The French Economy: A Study in Paradoxes

Not long ago I reread La France Nouvelle of Prevost-Paradol, a book written by a Liberal on the eve of the Franco-Prussian War and in the presentiment of defeat. "When the present head of our country," wrote Prevost-Paradol, referring to Napoleon III, "said that a country's rank depends on the number of men it can place under arms, he did nothing but give a too absolute expression to a correct idea, for one must take into account the relative quality of men as well as their numbers. Xerxes, for example, placed many more men under arms than Greece, and yet the great soul of Greece vanquished him. But when it is a question of equally civilized nations and of courageous citizens, equally imbued with feelings of honor, this maxim becomes rigorously true, and it is to the most populous nation that military and political ascendancy inevitably belong with all the material and moral advantages accruing from them."

Prevost-Paradol was here forecasting what a century later every Frenchman learns at school: France lost her position in Europe first and foremost because her population throughout the nineteenth century increased less than that of her neighbors and rivals. True, the post-war rise in the French birth rate has rekindled hopes which would have seemed Utopian twenty years ago. But the French economic revival today appears relatively insignificant when compared to that of small countries like Sweden or Switzerland or to this century's giant, the United States.

The French were disillusioned with the economic condition of their country the day they abandoned the fiction of a healthy equilibrium. As long as the maintenance of a certain just proportion between industry and agriculture, town and country, large and small business seemed to obey an unwritten law of French collective life and the requirements of order and measure, we were content to sit back and contemplate, without a sense of bitterness or inferiority, the steady growth of English or American cities, the preference given by the peoples of the West to industrial work, the multiplication of huge factories. That so many traditional forms still survived in France, that our small enterprises continued to function on a personal scale, and that we were blessed with millions of peasants, masters by divine right of their own land--these facts all seemed proof of wisdom; we avoided the ravages of crises, massive unemployment, the grim lot of the work slaves of the suburbs.

But as soon as the now hackneyed theory of economic growth was applied to France, these illusions were shattered. As soon as it was realized that the relative importance of industry and of trade, transport, and services depends not on the genius of nations but on the maturity of their economy, France was found to be more backward than Sweden or Switzerland; indeed, she seemed almost as backward as China and India (whose civilizations in the past had been second to none).

This criticism or self-criticism of the French economy still haunts books, reports, articles, and lectures. It can be found in the publications of the Economic Commission for Europe, and in the periodic reports of the Commission du Bilan National. Herbert Luethy has translated it into German, while Jean-Paul Sartre has adopted it in order to interpret, in a pseudo-Marxist manner, the hesitations of the proletarian revolt. Let us briefly examine its principal points.

In 1900 the percentage of industrial manpower, relative to the number of persons between 15 and 59 years of age (25 per cent), was higher in France than it was in Germany, Holland, Denmark, Norway, or Sweden. But for the next half century it failed to rise, and today the figure is lower than that of all the other countries of Western Europe with the exception of Holland. Similarly, the percentage of those employed in agriculture, relative to the male population aged from 15 to 59, is higher in France than for all the other countries of Western Europe, higher even than for Denmark and Holland, both of which are exporters of agricultural products. (It was 48 per cent in 1900 and 32 per cent in 1950.) If the distribution of manpower over the three economic sectors (mining, agriculture, and fishing; manufacture; trade and transport) is one of the most accurate criteria of the stage reached by a modern society, then the conclusion is undeniable: a century ago, when Prevost-Paradol was writing, France was still the most highly industrialized country on the continent; today she leads Southern Europe but trails behind Northern Europe.

The active male population employed in French agriculture fell from 5.6 million in 1901 to 3.3 million in 1954. What was denounced, thirty years ago, as the "depopulation of the countryside" was not a myth. In half a century, more than 2 million Frenchmen have sought nonagricultural employment. French industry, between 1921 and 1954, only absorbed 600,000 of them, whereas trade, transport, and services took close to a million. In short, French industrial manpower has barely advanced in the last thirty years, those workers not needed in agriculture going mostly into shopkeeping, transportation, and white-collar work.

French failure to industrialize aggressively has been accompanied by an insufficient concentration of the means of production; one might almost say by a paralysis of capital. Concentration has made but slight progress since the turn of the century. Enterprises employing more than twenty workers represented 4 per cent of the total in 1906 and 8.5 per cent in 1950. Enterprises employing more than ten represented 7 per cent of the total in 1906 and 15 per cent in 1950.

Likewise the disparity in the size of our agricultural units has been a classic theme for instructive reflection and morose meditation: 40 per cent of French farms, or one million, were calculated in 1950 to have a gross income of less than 300,000 francs (about 860 dollars). An economy hovering somewhere between the Middle Ages and the twentieth century: such is the pessimistic image which the French have substituted in their national consciousness for the idea of a harmonious balance.

