Strikes in France: economic reckoning
The nationwide strike - and resulting civil turmoil - by public sector employees in France underscores that economic realities have a way of finally catching up with ideological governmental policies.
Government leaders, in other words, would seem best served in developing fiscal and monetary policies that take account of the larger international economic setting rather than devising go-it-alone policies geared to the philosophical prejudices of a political constituency .
In the case of France, it might be recalled, the Socialist government of President Francois Mitterrand came to office back in 1981 seeking to expand the economy at a time when most of the the rest of the industrial West - caught up in a curious mix of high inflation and deepening recession - was developing austerity programs.
Instead of creating its own austerity program, the Socialists marched in the opposite direction. The government added 50,000 new public-sector workers in a bid to stimulate the economy. It nationalized leading manufacturers and private domestically owned banks not already nationalized. But the government soon found that its policies were hopelessly out of phase, both with economic conditions and the policies of other nations. France soon ran huge balance-of-payments deficits, its inflation rate climbed even higher, and the franc declined in value. As a result, the government was forced to dramatically shift gears and impose an austerity program.
The new program included limiting wage hikes to dampen inflation as well as laying off thousands of workers in such unprofitable industries as steel and shipbuilding. Not surprisingly, austerity measures have proven unpopular with members of Mr. Mitterrand's own leftist coalition as well as many French workers in general. One result: increasing public demonstrations - including farmers, truck drivers, schoolteachers, and, as evident this week, public-sector workers.
France, it needs to be pointed out, has not been alone in initially moving in one economic direction for ideological reasons, only to have to do an about face. In the United States, the Reagan administration came into office cutting back on the rate of growth in social programs, opposing public-works programs, and reducing tax rates. Within two years, however, the White House was forced to retreat from further cuts in social programs. It accepted a public-works program. It accepted a $99 billion tax increase package put together by Congress in 1982.
The French government clearly has its work cut out during the weeks and months ahead. According to an analysis by Morgan Guaranty Trust Company, France, while moving out of recession by the end of 1984, will post little real economic growth for the year as a whole.
The immediate challenge for the government is to stick to its guns in holding down wage increases. The government wants to limit increases to 5 percent. It will have to be firm with public workers, who are seeking more. It would also seem wise in going ahead with plans to modernize its older manufacturing industries. That will mean higher unemployment on a short-term basis, bad news for an economy that already has over 2 million people unemployed.
Many economists believe that the current government - or its successor, if the current one is prohibited by its ideological commitments - will also have to come to grips with the fact that widespread nationalization of French industry will most likely work against long-range economic growth.