Although France was one of the founding members of the European Economic Community, the potential benefits of membership of an integrated European economy divided opinion from the outset. On two occasions, in 1992 and 2005, the French public was consulted directly in a referendum on proposals to deepen integration through treaty changes. The first referendum was held on 20 September 1992 on the question of completing the single market and preparing for monetary union (EMU) under the Treaty of Maastricht. On that occasion, on a large turnout of 69.7 per cent, a narrow majority (51 per cent) voted in favour. The second referendum, on the question of ratification of a constitution for the European Union (EU), was held on 29 May 2005. On a similarly large turnout of 69.4 per cent, 54.7 per cent voted against. All other treaties starting with the Treaty of Paris setting up the European Coal and Steel Community (ECSC) signed on 18 April 1951 were approved by a majority in Parliament.

Attempts by historians to separate the effects of European integration from all the other factors influencing the performance of the economies of member states since 1951, and to quantify them, have proved to be very difficult indeed. While it is not possible in a short chapter to analyse the full range of issues that membership of the EEC/EU has involved for the French economy, the aim of this chapter is to summarize some of the most significant ones. These are: the European Coal and Steel Community (ECSC); the European Economic Community (EEC) and its com-mon agricultural policy (CAP); the European Single Market; and the Economic and Monetary Union (EMU).

THE EUROPEAN COAL AND STEEL COMMUNITY

The proposal in May 1950 to place the coal and steel industries of France and the Federal Republic of Germany under the supervision and control of a common High Authority was a French initiative designed to achieve two main objectives. The first was to maintain the consensus within France that the Monnet Plan had achieved, while the second was to build a positive relationship with the new Federal Republic of Germany.

In 1947 a young geographer in Jean Monnet's planning commission, Jean-François Gravier, published a best-selling book entitled Paris et le désert français, to highlight the economic disparities between the capital city and the rest of metropolitan France. At that time income per capita in the Seine department of Paris was 80 per cent higher than the national average, while in the poorest parts of France – Brittany, Corsica, the south west and outside the cities in the southern Alps – the average per capita income was less than 75 per cent of the national average. Even worse was the fact that levels of inequality had been increasing rather than declining in the interwar period. After the war the consensus was that it was the central state, with its national plans to promote economic development, that was best placed to correct such disparities. However, disillusionment with the direction that national planning had taken under de Gaulle, illustrated by the sporadic outbursts of violence in the poorest regions, most notably Brittany and Corsica, by groups demanding some devolution of power or complete independence from France, led the Socialist party to consider the question of devolution.

The contraction of large parts of the manufacturing sector from the late 1970s onwards, which was as much a regional as a national economic problem, since most of the industries in question were located in the north and northeast of the country, added urgency to the debate. Under legislation passed in 1982 the new Socialist government promised to introduce local democracy by devolving power from the central state. The question was how much power and to which level of subnational government.

At that time there were 36,500 municipalities (communes) in France and 100 departments. Rather than merge the municipalities, as Denmark and Sweden opted to do, the Socialist government added a new layer of subnational government, that of directly elected regional councils. By 2015, regional inequalities in metropolitan France were judged to have reached their lowest level for 100 years. Average incomes in the Seine department were 35 per cent above the national average, falling to 27 per cent after income tax.

As we saw in Chapter 4, the greatest inequalities after the Second World War were between those living and working across a range of sectors and activities in Paris and those working in the rest of the country, in what Gravier referred to as the French “desert”. Even in that desert there were distinctions within the agricultural sector between the large arable farms in the north and the Île-de-France, which employed paid labour, and the small family-run, mixed farms elsewhere. There were also distinctions between those working in industry, mainly in the north and northeast of the country, and those working in the service sector, spread across France. It was the rapid growth of the economy and the movement of millions of people out of low-productivity jobs into higher productivity ones that led to a rise in living standards and a reduction of the gap between Paris and the rest of the country. It was when growth rates slowed down after the mid-1970s and the tens of thousands made redundant in the traditional industries could not find alternative employment in the expanding service sector that inequality began to rise and mass unemployment became a structural problem. Although it was never as high as in the neighbouring countries of Italy and Spain, unemployment became a persistent problem for France, peaking at 10.8 per cent of the active labour force (2.8 million) in 1997, and reaching a new high of over 3 million people in 2015. On the other hand, income inequality levels, although rising from the 1980s onwards, were also lower than in Spain and Italy, and were much lower than in the United States and the United Kingdom. In this chapter we shall analyse the record of the French government in addressing the main forms of interpersonal inequality over the period since the “30 glorious years” came to an end.

