Ravaged by the war, France struggles to rebuild its economy. The loss of foreign investment and indebtedness to the United States for war loans have weakened the franc. In an effort to protect and expand French interests, the government nationalizes some industries, including the state oil company. By the late '20s, a stabilized franc helps put the economy back on its feet.
While industrial production slumps, France's economy withstands the 1929 crash better than other European countries, largely because it is more domestically than internationally oriented. A high percentage of the population still engages in small-scale agriculture, and France does not depend heavily on the trade of mass-produced goods. France is able to extend a large loan to the Bank of England.
The government nationalizes the railroads. World War II destroys the infrastructure and 50,000 factories. Germany appropriates half of France's public-sector revenue. The Vichy government forms "Organizing Committees" for each economic sector in a move toward a coordinated economy and away from the free market. France emerges from the war economically weak.
France nationalizes the banking, electricity, gas, and coal sectors, as well as companies that consorted with Vichy. Banker Jean Monnet develops output and modernization goals for key economic sectors. Under "indicative planning," details of the Monnet plan in each sector are left to committees represented by the Planning Commission, major firms, public enterprises, unions, and technical experts.
U.S. aid flows through the Marshall Plan and, combined with the national plan and worldwide prosperity, brings an economic boom and annual growth of 5 percent. France invests heavily in infrastructure and in 1957 plays an active role in setting up the European Economic Community (EEC), or Common Market, an expansion of the 1950 European Coal and Steel Community.
France's aggressive investment program contributes to inflation. War in Algeria leads to heavy expenses and labor shortages. Industrial output slows. After the Franco-British operation to retake the Suez Canal, Middle Eastern countries refuse to supply oil to France, which must turn to more expensive sources. The franc is devalued.
The economy regains strength, and France, closely followed by Germany, begins to dominate the EEC, vetoing Britain's application to join in 1963. The government implements an industrial policy that promotes large-scale economic projects in the fields of high-tech aeronautics, information technology, and telecommunications. The French economy outperforms those of Britain and Germany.
Investment in equipment modernization pays off: France undergoes an agricultural boom and becomes the world's second agricultural exporter after the United States. The sixth economic plan pushes massive investment in nuclear power, telecommunications, and information technology. France achieves economic growth of 5.8 percent per year until the oil shock of 1973.
The 30-year postwar boom known as the "Trente glorieuses" ("Thirty Glorious Years") comes to an end as France enters a prolonged economic crisis. Growth slows, becoming negative in 1975. President Giscard d'Estaing imposes unpopular austerity measures to stem rising inflation and unemployment. A major nuclear power program is designed to save on energy imports.
The government introduces radical reform, nationalizing banks, insurance companies, and many large industries, including steel, nuclear energy, and armaments. President Mitterrand's administration also increases minimum wage and social security benefits. Increases in social spending and growing losses at nationalized companies strain the government's finances, and the economic situation worsens.
Finance Minister Delors and Prime Minister Mauroy engineer a U-turn in economic policy to address the economic crisis. They reject protectionism and uncontrolled public spending in favor of austerity and increased productivity, and take a hard line against the traditional policy of bailing out troubled companies. The socialist program ends as Keynesian principles give way to more monetarist ones.
Prime Minister Chirac introduces a radical program of denationalization and deregulation. His reforms bring an upturn in macroeconomic performance, but they encounter serious opposition from striking workers. In 1991 France is caught up in the world recession in the wake of the Gulf War.
European economic integration in the form of the Single Market forces French businesses to become more competitive. The government launches a new program to privatize major concerns in the industrial sector (such as Péchiney and Elf Aquitaine) as well as the insurance and banking sectors (such as Banque Nationale de Paris). The economy registers moderate growth.
The state reduces its role in the economy but remains the leading employer, producer, and customer. Privatized firms emerge as major domestic and international players. Economic growth picks up and reaches 3.6 percent in 2000, driven chiefly by strong domestic demand. Growth is greatest in the financial services sector. France's more flexible economy now outpaces that of Germany as "motor of Europe."
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