How economics professor is running the body politic
When speaking on television, French Prime Minister Raymond Barre often lectures his audience on the nation's need for economic sternness like a Dutch uncle, wagging his finger at the camera.Skip to next paragraph
Subscribe Today to the Monitor
Many Frenchmen complain about the former economics professor's didactic manner. Others approve. "Mr. Barre very often says the truth to the French people, which is not pleasant," notes Jean-Maxime Leveque, chairman of Credit Commercial de France, the nation's largest privately owned commercial bank. "He says we have to pay for our petroleum, and this means a reduction in the standard of living for the French."
Such a reduction would be a dramatic change.The purchasing power of the French has been increasing around 3 percent per year since 1973. "That must be some kind of record in the world," a top banker boasted.
With most economists predicting a slowdown in the French economy this year, it will be difficult for that kind of gain in affluence to continue. Indeed, one government official figures that "real disposable income" -- income after taxes and inflation are deducted -- increased only 2 percent in 1978 and will grow less this year, if at all.
It is now somewhat over three years since Mr. Barre was appointed Prime Minister, and economists and others here are assessing whether the famous "Barre plan" for stabilizing, modernizing, and liberalizing the French economy has been a success. The government likes to call its actions "a quiet revolution."
Yves Laulan, chief economist at Societe Generale, maintains that the Barre plan is a "myth." His former economics professor (Mr. Barre) is a pragmatist, who works on a day- by-day basis, running around economic or political shoals, Mr. Laulan argues. "He is not a good economist. But he is a superb operator, a superb politician."
But Jean-Charles Rouher, a top official in Mr. Barre's "Cabinet," differs, citing the goals of the Barre plan. These are fighting inflation, keeping salaries and wages under control, stabilizing the French franc on foreign-exchange markets, and maintaining the nation's international payments in reasonable balance. Another aim has been to improve the efficiency of the economy by decontrolling prices.
Here's a look at results so far:
* Inflation. At its peak after the 1973-74 quadrupling of petroleum prices, the inflation rate reached 14 percent. In 1978 it dropped to 9.7 percent. Last year it accelerated to 11.3 percent. This year, it should run slightly lower again, several economists predict.
On the price performance, Mr. Laulan comments, "It is a complete failure."
Mr. Rouher calculates that without the run-up in oil prices last year, the inflation rate would have declined to 9 percent. Another government economist noted that prices accelerated even more in other industrial nations.
* Wage costs. Though the French worker has managed to improve his standard of living, the increase in productivity has been so rapid that French corporations have also managed to strengthen their financial position. On average, French corporations are weaker financially than their counterparts in Britain or West Germany.
Nonetheless, notes Otto von Fieandt, an adviser to Eurofinance, an economic research firm, French companies are in "a much more comfortable situation than two years ago" to confront a world of more intense competition and higher energy prices.
* Stable franc. The French franc has weakened against the West German mark, but strengthened against the US dollar. On average, the franc stands about the same as two years ago in relation to the currencies of France's major trading partners.
* Solid international payments position. Imports last year amounted to about 462 billion francs ($115 billion) and exports, 450 billion francs ($112 billion). The current account, which also tracks other factors in addition to trade, experienced a small surplus -- despite France's rising oil bill.
"As is everybody else, we are concerned about 1980," said a high trade official.
* A more liberal economy. Since 1977, the Barre government has decontrolled industrial prices (except oil and gas and pharmaceuticals) and has just started to decontrol service and retail prices. But it is being cautious, fearing that competition in the latter area is less intense than in industry.
The French government still retains an active role in the private economy, more so than in the United States. "Intervention of the state in France will remain at a high level," Mr. Rouher said.
Nonetheless, Claude Lachaux, the top economist at the Conseil National du Patronat Franccais, the nation's top business organization, rejoiced: "This [ price decontrol] decision was very important for us and the French economy."
Assessing the Barre plan, he said: "It is not very strict. But in the political context, Barre did the most he could."