INCOME INEQUALITY

During the early 1980s, when many OECD countries were following the example of the United States and cutting taxes and public spending, the French Socialist government did the opposite. It increased income taxes on middle and high earners while introducing an entirely new tax on wealth to help fund its nationalization and expansionist public spending programme.

The 30 years after 1945 were the longest and most stable period of growth in measured French history bringing to an end years of economic decline. Immortalized by the French economist Jean Fourastié as the “30 glorious years” (trente glorieuses), they were also a time of rapid structural change and economic development. Millions of people moved out of low-productivity jobs in agriculture to work in the industrial and ser-vice sectors. The protective walls of tariffs and quantitative restrictions that had long shielded producers from international competition were gradually dismantled as France participated in the European Economic Community (EEC) and in the trade liberalizing rounds of the General Agreement on Tariffs and Trade (GATT) and of its successor the World Trade Organization (WTO). The direction and economic importance of trade also changed, shifting away from the former slowly growing colonial markets and towards the expanding markets of the EEC. What was traded also changed, with France for the first time running a surplus in some agricultural products and foodstuffs as well as in transport equipment and some manufactured goods. Much of this altered after the mid-1970s, when the postwar boom came to an end at the same time as the developed economies moved into recession. In the 40 or so years since the mid-1970s, growth in France, as in other developed economies, has slowed down and employment in industry and agriculture has shrunk, but the service sector has expanded rapidly. With a return of women to the labour market on a scale not seen since before the First World War, the service sector was unable to absorb the millions of men left unemployed as a result of the contraction of industry and agriculture. At the same time, the cost of redistributing income to offset some of the growing inequalities in society led to a tax burden that was higher than anywhere else in the developed world.

Such momentous changes over a lifetime have stimulated considerable debate among historians but little consensus over the causes. What is undisputed is that what happened after 1945 reversed the long period of economic decline that contributed to the shocking surrender of France in 1940.

We have seen in the previous chapter that one of the purposes of the postwar reforms was to democratize economic policy-making in France in order to provide a wider range of groups with the economic security that governments of the Third Republic had failed to deliver. This was to be achieved by changing the structure of the economy according to a national economic plan. While the new postwar state was committed to intervening in the economy rather than continuing the combination of economic liberalism and protectionism that had failed to guarantee the living standards even of the agricultural sector under the Third Republic, the instruments and objectives of such an intervention changed over time.

What is clear is that there was nothing automatic about the way in which the French economy caught up with the more technologically advanced economies after the Second World War. The aim of this chapter is to analyse and, based on national accounts, measure how well the French economy performed over the whole period 1945–2018, before focusing on the performance in each of the four sub-periods identified in Chapter 2.

OVERVIEW OF THE PERFORMANCE OF THE FRENCH ECONOMY, 1945–2018

Growth

In contrast to the behaviour of the French economy in the nineteenth century and in the interwar period that had led historians to conclude that for better or worse France was following its own path to economic development, after 1945 it participated fully in the boom experienced across western Europe. Growth rates averaged 5 per cent per annum over the period 1950–73 compared with 1.5 per cent in the period 1870–1913. By 1973 per capita GDP was above that of the United Kingdom and was closing the gap with the United States, the technological leader (up from 48 per cent in 1950 to 73 per cent in 1973).

The postwar boom came to a sudden end in the international recession of 1973–75 but it hit the French economy later and was of shorter duration than the OECD average. Along with the rest of the developed world, the French economy suffered a second recession in 1992–93 and a third in 2008–09.

The long and acrimonious Brexit negotiations between the British government and the European Commission representing the 27 member states of the EU succeeded in uniting all the main political parties in France in opposing a similar French exit from the EU. If this seemed to be a ringing endorsement of President Macron's unwavering support for the Union, the Front National, renamed the Rassemblement National in June 2018 by its leader Marine Le Pen, made clear that its change of policy towards membership of the EU was conditional on the latter adopting a protectionist policy in its trade with the rest of the world, and ending the free movement of labour within the European Single Market. With protectionism on the rise across the world, Le Pen's policy was increasingly popular in France, where a growing number of voters were happy to blame the persistently high unemployment and rise in poverty and inequality on immigrants and imports.

