‘Privatization’ Program Is Moving Along at a Leisurely Pace in France

At first glance, it looks like an economic revolution. The conservative French government now has the legal right to sell 65 state-owned banks and industries to private investors and start the transformation of France into a free market economy. But reality may get in the way.

France has long had a tradition of government direction of the economy, under both conservative and socialist rule. But it has become fashionable in French conservative circles these days to preach what Europeans call economic “liberalism,” to praise President Reagan to the skies, and to promise prosperity for all if the shackles are removed from capitalists in the marketplace.

Premier Jacques Chirac has called the state industries “carriers of paralysis.” This kind of rhetoric inspired the platform on which the conservative Chirac government was elected last March and led to the law enacted by Parliament on July 31 authorizing the government to rid itself of the 65 nationalized companies.

No Fire Sale Likely

Yet despite the rhetoric and the law, observers do not expect the Chirac government to rush into any kind of fire sale. There are too many considerations that stand in the way, they say: Many French feel comfortable with the tradition of government direction, even some conservatives are nervous about upsetting things, and nationalists are worried that some firms could fall into foreign hands.

On top of this, the “privatization” program could become a controversial issue in the presidential election scheduled for 1988. It has already provoked some tense moments between Chirac and Socialist President Francois Mitterrand. The Chirac government obviously plans to move gingerly, putting only a handful of nationalized companies up for sale at the end of the year. That kind of sale will be a significant reversal of a historical trend in France but will fall far short of a revolution. Much depends on how well the first sales go.

The problems of “privatization” can be illustrated by the case of Bull, one of the 65 companies on the “for sale” list.

De Gaulle’s Decision

This state enterprise can trace its origins to a decision by President Charles de Gaulle in 1966 to create a French computer industry. De Gaulle acted out of fury over a decision by the U.S. government to refuse to allow the export of a powerful American computer to France for military use.

For many years, the French computer industry limped along, surviving only with the help of French government subsidies and private American investments. In 1982, when it was finally nationalized by the Socialist government, the company now known as Bull had an American partner, heavy losses and the image of a demoralized enterprise.

After nationalization, the government managed to turn the fortunes of the company and the French computer industry around. Bull showed a profit in 1985.

Although Bull is included on the list of companies to be sold to private investors, some prominent conservatives feel that the sale should be delayed. In a recent report, Serge Moyet, an official of a conservative think-tank associated with former President Valery Giscard d’Estaing, described Bull as too fragile to be sold soon. If Bull were sold, Moyet said, there would be a risk that it would fall apart or into foreign hands.

“The flame of the French computer industry was once going to be extinguished,” Moyet said. “Bull has offered France a last chance to preserve a computer industry and reinforce its national independence.”

The first companies sold will probably be less fragile and controversial than Bull. Edouard Balladur, the minister of economics, has promised to announce next month the names of the companies that are to be put on the market before the end of the year.

Some businessmen speculate that the most likely candidates for the early list are the glass manufacturer Saint Gobain, the insurance company Groupes des Assurances Nationales, the holding companies Financiere de Paribas and Financiere de Suez, and the banks Credit Commercial de France and Societe General.

Two Waves

France’s state companies, which account for a third of the country’s industrial revenue, were nationalized mostly in two waves. The first came just after World War II, when the De Gaulle government took over a number of companies that were either in desperate economic straits or owned by collaborators of Nazi Germany. The second came after the Socialists won control of both the presidency and Parliament in 1981.

Most nationalizations were thus carried out at the start or the end of a 40-year period when many politicians and economists agreed that it was wise for the government to direct the economy strongly. This state direction, known in French as dirigisme, was widely credited with creating a space industry, reinforcing the aeronautics industry, making the telephone system one of the most modern in the world, ensuring a place for France in high technology, and in general reviving the economy.

Some Suffered Losses

But many conservatives started having doubts in the past few years. While the more recently nationalized companies were beginning to show a profit, older state companies, such as Renault and the steel mills, were suffering enormous losses.

Worried that state direction was stultifying the economy, these conservatives began to look toward the free market of the United States as a model. “The present vogue of liberalism would be unthinkable without the success of Reagan,” editor Andre Fontaine wrote recently in the Paris newspaper Le Monde.

The conservatives led by Chirac won election last March on a platform promising “liberalism,” meaning a free-market economy.

Trying to fulfill his campaign promises swiftly, Chirac ran into an obstacle in July when President Mitterrand vetoed a Cabinet decree authorizing the sale of the 65 nationalized industries. Since there was a danger that foreign interests could try to gain control of these companies in the future, Mitterrand said, the authority to sell them should come from a law passed after parliamentary debate and not from a decree.

Chirac reportedly was infuriated by the veto but calmed down and pushed the authorization law through Parliament in three weeks.

Under France’s unusual double executive system, Chirac runs the government day by day while Mitterrand acts, in most matters, like a referee with significant powers to frustrate the government. The most dramatic presidential power is an absolute veto over any Cabinet decree. But the president cannot annul a law passed by the Parliament; at the most, he can delay its enactment for 15 days.

In the privatization controversy, Mitterrand knew that Chirac, while he preferred to act swiftly through a government decree, had enough votes in Parliament to eventually pass the program there. The president, however, wanted to slow down the process and focus the attention of voters on the controversy. This was all part of the maneuvering for the next presidential election, scheduled for 1988, when Mitterrand and Chirac may oppose each other.

Scored Political Points

Many political analysts believe that Mitterrand scored significant political points in the controversy. Although the conservative platform promised “liberalism,” according to this view, few voters read the platform carefully and knew what to expect. Many are worried that there are not enough safeguards in the law to prevent foreign takeover of the companies.

Moreover, many voters may be suspicious of all the rhetoric about a new ideology that extols the free market as a cure-all for economic ills and carries the name of “liberalism.” France seems to be going through a non-ideological period that makes pragmatic politicians popular. Recognizing this, many Socialists appear to be moving toward the center, dropping their old, ideological theories.

Some conservatives believe that this is not the time for conservatives to parade an ideology. Yvon Gattaz, the former head of the association of French businessmen and industrialists, recently dismissed some of the new conservative ideologues as “nitwits of an orgiastic liberalism.”

Even if all 65 companies, which are estimated to have a value of $30 billion, are sold, France will still be left with a relatively large number, by American standards, of nationalized companies. The list does not include such important state enterprises as Aerospatiale, Air France, the French telephone company and Renault.