The French Model of Capitalism. The French Model of Capitalism. The Traditional French post-war Model Dirigisme – directive control of the economy French Model and IPE Challenges to the French Model Neo-liberal shifts e.g. finance, privatisation Restructuring French Capitalism
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The French Model of Capitalism • The Traditional French post-war Model • Dirigisme – directive control of the economy • French Model and IPE • Challenges to the French Model • Neo-liberal shifts e.g. finance, privatisation • Restructuring French Capitalism • How might we interpret changes in French political economy?
The French dirigiste model • Dirigisme ‘a set of interventionist policies and directive policy-making processes’ (Schmidt 1997: 229 – see module document, p. 40). • A ‘statist’ variant of ‘co-ordinated capitalism’ (Schmidt, 2003). • France’s state-led industrial development (Zysman 1983), an actively interventionist, dirigiste, ‘player’ state using its agencies to steer national economic development (Shonfield 1969: ch. 5; Hall 1986). • Underpinned by the Republican étatiste tradition
Key features of French Model • dirigiste tradition - an expansive role for the state in directive intervention in economic activity • Co-ordinating and steering mechanisms • price, credit and exchange controls • state tutelle (or guidance) of nationalized industries‘the habit of the exercise of power by public officials over the private sector of the economy’ (Shonfield, 1969: 128). • ‘institutionally allocated credit’ state’s ‘gatekeeper’ role providing strategic, cheap capital for industrial investment (Zysman). But - ‘capitalism without capital’. • The Plan – and powerful planning Ministry.
Key Features of French Capitalism • Elitism:Grand corps, informal networks of business, administrative & political elites. • Pantouflage – career moves from ministry to boardroom. • Corporate Governance – ‘napoleonic’ power relations within firm. PDG (boss) autonomous from board. • ‘Protected capitalism‘ – interlocking shareholdings & board memberships (noyaux durs). Capitalism without sanction. • France’s ‘financial network economy’(Morin 2000: 38) • Industrial Relations - Conflictual and fragmented. Union and business assocs – low membership, poorly co-ordinated. • However, labour market is highly regulated -‘Strong’ state, weak civil society
French Post-War Model and IPE Context • Predicated upon ‘embedded liberal’ compromise • French ‘mercantilist’ policies • competitive devaluations • Protecting strategic industries • Intervention to build up ‘national champions’ • Strong economic growth
Challenges to the French model • See Ben Clift’s chapter, A Ruined Fortress? • The end of Bretton Woods • End of ‘credit rationing’ • End of competitive devaluations • Fiscal austerity • 1983 U-turn, end of redistributive Keynesianism (Hall 1986) • ‘Picking losers’ • See Levy 2000, state aids propping up failing industries
‘Neo-liberal’ change to policy & institutions • Financial Deregulation and Liberalisation • Reforming & reviving French stock markets • State or banks no longer the only sources of capital • Labour market deregulation • See Ben Clift’s chapter in Where are National Capitalisms Now? • Increased flexibility, temporary contracts etc. • Single European Act • Anti-trust regulation – state subsidies illegal • Public procurement - preferential treatment of French firms challenged
‘Privatisation’ Programme • See Schmidt From State to Market (1996) • Begun by Socialists in 1983-4, as a means of raising funds, to tackle fiscal crisis. • Stepped up under Chirac • Balladur (finance minister) hand picked sets of buyers – placing firms in safe hands • Re-constituting ‘noyaux durs’ – the French ‘financial network economy’. • Restructuring ‘protected’ capitalism • Continued by all subsequent governments - an important revenue source
Restructuring French capitalism • From mid-1990s on - a progressive dismantling of the protective cocoon behind which elites restructured the French economy. • noyaux durs (previously maintained by cross-shareholding merger and acquisition strategies) began to unravel, precipitated notably by privatisation • This suggests that the ethos of ‘protected capitalism’ (Schmidt 1996) was on the wane, and an Anglo-Saxon ‘shareholder value’ logic was gaining currency
Internationalisation of ownership & shareholding patterns • 1985-1997, foreign share ownership increased from 10 % to 35 % (compared to 9 % in Britain, and 6 % in the US) (Morin, 2000). • a ‘highly significant trend’ (Morin, 2000) the purchase by Anglo-Saxon Institutional investors (pension funds) of stakes in French firms relinquished by noyaux durs. • sea change in French capitalism, away from the ‘protected capitalism’ logic and towards Anglo-Saxon shareholder value norms
So what? implications for French capitalism • interaction of Anglo-Saxon norms with enduring French institutions, such as the French social model • Uneven-ness of adoption of Anglo-Saxon norms – e.g. corporate governance • Little transparency and limited accountability • PDG (boss) autonomy - unchanged
No Longer ‘capitalism without capital’ • dramatic increases in levels of stock market capitalisation and volume of share trading (Schmidt 2003: 537-8). • could be interpreted as a ‘liberal’ shift from a state led (bank-based) to a market led (asset-based) form of capitalism
French capitalism: still distinctive? • Capital markets play a very different role in the new French model of capitalism. • Limited ‘Anglo-Saxon’ dispersal of ownership • France has yet to develop a market for corporate control (few hostile takeovers) • Real power has not shifted to shareholders, and shareholding remains much more concentrated in France than either UK or US (Schmidt 2003: 539).
Conclusions • Assertions of ‘Anglo-Saxon’ transformation are dubious • Pre-existing norms & structures endure, interact with new influences • tendency to overemphasise evolutions at the international level, and underplay continuities at the domestic level. • The close-knit networks are being opened up by the influx of both foreign investors, and corporate governance norms. • Yet no teleological evolution to Anglo-Saxon capitalism. • But - by what means can state influence endure in the context of global capital markets?