The French Way (42 page)

How to redirect and energize the French economic and social system without importing the American model was the dilemma. Pursuing
the path of what was termed “ultraliberalism,” which itself was a nasty euphemism for what went on across the Channel first under Margaret Thatcher and later across the Atlantic beginning with Ronald Reagan, might jeopardize the benefits and traditions embedded in the Gallic order. Social solidarity and state paternalism seemed at risk. One journal on the left framed the issue this way: the Americans had created more than 11 million new jobs, reduced unemployment to less than 5 percent, effected 3.5 percent growth in GDP without inflation, and advanced so far with twenty-first-century industries like information technology that the Europeans and the Japanese feared they would never catch up. But U.S. methods like downsizing, retrenchment, income inequality, and temporary work had unbearable social costs. The question became, “How can we obtain the same results as the United States without adopting their methods ?”
¹⁷

American Ultraliberalism versus Republican Solidarity

Both “liberalism,” and more emphatically “ultraliberalism,” was coded language in the political discourse of the 1990s—avatars for the Anglo-American market approach to economic and social problems. The debate over liberalism demands close attention because it reveals how American practices divided the political elite, figured prominently in an election, and informed the making of policy.

In general the French held a low opinion of American market liberalism. As we have seen, three out of four of those interviewed in the 1990s routinely castigated the U.S. economic system. It was commonly described as “savage” and “brutal” and marked by job insecurity, insufficient welfare protection, a low minimum wage, and inadequate public services. American “hard capitalism,” it was said, exhibited little concern for the environment and even less concern for those who couldn't compete. Americans, referring to their deference to the rich, actually approved egregious income inequality, the French asserted.
Le Monde
was typical: it acknowledged the magnitude of American economic achievements but ruefully pointed out the “pauperization” of many American workers and the precarite of employment.
¹⁸

Claims by the euphoric Americans that they had found the way to perpetual prosperity did not impress French experts.
¹⁹
They admired the American “job machine” but doubted that it created well-paid and secure types of employment. They pointed out the high level of indebtedness of companies and households, the stock market bubble, and the rising deficit in current accounts. One day, it seemed, the United States would have to face the constraints that limited other nations. America was dynamic but, they contended, it had not transcended the business cycle.

French reservations about America in the 1990s extended to a society that seemed violent and fractured by inequalities of race and wealth. Three out of four of those polled said American and French values were different with respect to the family, morality, law and order, work, and lifestyle. The French complained about Americans' mania for political correctness, their fixation with work, the unassimilated immigrants, the crime rate, the gun culture, treatment of the homeless, and reliance on capital punishment. The French ambassador to the United States wrote that the “harshness” of Americans was reflected in the way they fought crime and in their competitive ethos.
²⁰
A prominent journalist on the left described the social costs of “American methods” as “the poverty of twenty million whites and ten million blacks, the largest prison population in the world, the weakest social protection, the implosion of the educational system, crime and drugs in the urban ghetto.”
²¹
Correcting French weaknesses by imitating American liberalism did not seem like the answer.

If the good economy could not be achieved solely through market forces, neither could the good society. The better route, most French people assumed, was through a commitment to social solidarity, or, more accurately, to republican solidarity.
Republican
precedes this notion of solidarity because it derives from the founding principles of republicanism that date back to the French Revolution. The French
believed they took the goals of equality and fraternity, as the basis of a national community, more seriously than did Anglo-Americans. They attacked, rather than exalted, inequalities of income and wealth, and they preached the responsibility of all for the poor.

The editor of
Le Nouvel Observateur
contrasted Franco-American approaches to social policy. Citing conversations with President Clinton's economic team, Jean Daniel reported that these advisers, despite the spectacular achievements of their methods, admitted they had impoverished and marginalized many of their compatriots. As Daniel observed, “Modernity, happily, is no longer in any case a matter of renovating the economy by allowing an invisible hand, that of the market, to assure the happiness of everyone while prohibiting the state from imposing the slightest regulation. Now that communism has collapsed, it's not liberalism that has triumphed. On the contrary, it's the constructive critique of capitalism—its moralization—that has been rehabilitated. We see this flourishing in ten European countries (France could be the eleventh) that have rewarded themselves with a left-wing government and have declared their support for a social Europe….”
²²
A social Europe, in contrast with an Anglo-American liberal Europe, for Daniel meant, at a minimum, placing social objectives—like helping the disinherited and the insecure—at the same level as economic, monetary, and political goals.
²³

Any reflection on this virtuous presentation of republican solidarity and the reality of social life in France at the fin de siecle would have exposed discrepancies.

Solidarity both masked a defense of the status quo by vested interests and failed to reach all the disenfranchised, especially those living in the dismal banlieues. Much of the resistance to ultraliberalism and the pose of solidarity was little more than protecting entitlements or so-called
droits acquis
or
acquis sociaux.
Some scholars have denigrated republican solidarity as a fraud.
²⁴
All was not perfect with the French model and some, especially on the far right, wanted it overhauled.
²⁵
Nevertheless, the republican social contract remained the intellectual and political bulwark against adopting Anglo-American social policy.

