Steering for the rocks
Sam White
Paris Things are beginning to go badly for France's four-month-old Socialist government. Even though no one expected miracles from it — though miracles, if not actually promised, were often implied in the Socialist election promises — no one either expected the kind of incoherence and hasty improvisation which now characterises the new regime. 'Incorrigible Socialists', writes Raymond Aron this week, 'one would have thought they had studied the problems, defined the industrial policy which the nationalisations would be designed to serve and foreseen the means. Not at all. They have talked for ten years, discussed for a month, decided in ten days and only after leaving the final decision to the one among them who is most allergic to economic thought — the President himself.'
Take, for example, the matter of unemployment (the principal issue on which the Socialists won the election), which is now certain to go over two million by the end of this year. One would have thought from its election propaganda that the government had some coherent and grandiose plan for drastically reducing unemployment, if not actually eliminating it. The Prime Minister M. Mauroy, has now finally unveiled the plan which turns out to be a ragbag of improvised measures designed more to put the country on part-time work — at reduced rates — than to create full-time employment.
It is proposed to create a four-day week for government employees so that some of their work can be taken over by other parttimers while a scheme of sabbatical leaves for middle ranking executives will broaden the chances of employment for others. There will also be tempting credit facilities and a reduction of social charges to medium and small enterprises which take on more workers, and work camps for youths who have no jobs to go to after completing their military service. This latter idea, incidentally, has not been floated in France since the days of Vichy; one can imagine what an uproar it would have created if Giscard, with his family links with Vichy, had proposed it.
All this, the government claims, will create 120,000 new jobs by next year which at best is calculated to contain unemployment at its present level rather than diminish it. We are already far from the government's original promise to halve unemployment within a year and reduce it to a negligible figure in two. Furthermore, if the government's plans to reduce or contain unemployment are largely based on winning the goodwill of employers this has been immediately contradicted by its own fiscal measures, especially the introduction of a wealth tax. Originally it was promised that this tax would not include in the estimation of taxable wealth a factory owner's machinery. The ruling was abruptly changed so as specifically to include it. In short, what advantages in interest rates an employer was to receive in taking on more workers would be wiped out by a tax on his industrial capacity. It would also discourage him from investing in new machinery. The result of all this has been not a rush by small industrialists to take on workers but a rush to sell out to bigger concerns to rid themselves of taxable assets.
A similar confusion — and a highly demoralising one — arose over the funding of a gowing deficit in the Unemployment Insurance Fund. Until now civil servants, whose own security of employment is assured, have been exempt from paying a levy to this fund. Then M. Mauroy announced that in the interests of 'national solidarity' they too would have to contribute. However, the national executive of the Socialist Party, more conscious than M. Mauroy that civil servants form the mainstay of Socialist support in the country, quickly protested with the result that the measure was withdrawn.
If there is confusion over the measures to combat unemployment it is as nothing compared to the confusion over the nationalisation of French banks. Here it seems almost unbelievable that a government containing so many highly qualified men should have entered into a complex project in so illprepared a way. One can only conclude, in view of the calibre of men like Delors and Cheysson, that warnings were given but were not heeded by the President. Now the full storm of the domestic and international legal and financial problems has broken over the government's head. Through the three major banks, already nationalised, through its own representatives on all the others, and through a whole series of other agencies created in France since the war, the government effectively controls every avenue of credit. So why should it have been determined to nationalise virtually the entire banking system? It not only seemed pointless but also — which is proving to be the case — horrendously expensive. In compensation alone it will add an enormous extra burden on the Franch treasury which the taxpayer will have to bear for the next 10 or 15 years. It will therefore effectively reduce both the state's and the individual's capacity to invest in productive ventures.
On top of the financial burdens there are legal complications of a kind which international lawyers dream of. The finance minister M. Delors still insists that he will not nationalise foreign banks in France just as he once insisted to the Cabinet that the nationalisation of French banks should be scaled down. Now France's highest legal advisory body, the Conseil d'Etat, has ruled that if French banks are nationalised so must be the foreign banks operating in France. M. Mauroy can only side-step this ruling by raising the threshold at which French banks are to be automatically nationalised which would allow most of them to escape their fate.
If foreign banks are nationalised one can foresee an avalanche of legal actions; nationalisation in present day France is not the simple operation it was in the primitive days of the French economy in 1936 or 1945. Today all the companies that are about to be nationalised are in fact huge multi-nationals with world-wide ramifications which many foreign governments will refuse to see pass under the control of the French state. All too enjoy heavy foreign participation in the parent company. The result is that nationalisation in France, far from being a domestic affair, is an international one directly affecting its relations with a number of foreign countries. As a result the mere fact of nationalisation creates a kind of trauma in commercial relations with the rest of the world.
The case of Renault is often cited as an example of a successful nationalised industry. However, Renault not only receives huge government favours in subsidies but achieved its autonomous status after years of battle with the state and in the face of a succession of weak governments. It is the kind of battle which French industry and banking cannot afford to fight again. The alarm bells are already beginning to sound over the incoherence and the often selfdefeating nature of some of the government's policies and they are beginning to sound in such unlikely places as the Socialist daily Le Matin, the intellectual left-wing journal Le Nouvel Observateur, Le Monde, and even in Le Canard Enchaine. It is not the least disturbing feature of the French scene that L'Humanite can claim with some plausibility that it is the only fully loyal supporter of the government.
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