FRANCE
The pursuit of happiness
MARC ULLMANN
Paris—Anyone still suffering from the illu- sion that there is little to choose between President Pompidou and his predecessor ought to have been present at the celebra- tions in Ajaccio last Friday to mark the bicentenary of the birth of that most cele- brated of all Corsicans, Napoleon Bona- parte. If the responsibility for the honours of the occasion had fallen on General de Gaulle he would have treated us to some- thing on the grand scale. M Pompidou, for his part, quite simply had a job to do, and wanted to get it over with. His text was as flat as a schoolmaster's lesson in history; the eulogy was reduced to the minimum; and the final verdict on the hero was succinct: 'he failed to bring happiness to France'.
Otte could well take this phrase as the inspiration of the new regime. Thus France is told that the austerity programme which is to squeeze internal demand and leave surplus production for export, so as to allow the franc devaluation to work, is in fact the lesser evil: that it does not com- pare with the extent of deflation and unem- ployment which would have been required to defend the old parity of the franc.
This approach to the country's economic predicament has already got the Govern- ment in hot water with the classical econ- omists, who say that deflation is the ante- cedent to a successful devaluation, and not the appendix to it. M d'Estaing has prom- ised us 'the accompanying measures' for the beginning of September, a remark which has provoked one of his critics to com- plain that 'it is the devaluation which ought to have been the "accompanying measure, and not the other way round. By putting the cart before the horse the Government has taken the risk that the whole enterprise will fail through its inability to restrain price inflation at a time of overheating and full employment.' This amounts to saying either that the devaluation came too early, or that it should have been preceded by a touch on the brake. Both propositions have been advanced in Paris. and M d'Estaing has _endeavoured to refute them both.
The first proposition is of course the easier to deal with. By picking the dog days of August the Government pulled off the classic devaluation d fraid. The surprise was complete, the speculation nil. Equally, by acting less than two months after its forma- tion, the new government has secured its political flanks. Responsibility for the de- valuation can be attributed to the old re- gime, while confidence in M Pompidou and his team, far from being eroded, is reck- oned by the pollsters to be still on the ascendent. Finally, by acting alone, instead of waiting for a general monetary realign- ment, the authorities can claim to have shown realism. Admittedly the franc will not, even now, escape scot free from the effects of a new wave of speculation on the Deutschemark. But it will no longer be in the front line: that honour will now pre- sumably revert to sterling and perhaps to the Belgian franc.
This leaves the other complaint: that the authorities should have damped down in- ternal demand first. People like M Jean- Marcel leanneney, an economics professor who served in several of General de Gaulle's governments, have pointed out that French industry is currently working to capacity and complaining about delivery dates and shortages of skilled labour. This, they say, is precisely the sort of economic climate which encourages businessmen to accept whatever wage and price increases are de- manded of them.
The Government's answer to these critics really depends on an interpretation of the statistics of the last two months. If it is accepted that the steadily tightening credit squeeze which has persisted all summer has still had no effect, then no doubt the worst fears are justified. But if it is true that com- pany liquidity is already very short, then a further dose of 'disinflation' at this stage should suffice to stiffen the businessman's backbone. M Giscard d'Estaing places great reliance on the penalties imposed upon banks which exceed their authorised lend- ing ceilings (they have to deposit with the Banque de France sums equivalent to the amount of the excess, in an account which receives no interest).
With regard to internal demand the Fin- ance Ministry is counting on a combination of three pressures. First, a drastic cut- back in capital expenditure by the state. Already some £350 million has been chopped off the 1969 estimates, and next year's budget, now in the final stages of preparation, will be the toughest since 1959. Second. a squeeze on the private purse. The average Frenchman has been on a spending spree in recent months, financed in part at least by the liquidation of savings. The threat of recession, even a modest recession, ought to encourage people to start putting money aside once more. On top of this September and October are the months when about one-third of the annual bill for personal income tax falls to be paid, while most householders will face a three months' bill for rent on 15 October. Finally, new hire purchase restrictions, coming on top of historically high rates of interest, will in- volve a 30 per cent initial deposit. 'With all this', a senior official of Finance Ministry commented the other day, 'if people still go on consuming more they must be aston- ishingly resilient'.
The case for the defence is thus a fairly solid one. But it does rest on one rather problematical assumption: that there will be no trouble in the factories after the re- turn from the holidays. If there are to be serious strikes, and if resistance to wage de- mands collapses, then prices will take off and nothing on earth will persuade the French to save. Each one of us knows that in times of inflation a frigidaire today is better than half a frigidaire tomorrow.
However the Government is optimistic. It thinks the large majority of workers pre- fers stability to conflict. It reckons that its own stock of goodwill is not yet exhausted, and that by appealing directly to public opinion it can gain a respite of at least three months. Already M Pompidou is pre- paring—with far greater care than he gave to his speech in Ajaccio last week—for a press conference at the beginning of Sep- tember. He intends to sound a note of un- flappability. He also hopes to carry con- viction that his medicine is the least dis- agreeable purgative available. Meanwhile his ministers plan to sweeten the dose with an increase in the minimum wage and in pensions.
For the moment the trade union leaders do not know what the mood of their mem- bers is going to be when they get back from the beaches. They reckon that it will not take much to transform them into either lambs or wolves. They add that which it is will depend on the level of prices (particu- larly food prices) and on the political climate.
As regards prices it is still too early to say what is going to happen. In theory
profit margins in the shops are supposed to be frozen. But who is going to go round checking in every corner store? Certainly the agreement with France's partners to put the sacrosanct pricinciple of a single mar- ket price for agricultural products through- out the Common Market into cold stor- age for the time being will help. This is a piece of common sense, even if it doe, ex- pose the fragility of the common agricul- tural policy, so long regarded as the slum. bling block to British entry into the Com- munity.
As to the political climate, it remains astonishingly favourable. It really does look as though people are prepared to give the new regime credit for upsetting the Gen- eral's order of priorities. This may be a matter of complicity, and it may be pretty fragile. But for the moment it exists. And the explanation for this complicity may be very simple: a nation which has not yet had time to digest all the implications of de Gaulle's departure is not yet ready to pass strictures on his successors.
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