Historically, free-market liberals had a difficult time getting a fair hearing in France. Neither before nor during the fin de siecle did the French embrace laissez-faire fundamentalism to the extent of either the British or the Americans. Raymond Aron once spoke of liberals in France as “the eternal vanquished, the internal exiles, admired outside of France but without visible influence inside the country.”
²⁶
Liberal economics had few champions in the 1990s; more common were rants against it, such as the antimarket polemic titled
The Economic Horror
, which sold some 350,000 copies.
²⁷
Gallic aversion for the market was both striking and resilient. In a 2005 survey of twenty nations the French led everyone, including other Europeans, in disagreeing with the proposition that “the free enterprise system and free-market economy is the best system on which to base the future of the world.”
²⁸
(Americans, of course, largely approved.) The market was, and is, not popular in the land of the Gauls.

“Ultraliberalism,” with its Anglo-American associations, was not an acceptable option for either the Right or the Left in the 1990s. Plain vanilla “liberalism,” however, was tolerable on the mainstream right-though it was usually spoken sotto voce. On the left even “liberal” was offensive. Among the political class there was virtual unanimity that America was not a model for reform. Liberalization would come, but only
a la française.
As Alain Duhamel wrote in 1993 about attitudes toward the market, “The Socialists are still reticent, the communists remain stoutly opposed, the Jacobins are allergic, the ecologists are ignorant, and the vested interests have an insatiable appetite for exemptions.”
²⁹
This remained the case throughout the 1990s.

The Left in this decade updated its critique and reified free-market liberalism into an economic vocabulary conflating it with economic inequality; rampant profit making; the disruptive forces of globalization, including the outsourcing of jobs; and, to be sure, the Anglo-Saxons.
³⁰
In the era of globalization
les gros
, the trope that market economies are run by a wealthy oligarchy, became the “masters of the universe”
(maitres de monde)
—that is, the CEOs of American investment
funds who reputedly acted as the pitiless agents of the new shareholder capitalism.
Liberalism
was equated with the market and all its unwelcome consequences at the expense of acknowledging its more appealing political dimension, which spoke to individual rights and civil society. To express their distaste the term was usually preceded by prefixes like
hyper-
or
ultra-.

One should not, however, exaggerate French aversion for market forces. Strictly speaking, France was a market economy and became more so at the end of the century. If virtually no one invoked Reaganomics as they did in the 1980s, at least “liberalism,” in the sense of recognizing the benefits of allocating resources via the market, gained adherents among conservative politicians, some economists, and business managers—especially those with global ties. It became legitimate among mainstream parties on the right such as the Union pour la Democratie Française (UDF) and the Rassemblement pour la Republique, and had its spokesman in the person of Prime Minister Edouard Balladur. And in the late 1990s, in a grudging way, moderate socialists like Lionel Jospin and Dominique Strauss-Kahn came to endorse a “managed” market economy. The market gained disciples among policy makers across the political spectrum—even if few celebrated it openly. Among the public at large, polls suggested that despite a continued attachment to a powerful state acting in the general interest, there was a growing acceptance of the market economy—at least in principle. By the end of the decade, two-thirds of voters on the moderate right and almost as many on the left endorsed the market economy.
³¹

Liberalization by Stealth

In the 1990s the Fifth Republic opened the economy to such an extent that it resembled what it looked like in the halcyon days before the First World War. It deregulated, privatized, and encouraged international competitiveness, including foreign investment, and it tried
to streamline the welfare state by trimming the costs of pensions and health care. But none of this, or so it was claimed, was in imitation of the Americans. To paraphrase Philip Gordon and Sophie Meunier, who explained the process of “globalization by stealth,” one might speak, in this case, of “liberalization by stealth.”
³²

What was driving fin-de-siecle France toward market remedies was less the gap with America than it was the need to reform an unsustainable welfare state, reduce unemployment, and gain international competitiveness, especially in light of European integration and globalization. Politicians on both the right and the left improvised: they tried, sometimes simultaneously, a dose of competition as well as what they hoped was more enlightened dirigisme. But they masked their turn toward the market by claiming their reforms did not subvert the French model and were not inspired by the Anglo-Americans. The elite of the Fifth Republic had to be wary and employ subterfuge if they were to introduce competitive policies as remedies for social and economic problems: they had to liberalize, yet sustain, republican solidarity and some measure of dirigisme.

Both socialist and conservative governments tacked away from the protectionist and statist policies of the past. They deregulated financial markets by opening them to foreigners, giving the central bank autonomy, initiating a NASDAQ-like stock market, and freeing investment from the control of the Ministry of Finance. Public monopolies like Electricite de France and France Telecom were exposed to private competition. The labor code was circumvented. In spite of rigid rules on employment contracts, loopholes allowed millions of new jobs as temporary work. Privatization accompanied deregulation. In 1993 Edouard Balladur specified a score of companies, starting with such giants as Elf Aquitaine (petroleum) and Rhone-Poulenc (chemicals and pharmaceuticals), and by the end of the decade virtually all these targeted firms had been returned to private ownership. All of the banking and insurance sectors were gradually privatized, as were most state-run manufacturing industries. Minority private shareholding was permitted in
such flagship nationalized firms as Air France. In fact, more privatization occurred under the socialists between 1997 and 2002 than under any of their conservative predecessors. Governments, both conservative and socialist, reduced taxes, worked to open the economy to EU competition, and adopted restrictive fiscal and monetary policies to prepare for the coming of the Euro at the end of the decade. And they blessed foreign trade and foreign investment and encouraged small business start-ups.