As the Covid-19 pandemic began to spread across the world it revealed and widened inequalities both within and between countries. Not only did it expose differences in income and living and working conditions but it deepened the division between the digital and the non-digital economy, thereby revealing the extent of European dependence on the US technology giants that had been its main beneficiaries. There was no European equivalent of Google, Apple, Facebook or Amazon. This was blamed by the French government partly on the tax privileges enjoyed by the US multinationals and partly on the failure of the European Commission to address the problem. Long before the outbreak of Covid-19, indeed since 2013, the French government had been campaigning to win the agreement of the other EU member states to tax the big tech companies in the countries where they made their profits rather than in those where they were headquartered. However, since European tax policies require unanimity, the French were unsuccessful. When Apple and the government of the Republic of Ireland won their appeal against the Commission's demand for a repayment of tax, and with the US opposed to any change in the way that the firms were taxed, the European Commission was unwilling to risk starting a trade war with the US by pressing the case, preferring to leave the issue to the OECD to negotiate.

Appendix

It is regrettable how little the British know about the economy of a neighbouring country in which so many chose to have a second home, retire or simply visit before the United Kingdom left the European Union. A common assumption is that the French economy is based on agriculture and industry, unlike the more modern, service-based British economy. With high taxation and an inflexible labour market, it seemed understandable that many young, educated French people should escape the high unemployment in their country to work in Britain, and in London in particular.

In 2014, when the Socialist government of François Hollande was in power, a leading British economist wrote that what he found to be the most interesting question about France was not why it was doing so badly but rather why it was doing so well in spite of operating “some extremely destructive policies”. In fact, before the Covid-19 pandemic struck, the service economy in France made the same contribution to value added as in Britain (about 80 per cent). The two countries also had about the same size of population (around 66 million), and similar levels of GDP and per capita income. Where they differed was that the service sector in France employed about 75 per cent of the active labour force whereas on some counts it employed 85 per cent in the UK. Unemployment in France was for many years much higher than in the UK, but levels of labour productivity were also higher in France. One of the biggest differences between the two countries, however, is that, since the 1980s, the government in France has consistently raised much more in taxation than Britain, in order to redistribute the gains made from closer integration into the European Union to those who did not benefit to the same extent. As a result, France, while not without its problems, has a more equal society than the UK.

When in 2018 I was invited by Agenda Publishing to write a history of the French economy since the Second World War, I happily accepted the challenge. Unlike my previous archive-based work, this book was to be based on published sources.

Of the many changes that transformed the French economy after the Second World War, one of the most marked was the new interventionist role played by the state. In contrast to the laissez-faire economic liberalism of the Third Republic, which had responded to the demands of a narrow but sizeable agricultural lobby group, and to the authoritarian management of Vichy that had served the interests of the German occupation forces and the Nazi war economy, the postwar state was to serve the interests of a much wider range of groups in France demanding economic as well as political security. Under a series of reforms enacted between 1944 and 1948, the structures and instruments that would enable this newfound scale of state intervention in the economy were put in place. Some were inherited from the structures introduced by the Vichy state; others reflected the political aspirations of the resistance groups. Together, the reforms included an extension of the nationalization programme begun under the Popular Front government to include coal, electricity, the main deposit banks, the remaining privately owned firms in the aero engine industry, the Renault car and truck maker and all the air transport companies. These nationalizations were in line, in terms of both the type of industries targeted and the method of implementation, with those introduced in other European states. Where the French were different was in creating a system of indicative planning that, unlike the Soviet system, was designed to operate within a parliamentary democracy. The entire apparatus of state intervention that was put in place was designed to make economic policy-making more democratic than had previously been the case.

It was not just the economic liberalism of the Third Republic that was swept away after 1945, but the entire constitution. Although it had been set up in response to French defeat in the war with Prussia and had survived the First World War, the Third Republic was now associated with decline and defeat. That there would be no return to it in any shape was confirmed by the results of a referendum held five months after the end of the war in Europe.