The diversity of small businesses and the wide range in their efficiency have constituted the main element in French self-criticism, as it has been developed by public officials and economics professors. Other favorite targets have been the state's subsidization of surplus products (wine, for example) and the billions of francs spent every year maintaining the alcohol monopoly, which afford an ideal opportunity for denouncing conservative dirigisme or the indecent activity of pressure groups. The high cost of construction and the dispersion of building workers over tens of thousands of small enterprises also illustrate the statistics of feeble productivity.

These criticisms of the French economy usually take on a political coloration. Left-wing critics emphasize that French businessmen are irresponsible, authoritarian, enslaved by bourgeois traditions, indifferent to questions of productivity, anxious to obtain the protection of the state. Right-wing commentators single out the evils of inflation, the disorder of public finances, the sudden introduction of the forty-hour week, the incoherent intervention of the state. Each side denounces the "Malthusianism" of the other.

In times past, the French used to pride themselves on their wisdom in maintaining a balance between industry and agriculture. But today, we are naturally dismayed because our badly equipped farms, our grimy little shops, and our unproductive artisans have not disappeared.

How do the French themselves explain the survival of so many inefficient enterprises? How do they account for the fact that manpower employed in manufacturing industries has not multiplied as fast as that employed in shopkeeping, transport, and white-collar work?

A geographical explanation has been put forward by the French historian, Charles Moraze. Nature, which favored France in the past, has handicapped her in an age of technical civilization. France was a rich country as long as wealth was linked to the land, as long as multiple-crop farming was rational, as long as the diversity of her soils and climates could assure both abundance and differentiation. But in an age when the scientific cultivation of cereals can provide at one and the same time for the feeding of the population, the reduction of agricultural manpower, and the use of those thus freed for more productive employment, then France is poor in relation to more highly industrialized countries.

Moraze emphasizes two other particular difficulties which industrialization in France has run into. The mountainous nature of the Massif Central proved an obstacle when the French railway network was laid down in the nineteenth century. Furthermore, between the nineteenth and twentieth centuries the location of industry altered more radically in France than in any other country in Europe. The coal deposits of the Massif Central disappointed the hopes of the prospectors, with the result that the small-scale industries of the eighteenth and nineteenth centuries, which made France the foremost industrial country on the continent in 1850, constituted a brake on later developments.

This explanation dissipates the legend, still widely spread abroad, of "the natural wealth of France." The coal deposits of the Ruhr or of Wales represented in the last century a more authentic source of wealth--or, let us say, a greater incentive to the creation of new wealth--than the sun of the Cote d'Azur, the rolling hills of Burgundy, or even the plains of the Brie or the Beauce. France was short of coal during the century in which this was an indispensable condition for heavy industry, and the diversity of her provinces and agriculture offered her strong reasons for not specializing.

An explanation of greater currency today is the demographic theory which Alfred Sauvy, in particular, has elaborated and confirmed with examples and analyses. The non-increase of a country's population, according to this theory, should permit curtailment of what can be called "demographic investments"--that is to say, the extra funds needed to train a growing number of young men. The pre-war stagnation in the French birth rate acted as a brake to industrial expansion for mechanical and psychological reasons.

Economic progress presupposes rapid modifications in the relative importance of different sectors of the economy. Now transfers of labor from one sector to another are above all effected through the opening up of new jobs on the labor market. Instead of taking the place of the retiring older worker, the young worker heads for those industries which are expanding. It is far more difficult to get mature workers to give up jobs they are used to in order to take up new and unfamiliar ones in a different trade. With a rising birth rate, the increase in the number of workers tends to increase labor mobility, whereas a static or shrinking population tends to reduce it.

At the same time it is precisely a stagnant population which most needs a high mobility of labor. When the home market is expanding, thanks to the arrival of new consumers, the relative positions of various industries can be modified without any of them having to contract. But when the number of consumers is not rising and the home market can only benefit from a rise in the living standard, the growth of certain industries must be paid for by the contraction of others.

The feeble rate of industrialization, combined with a strong propensity to save (itself determined by both the distribution of income and the spontaneous inclinations of the French), created a surplus of capital, which for the most part was invested abroad. (French investments in foreign countries amounted to some 40 billion Napoleonic francs on the eve of World War I.) It would have been more in the national interest to invest within France herself--in her industry or agriculture--the francs that went into building Russian railways or the port of Gdynia in Poland.

The effect of demographic stagnation is, above all, psychological. Why increase the size of one's business if there are only one or two sons to take over the succession? The absence of young people engenders a fear of excessive production and of inadequate outlets. One lives under the tyranny of the present, viewing the future at best as a matter of holding on to what already is, whereas the law of modern economic life is growth.

