French financiers marvel at `capitalists in Socialists' clothing'

France's bankers and brokers can hardly believe their eyes and ears: The nation's Socialist government is actively encouraging genuine capitalism in the financial markets. To these financiers, it seems like the fox feeding the chickens rather than eating them.

``They are becoming capitalists,'' says stockbroker Patrick Legrand, a partner in the brokerage house Legrand, Lacourte & Cie., clearly surprised by the historic turn to the center by the Socialist Party over the past two years or so.

``It is a paradox,'' says another capitalist, eyebrows raised. ``The Socialists are sometimes puzzling.''

A member of the Central Committee of the French Communist Party grumbles: ``The leaders of the Socialist Party

are no longer Marxist.'' Bernard Marx (his real family name) adds that ``they are sometimes more liberal [free-market-oriented] than the conservative parties.''

Indeed, the dominant leaders of France's Socialist Party have largely dropped their ideological underpinnings, which were sometimes Marxist, and become social democratic, along the lines of the opposition party in West Germany. They support a basically free-enterprise system with considerable emphasis on government policies aimed at making capitalism more humane for the common people.

``Contrary to what is often said, Socialists are primarily pragmatic,'' claims Dominique Strauss-Kahn, national secretary for studies of the Socialist Party. ``Very few are ideological.''

In the financial area, this ``pragmatism'' has resulted in liberalization of the financial markets. This is especially astonishing in France, since state interference in markets has been a tradition of all governments since the days of French royalty. Conservative regimes practiced dirigisme -- steering of private markets and companies by the government.

Speaking of the conservative government of former President Val'ery Giscard d'Estaing, Mr. Legrand recalls, ``Giscard did not do a lot for the stock exchange and for the corporations.''

Adds J. Paul Horne, the Paris-based economist of Smith Barney, Harris Upham & Co.: ``The Socialists have done more to deregulate financial and other markets than any other government.''

A high-ranking civil servant thinks this is because conservative parties, when in power, are afraid they will be attacked by the Socialists and Communists if they introduce more liberal market measures.

Others say the conservative parties are more beholden to the financial community for campaign support and do not want to disturb such backers.

Whatever the case, Mr. Strauss-Kahn, explaining the Socialist Party's liberalizing moves, asserts that France had ``capitalism without capitalists.'' It had a narrow stock market, with very few people active in it. Banking was full of rigidities. Investors were reluctant to take the risks involved in such activities as venture capitalism.

So, this party official continues, the government has tried to liberalize financial markets -- ``much more than 20 years of conservative governments.''

Strauss-Kahn does not sound like an unbridled free-enterpriser. Nonetheless, he points out that capitalism offers the advantages of encouraging initiative, self-motivation, personal responsibility, and a willingness to accept risk. But it also has disadvantages, and, he maintains, these have often prevailed in France.

``French capitalism is very old-fashioned capitalism,'' he says.

The government's extensive financial reforms are an attempt to obtain more of the advantages of capitalism. ``It is a shift to pragmatism. We try to have a real market, because it is a matter of efficiency. If you have to have a market, it must work.''

The move to the center is also an effort to capture more votes of the political center in parliamentary elections next spring. Public opinion in France has become considerably more supportive of free enterprise.

Reflecting this, the nation's neo-Gaullist movement, the largest of the conservative opposition parties, earlier this month adopted a Reagan-style electoral platform of tax cuts and deregulation aimed at reviving economic growth.

The measures include a rapid lifting of price and exchange controls; the abolition of government approval for layoffs in industry; the privatization of banks and competitive nationalized industries; and the encouragement of more flexibility in working hours and in salary scales.

Indeed, Michel Develle, chief economist at Banque Paribas, wonders if liberalization of the French economy will be too fast if the conservative parties win the elections next spring, as the latest public opinion polls indicate.

``Public opinion wants to change -- but not to accept the direct consequences of the change,'' he says.

Referring to the nationalization of private banks and of eight major industrial corporations, and to other measures taken soon after the Socialists first came to power in 1981, Strauss-Kahn concedes: ``Even if the Socialists did not realize this in the beginning, the left majority had not been elected to escape capitalism. A large majority of the people approve of the capitalist system.'' The 41/2 years in power has made the Socialists ``more realistic, ''Strauss-Kahn asserts.

He accuses the conservative parties of becoming ``ideological'' -- instead of simply pragmatic -- in their support for free enterprise.

Strauss-Kahn admits that the Socialists face a tough battle in next year's elections.

But if they lose, he says, the Socialists now stand a better chance of returning to power in later elections by having weakened the conservative charge that the Socialists would take away the savings of the people -- or worse.

``This idea is now dissipated,'' he says.

In another office at the Socialist headquarters near the stone pile of the National Assembly, a poster of a fashionable French woman is stuck on the wall next to the face of Karl Marx -- ``the new look,'' a party official jokes. A Thursday column