A softer landing

From State to Market?
May 23, 1997

Liberal political economists, especially this side of the Channel, often view France as the archetypal interventionist state whose resistance to the invigorating power of the market left it increasingly vulnerable to more efficient, low-cost economies of the Far East. French adoption of more liberal policies was subsequently seen as a belated victory of Adam Smith over Colbert. Reality is substantially more complex and very French, creating a more liberal system with interventionist techniques with the result that France could be better placed to face the global market than its more Calvinist neighbours.

Vivien Schmidt traces the evolution of French state-business relations during the Mitterrand era, which despite apparently huge swings in policy, saw the greater and most important parts of French business successfully transformed into modern, internationalised enterprises. Schmidt briefly sketches the origins of French dirigisme and initial steps towards liberalisation under Giscard, but moves rapidly to cover the past 16 years. The oscillation in policy during the Mitterrand years started with classic socialist doctrines of nationalisation; moved to deregulation and privatisation under the period of cohabitation; the neither-nor compromise of the second Socialist government, and finally more liberalisation during the final period of cohabitation. The domestic environment of change is set against an international background, especially the increasing impact of the European Union on policy styles and habits.

There is an underlying constancy of process which largely explains the successful modernisation of French government-business relations and of the French system of business. In order to explain this, Schmidt mounts an equally careful examination of the policy-making elite and the complex relations linking the state with the industrial and business core of the French economy. This is, perhaps, the largely familiar ground of les grandes ecoles and their closed, privileged world. But this book reveals much of the recent trends and pressures on the French ruling class. Schmidt shows us the conflicts and tensions which affected relations between ministries and the conflicts that erupted between state institutions and major corporate actors as the French business system responded to a more complex and internationalised economic and policy-making environment.

For the more academic reader, Schmidt's book provides an analysis of a policy system undergoing transformation. Schmidt argues that the French system is inadequately explained by pluralist, corporatist, state-centred and policy community models alike. In fact, the French approach to government business relations has to be defined in terms of a "statist" model, with Japan and the United Kingdom its nearest relatives. In this form, institutions matter, in turn shaped by history and shaping politics. Schmidt conforms to the traditional and perhaps debatable view that the main characteristic of the French statist approach to policy is to adopt a "heroic" style of policy formulation where a homogeneous elite develops policy in isolation, subsequently imposing the outcome on the French business system. This closed system is balanced by a willingness to discuss and to compromise with interested parties at the implementation stage.

A major catalyst for change has been the growing intervention of EU-level policy-making. Schmidt shows how the primacy of Brussels has decreased the independence of French governments and undermined their authority to act unilaterally. As a result, French business won more independence, looking as much to Europe as to the nation state for policy-making and its regulatory frameworks. Moreover, the increasing weight of Brussels's regulatory power has reduced the flexibility available to the French government at the implementation stage. This explains the growing discontent among some elements of French society that in the past were reconciled with government decisions by less rigorous application of their outcomes. The elite is also having to discover a new style of consultation and consensus-building in the formulation of policy at the European level.

This is one area of policy-making where Schmidt contrasts the British experience favourably with the French. We appear to possess a policy system more attuned to the Brussels style. Our policy elites seem better able to adjust to the collegial demands of EU policy-making which emphasises consultation and consensus-building at the formulation stage and a more emphatic and rigorous implementation of agreed policy positions. This was partly due to the growing authority of a liberally-minded DG-IV (directorate-generale for competition) which sat more easily with the dominant ideology of the Thatcher-Major governments, but it seems also to be more consistent generally with the Whitehall policy culture.

But from Schmidt's neutral American perspective, the British do not generally appear to have come through the last decade-and-a-half as well as the French. The UK adopted a stricter view of the market and the state disengaged from business more rapidly. This brought a range of short-term gains, especially in terms of accustoming business and labour alike to a harsher and more competitive environment. The cost was the culling of large swathes of production industries and/or the loss of national control over a large number of core business activities. Although the French may still have to pay the full price of conversion with more job insecurity and less luxurious social provision, a "dirigistic" process of conversion, with core industrial interests protected and nurtured, appears to have left France with a modernised industrial economy which should continue to thrive in the next century.

In a book of nearly 450 pages, Schmidt is likely to lose the casual reader. However, final-year undergraduates and postgraduates will find it useful for its clear introduction to the policy-making literature, and non-French reading scholars generally a source of much data about recent events in French government-business relations and the minutiae of French policy-making.

To do Schmidt justice, the book bears a close and careful reading. But, sadly, few British officials or politicians are likely to make the effort, or in some cases, to believe what they read. In any case, it might be too late for the UK to adopt the French soft-landing approach to liberalisation.

Keith Hayward is professor of international relations, Staffordshire University.

From State to Market?: The Transformation of French Business and Government

Author - Vivien A. Schmidt
ISBN - 0 521 49742 6 and 55553 1
Publisher - Cambridge University Press
Price - £55.00 and £19.95
Pages - 476

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