San José State University

Department of Economics

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THE ECONOMIC HISTORY AND

THE ECONOMY OF FRANCE

 John Law and Hyperinflation in France

c. 1719
 The Economy of France at the Time of
the Industrial Revolution
 Hyperinflation During the French
Revolution
 Regions and Regional Policy of France
 The Economy of France Since the End
of World War II
 Socialism in France
  Politics and Economic Policy in the
Fourth Republic
 Privatization in France
 Bibliography on Privatization in France
 The Concorde Supersonic Transport
 The National Income Statistics for
France
 Regional Population Densities
 The Economic History of Haiti
 The Economic History of French Guiana

The Economy of France at the Time of the

Industrial Revolution
The economy of France in the eighteenth century was
problematical. France was a major power, but not
because of the degree of her development. In terms of
the degree of development France was rather
backward compared with England. But because of
sheer geographic and demographic size France was
powerful and important in economic and political
affairs of the time. Although the average educational
level in France was inferior, the intellectual elite was
second to none in Europe. This shows up in terms of
the names of the prominent figures in science,
mathematics, technology, literature and so forth.
As a whole however France was still a country of
peasants when the industrial revolution was taking
place in Britain. In the ongoing political competition
that was taking place between France and Britain,
France was consistently losing. In many ways the
position of France with respect to England was
analogous to the Russian Empire/Soviet Union with
respect to Western Europe and the United States in
the twentieth century. Both France in the eighteenth
century and the Russian Empire/Soviet Union in the
nineteenth and twentieth centuries were formidable
military powers because of their size and vast pool of
soldiers. On land their military mass was undefeatable
but at sea and abroad they were vulnerable.
France used much less coal than England and Belgium
during this period. This was in part due to the lack of
suitable coal deposits in most of France but there were
coal deposits in the north. Furthermore France could
and did import coal from England and Belgium, but
she used less coal because she had less industry
needing coal rather than vice versa. The answer seems
to lie in the more centralized, authoritanian
government that French business had to cope with.
First the aristocracy oppressed business then when the
aristocracy was overthrown there was the radical and
turbulent political regimes to contend with. This
retarded the development of French industry beyond
the time when the greatest profits could be made from
industrialization. The net result was that French
industry tended to be smaller and more family
controlled than industry in the United Kingdom and
Belgium. Such indutry was more dependent on
government protection, intent on surviving rather
than expanding.

The Economy of France Since WW II

Germany defeated France in a six week campaign in
1940. Germany then occupied northern France,
including Paris, and put the rest of the country under
the control of a puppet fascist regime in Vichy. The
French economy thus operated under a corporatist,
state capitalist system during the war. There was a
resistance movement that united all elements of the
French political spectrum; conservative, socialist and
communist. This united front continued after the end
of the war and there was mutual agreement that it was
necessary to promote a renewal of France and avoid
the economic stagnation that existed before the war.
All parties assumed that economic planning was
essential to this goal and a Ministry of National
Economy was created.
General Charles de Gaulle had been head of Free
France during the war and he was elected Head of
Government in 1945. He immediately declared that he
would nationalize credit and electricity. His
government went on to make the coal mines, the large
banks, the large insurance companies, the electrical
and gas companies, Air France, and Renault Auto into
public enterprises. The government acquired direct
control over 20 percent of industry.
This policy was in keeping with the traditional policy
of dirigisme in France. Although there was widespread
support for this role of government in the economy,
there was a great many small businesses that did not
welcome these measures. The united front of the
Resistance began to unravel. The Communists
withdrew from the government in 1947 and the
Socialists withdrew in 1949.
Jean Monnet drew up a set of goals in 1945 of what the
French economy should accomplish by 1950. In
addition to achieving target outputs Monnet called for
the modernization of French industry. Monnet noted
that the French Government did not have the
resources to reconstruct all of the French economy so
he called for the public investment in key economic
sectors. These key sectors included the transportation
system, coal, electricity, steel and agricultural
mechanization. Later fuel and fertilizers were added
to the list. Monnet's formulation, extended to 1952,
became known at the Monnet Plan.
In each key sector under the Plan the details of the
planning were left to the modernization committees
made up of representatives of the Planning
Commission, the major firms in the sectors, public
enterprises and unions, and technical experts.
These committees did not have the power to enforce
their decisions, compliance was voluntary. This
process came to be known as indicative planning.
Inflation was a chronic problem in the postwar period,
but it opted to not implement price controls. The
statistics on the price level were:

Wholesale Price Index

1938=100

December 1945 1946 1947 1948 1949 1950

Price
469 846 1217 1974 2002 2409
level

Private enterprises generally supported the Monnet

Plan because they agreed with its goals for France, but
the fact that the Government guaranteed bond issues
in approved sectors did hurt either. The production
targets were generally achieved and productivity gains
were substantial.
The war-time coalition further fragmented. Rival
trade union federations were created to counter the
Communist-dominated Confederation Generale du
Truvail (CGT). When the CGT called extensive strikes
in 1947 which failed, these rival confederations gained
legitimacy.
Military spending for Viet Nam (French Indo-China)
and Algeria drastically affected the government
budgets. Budget deficits contributed to the ongoing
problem of inflation. The persistence of inflation
resulted in a program of subsidies for businesses that
prevented them from developing the efficiency they
needed for international competition.
Although the French economy grew it did not grow
nearly as fast as the West German economy.
Agriculture in particular was rather backward. The
perceived success of the Monnet Plan led to a plan for
1954 to 1957. This plan was called the Hirsch Plan.
The targets for the Monnet Plan had been increases of
about 10 percent in key sectors over a five year period.
The Hirsch Plan called for 25 percent increases over a
three year period in a much broader range of
industries. France achieved the targets of the Hirsch
Plan.
Charles de Gaulle once again won the presidency in
1958. He chose a prime minister committed to
planning. A Third Plan was formulated for the 1958-
1961 period. It called for an increase of 23 percent in
GDP but attempted to develop an integrated program
of national development and called the achievement of
social goals as well. Except for agriculture the Third
Plan's targets were achieved.
The Fourth Plan covered 1962 to 1965. The planning
methodology had become highly sophisticated. Social
goals were given as much emphasis as economic ones
and the Fourth Plan became the model of indicative
planning. The French planning establishment felt they
had found the ideal middle ground between a laissez
faire market economy and Soviet-style central
planning.
The Fifth Plan (1966-70) was similar to the Fourth
Plan and called for a strategy of "balanced
expansion." Despite a near revolution in May of 1968
the Fifth Plan's goals were attained.
General de Gaulle was defeated in the election of April
of 1969. Although French productivity increased the
increase did not match that of West Germany. The
problem was apparently insufficient investment, both
in physical equipment and research and development.
Also the scale of French establishments was
significantly smalled than that of German
establishments, even though the French Government
encouraged mergers and consolidations.
Agriculture remained a problem and many French
farmers were little interested in efficiency and
productivity.

The National Income Statistics for France

For the economic histories of other countries click here.

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