In the course of this century the French state has retarded economic expansion both by what it has done and by what it has omitted doing, thanks to the false notions or ignorance of those who were governing the country. If constant causes, such as geography, the stagnation of the population, the psychology of managers and workers, had been entirely responsible for the economic slump, then they should have operated as much from 1920 to 1930 as from 1930 to 1940. Instead, the national income index dropped in 1937-1938 to 86 (assuming 1928-1929 equals 100). Economic growth in Europe was slow between the wars, but it was regular. Nothing need have prevented the French economy, such as it was, with its strengths and weaknesses, from continuing its development. The crisis, which struck all the countries of Europe, was prolonged, aggravated by major mistakes of policy and above all by the refusal of all French governments, whether of the Right or of the Left, to devaluate between 1933 and 1936. When the barriers were finally swept away, the forty-hour week was introduced, as though such a measure could help to absorb an unemployment which was not widespread anyway.

There is additional evidence that the economic policies of the state have been at fault. Economic progress normally involves an increase in the share of wages and salaries in the national income and a reduction in the share of mixed incomes. Such was the case in France at the end of the eighteenth and nineteenth centuries. The share of mixed revenues--that is, of producers who are both employers and employed, single or family enterprises--fell from 53 per cent in 1788 to 28 per cent in 1890, while the share of wages rose over the same period from 16 per cent to 52 per cent. At the same time that of capital declined from 31 per cent to 18 per cent. But in 1952 the proportion of mixed revenues rose again to 32 per cent, that of wages declined to 49 per cent, and that of social transfers (social security, health insurance, family allocations, pensions, and so forth) rose to 14.3 per cent. As for the share of capital, it had shrunk to a level of 4.6 per cent. These changes are not explained by the spontaneous movement of the economy; they are due to the intervention of the state.

The state enacted legislation which reoriented an important fraction of wages and salaries through the coffers of the social insurance system. The inflation which has persisted almost ceaselessly since 1914 provoked the collapse of stock-market holdings and gave a new lease on life to mixed revenue producers, like small entrepreneurs, artisans, and shopkeepers. The French tax system has not been neutral; it has not tended to place big and small on the same level, where the fittest naturally survive; it has aided the small and has shielded them from the rigors of natural selection.

State policy, however, is not a final cause, and it requires explanation as much as it provides one. On the one hand, the state's conservative direction--tariff protection, subsidies for unsalable products, benefits for inefficient producers--attests its own weakness and the influence of private corporations; on the other hand, it also expresses a widespread state of mind. Let us once again take the example of the crisis of 1929. Why were the successive French governments, of both the Right and Left, incapable of taking the relatively simple measures which would have put an end to this absurdly ruinous crisis? The governments of other countries also committed errors and prolonged the Depression. But in France the errors committed went from one extreme to the other, with the country settling down to a regular state of subproduction. Was this due to the economic ignorance of French leaders? Without a doubt. Was it due to a rebirth of a latent peasant and craftsman's mistrust toward the cities, industry, and capitalism? Without a doubt, also. German or American unemployment seemed to justify the skepticism which the French of the provinces had always felt toward the indefinite expansion of production and purchasing power, the miracles of science and technology. Until very recently the French did not possess a system of education, nor a scale of values, in keeping with the needs of industrial civilization.

Even so the French have played an important part in the development of new industries, automobiles, and airplanes. They have not turned their backs categorically on technical civilization. What has been particularly marked in France has been the fact that new industries have risen up alongside of the old.

Since 1945, in spite of inflation, strikes, and an apparent disorder, France has been in a period of renovation. Since 1953 the rate of expansion has been normal; that is, it has matched the growth of economically advanced countries. It has been of the order of 5 to 6 per cent for the national product, 10 per cent for industry. Never have the French talked so much about stagnation as they have since their economy began to expand.

In such conditions the turbulence of the next few years is inevitable. The immediate difficulties--the standard of living, the value of the franc, the problems posed by the transformation of existing economic structures, agricultural surpluses, the modernization of backward sectors and regions, and the repercussions of the events of North Africa--will all combine in unpredictable fashion in the French parliament and in the country. The regime will be, or will appear to be, menaced; men, parties, classes will exchange invectives and brandish ideologies in the familiar style of French tumult. But if the transformation of North Africa into independent states can despite everything be accomplished, without irreparable damage being done on one or the other side of the Mediterranean--then the internal uproar, the cries of the Poujadistes and their successors, the vain Stalinism of a fossilized Communist Party, and the bitterness provoked by the loss of the Empire will not keep France from advancing, in her own peculiar way, along the common road of the peoples of the old continent of Europe.