reasons, but unlike Thatcher’s United Kingdom where miners and workers in the coal industry were essentially thrown out onto the street to fend for themselves, the Mitterrand government initiated a decade long plan to wind down the industry and gradually displaced the workers through retirement and placement in other government owned industries. The government also saved jobs in a steel industry that was on the brink of bankruptcy. The steel industries that the government owned were streamlined so as to compete in the contemporary global market, and by 1990 France was the second leading producer of steel in the world, and though they still struggle to keep out of the red, the French steel industry never suffered what we have seen in the United States where large segments of America that relied on steel production have turned into a rust belt of unemployment, poverty, and abandonment.
The Mitterrand government also invested in technology and new industries. An example of this was the revitalization of Air France and the investment in the British-French-German Air Bus Consortium. The French government still owns 13% of the company that reported $2 billion dollars in profits in 2008. Even today after years of conservative government and the EU trying to privatize the European economies, a significant share of the French economy still is in the government’s hands. In 2006, the state controlled 90 companies directly and 755 companies indirectly, and in 2007, the portfolios of these companies were estimated at $191.9 billion euros. (Cohen)
The neo-liberal pundits and believers in free market capitalism like to point out the failures of the French government’s nationalization of key industries, i.e. Credit Lyonnais and Elf-Aquitaine, but the privatized sector has its failures too, and the failures of the French government does not compare to the failures in the United States, i.e., Enron, General Motors, the Savings and Loan collapse and scandals, and the 2008 collapse of the mortgage markets and the private financial sectors in United States.
From our point of view, however, France’s attempts to reform capitalism through the nationalization of key industries and services and creating a hybrid of capitalism and socialism had significant and critical flaws. The most important of these flaws is the fact that they left capitalism intact to fester at the core of the economy. When threatened, it was able to reverse all the efforts to reform it by simply cutting off the flow of blood to the body politic. Also, the government reforms, for the most part, were for the people, not by the people as it should be in a truly democratic economy where the employees and citizens of the country directly share in the ownership of the enterprise and directly participate in the decision-making processes. However, there is in Europe an important example of a successful large-scale cooperative network that is owned and managed by its employees and is much closer to the concept of true economic democracy than the codetermination model and the nationalization model in France and that is Mondragon, the worker cooperative complex that will be discussed in the next excerpt.
Cites:
1. Cohen, Paul, "Lessons from the Nationalization Nation: State-Owned Enterprises in France," Dissent Magazine, Winter 2010 https://www.dissentmagazine.org/article/lessons-from-the-nationalization-nation-state-owned-enterprises-in-france
Illustrations:
1. Illustration #18, The Alchemy of Money, Tino, Marcello and Andrea Dalla Bona, Learn or Die: The New American Revolution, Thompson and Prince 2020
2. Cartoon, French Economic Nationalization, Source, Nick Anderson, Houston Chronicle
Author's Note - This the first in a series of excerpts on The Prelude To An Economy By The People. The excerpts will focus on the flaws of previous attempts at reform of the economic system. On our way to a new paradigm we will focus on (1) The New Deal, (2) Nationalization of the French economy during the Mitterrand Era. (3) German Codetermination, and The Mondragon Cooperative Network.
Author's Note - I have made Learn or Die: The New American Revolution available to you through Smashwords in a Freedom for Free Edition where you can pay what you want for the book or nothing at all. It is free. I'm doing this because after 50 years of research and study I believe I have found the way for all of us.
Comments