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So far I've been speaking mainly about Britain. The first major attempt at a real monetarist experiment was made by Giscard d'Estaing who came to power as President of France in 1974. Giscard of course had no pretensions to being a Socialist but this was nonetheless a radical change in the French consensus which, during de Gaulle's long reign, had favoured policies of government intervention and national sovereignty. But the real failure of French Socialism came after the victory of François Mitterand in May 1981. Given that the Left had been out of office since the formation of the Fifth Republic in 1958, this was a huge event - a response to the austerity that had been imposed under Giscard by the Minister of Finance, Rayond Barre. Mitterand's 110 Propositions for France was an ambitious programme for a Keynesian economic reflation and redistribution. 'A burst of reformist activity rarely seen anywhere in advanced capitalism since 1947 began immediately following the 1981 election. There were nationalisations on an unprecedented scale, plus reforms to strengthen union and worker rights on the shopfloor. The government began a bold redistributive scheme of demand stimulation. Social programmes were reinforced and certain new measures such as early retirement and work sharing were introduced. The promotion of research and development, culture, gender equality and education received new attention and bigger budgets.' (8) Fazi and Mitchell (loc 1481) describe it as 'an attempt to revive and extend the post-war dirigiste model that the previous right wing government had attempted to dismantle.'

(8) George Ross and Jane Jenson: 'The Tragedy of the French Left', New Left Review No 171, 8th September, 1988, p.7.

Ross and Jensen however suggest that the programme had been the result of Mitterand's support for the left wing 'CERES' group within the Socialist Party, largely ex-Communist Party members, as a means of seeing off a leadership challenge from Michel Rocard, formerly a leader of the 1968-era Parti Socialiste Unifié. Mitterand 'thus moved towards his 1981 presidential candidacy with a party whose programme, written by CERES, was considerably to the Left of most of its membership and electorate ... For the Socialists ... [the] programme had always been more rhetorical currency to undercut the Communists than commitment to policy. The Left did move quickly to implement the new reforms but its pre-1981 history meant that many of its new policies were more in the nature of slogans than of maturely thought-out approaches to change. Worse still, little thought had been given to the difficulties, especially those caused by the parlous state of the economy which were certain to ensue as the government tried to carry out these measures. Given that the PS was considerably to the right of its programme, and that the President was much more of a manoeuvrer than a man of deep left principle, the likely trajectories were not difficult to predict.' (pp.34-36). 

Ross and Jensen put this 'parlous state of the economy' down to contradictions within the capitalist reform programme of Giscard d'Estaing and Raymond Barre, sufficiently brutal to alienate the working class and create the impetus for Mitterand's victory but not sufficiently brutal to impose a thoroughgoing neo-liberal logic as Thatcher was later to do: 'The living standards of French workers - those employed to be sure - continued to rise during this period along with spending on the social services ... Barre's attempts to control international problems through an overvalued franc heavily penalised French industry's already weak trade positions. In consequence, investment virtually ceased in French industry after 1974. Such muddling through set a time bomb ticking for whoever took charge of the economy in 1981. The absence of serious deflationary policies plus administrative controls to keep unemployment levels down meant that capital could not 'purify' itself in ways which would otherwise have been dictated. An overvalued currency artificially cut back the limited export prospects of an industrial base which was already at the outer margins of competitiveness ... One index of how desperate the situation had become was that virtually all of the industrial conglomerates which the Left had pledged to industrialise [sic. nationalise? - PB], a group which included the fine fleur of French multinational corporations, were deeply in the red by 1981. For similar reasons French agriculture was also in desperate shape.'  

On top of that, Europe was facing what was called the 'Volcker shock', when the US treasury introduced a very high interest rate policy, radically raising the value of the dollar. In response, the German Bundesbank did likewise so as not to lose value relative to the dollar and France, as a member of the European Monetary System, precursor of the Eurozone, was forced to do the same. The EMS had been designed by Giscard and by the then German chancellor, the Socialist Helmut Schmidt. It anchored all participating currencies to the German mark through the Exchange Rate Mechanism (ERM), meaning that, following Fazi and Mitchell: 'a nation facing reduced international competitiveness had to cut costs (for example, by constraining wage rises) to bring its inflation rate down and constrain domestic demand to reduce growth in national income and GDP, in order to reduce spending on imports.' Fazi and Mitchell continue: 'By tying the French franc to the German mark through the ERM, the EMS restricted the French government's ability to adjust monetary policy to meet the country's macroeconomic needs.'

'Mitterand found himself in a position where a decision had to be made about whether to leave the EMS or abandon the progressive agenda. Regrettably he chose the latter path. In the Spring of 1983, Mitterand and the Socialists suddenly and drastically reversed course, in what became known as the tournant de la rigueur ... Mitterand was convinced by his finance minister (and future president of the European Commission) Jacques Delors to adopt a "strong franc" policy in which the French franc would be purposely overvalued to ensure monetary stability and to counteract inflationary pressures. On 16 May 1983, the European Council extended a large foreign currency bailout to France on condition that it tighten fiscal policy. The French agreed to limit their fiscal deficit to 3 per cent of GDP in 1983 and 1984, restraining social security and unemployment insurance payments and cutting the capacity of state owned industries to borrow ...'

Effectively Mitterand began to pursue a policy similar to the one Thatcher was pursuing in Britain, forcing mass layoffs in steel (25,000 jobs), ship building (6,000 jobs, reducing its capacity by 30 per cent) and mining (over 20,000 jobs). Fazi and Mitchell describe it as a product of 'the long standing battle between the old-school planners - who supported a policy known, literally, as 'l'autre politique' (essentially to close off France's markets, to float the franc and reject the constraints of the EMS) - on one side and the economists and technocrats of the Trésor (Finance Ministry) and the Banque de France on the other, who had been advocating price stability, financial austerity and 'European solidarity' long before 1983. These included prime minister Pierre Mauroy, Trésor director Michel Camdessus (who subsequently went on to become the über-liberal governor of the Banque de France and then the head of the IMF), and finance minister Jacques Delors.'

Note that this is not a straightforward battle between 'Socialists' and 'Conservatives.' The 'old school planners' had established themselves during the long period of De Gaulle's reign and probably identified more or as much with the European Christian Democratic political tendency as with the Socialists. The Socialist Jacques Delors declared that 'National sovereignty no longer means very much, or has much scope in the modern world economy ... a high degree of supra-nationality is essential' and many Socialists agreed, believing that Mitterand's experiment had proved the impossibility of substantial Socialist reform within the nation state. We might remember my conversation, mentioned earlier, with Bob Rowthorne.