Custom Search

1)    From state to market. Discuss with reference to French state-economy relations during the Fifth Republic.

a)      This is about the abolition of French dirigist policies with Mitterand in 1984 (the U-turn) – whether the trend has continued and whether the trend was there before 1984.

b)      Theoretical and historical reasons

i)        Historical background – Fifth republic was formed as strong presidency in 1958. Previously National Assembly had tried to be effective, and largely failed. Now the government first time actually had an executive capacity, this coupled with de Gaulle’s nationalism and ideas for national champions (Renault etc.) set the stage for the interventionist policies.

ii)       Oppose this to Britain historically conservative, then alternating, with stop-go policies etc and Germany with its reconstruction, no national pride.

iii)     Keynesian theory from economics as justification for expansion – when state spends more than borrows, then the extra activity created will cause further supporting activity and growth in welfare. However, the money has to be borrowed from somewhere, raising interest and crowding out private projects. If there are not enough resources for government to employ, inflation will occur.

iv)     But resources could be attracted from Germany, and devaluations managed to compensate for inflation and interest rate.

c)      Changing conditions

i)        Developments in rest of the world - Germany was becoming an acceptable international power, the financial flows increased and the dirigist policies became increasingly expensive for Germany. European Union was set up and its EMU required more monetary control. This implied that devaluations were not an easy option to restore international competitiveness after inflation.

ii)       Domestic reasons - Inflation accelerated with oil-shocks and expansive government spending (cost-push and demand-pull). In addition, it became clear that market based production systems are more effective at utilizing information and using modern competitive production techniques.

d)      Resulting movement towards markets - Thus in 1984 Mitterand did a U-turn, and in 1985 right wing coalition with Chirac came to power. Inflation was curtailed, at the expense of slower economic growth and European Union partner Germany was satisfied.

e)      Movements after 1984

i)        However, lately the marketisation of the economy has slowed. The reforms are costly and create uncertainty among people. Protective legislation is often preferred by working class instead of higher salaries, thus Jospin left-wing government in power again.

ii)       However, much of the marketisation is irreversible. Capital flows are free inside European Union. There is a fiscal stability pact that limits the possibility of government deficit to less than 3% of GDP, except in exceptional circumstances.

f)        Extensions - The question is whether an optimal level of marketisation has reached or whether there is still room for further liberalization. Personally being a libertarian, I think that after a period of consolidation and when international conditions become more favorable, the progress should continue. Although comparing with US is not popular in France, looking at their better economic performance and more market based economy, is surely evidence in favor of Americanizing in the future.


2)    Why have successive French governments supported further European integration?

a)      France and Germany have been at the center of European union deepening and widening, whereas Britain has been an outlier, American Trojan Horse for progress etc. Answer lies in the different historical experiences, political systems, state-economy relationships and trading patterns. At the end of the day, they can all be viewed under a common denominator – economic advantages.

b)      Historical experiences and political motives

i)        Control Germany, allowing it to rearm. This required giving part of French sovereignty in return, which halted the progress (Empty Chair crisis and Luxembourg compromise with de Gaulle).

ii)       Good relations with Germany (Adenbauer and Pompidu) that needed formalisation and cashing in.

iii)     Become superpower comparable to USA

c)      Economic spillovers and functional explanations

i)        Commission was pushing for further powers, steel community was strong and successful.

ii)       Monet and Schuman had envisioned that.

iii)     Need for international co-operation to ensure stability of trade and financial system. USA was unwilling to take the role. France especially supportive because it had highest regulation and without international standardization of legislation it would have become uncompetitive.

iv)     Design of CAP beneficial to France

d)      Political motives – no alternative strategies. If you were left out, decisions were made without you.

e)      Still, no matter what, when economic conditions worsened in 1970-s progress was made to a halt. And all the other important treaties, SEA and Maasticht, were a result of many package deals to ensure immediate benefits to each participant.


3)    Neo functionalist theories of European integration provide the most convincing explanation of the establishment and subsequent development of the European Community.

a)      European Union has evolved slowly into a large and important international organisation, much like predicted by its founders, Monet and Schuman. They called the theory a functionalism – small projects creating spillovers and causing further integration. Neo-functionalists have extended the theory and say that the process of integration its-self causes further integration. So is European Union a process of these spillovers, or is it more like the neo-realists claim – the most optimal rational solution to current situation? the answer to this question is important in two sense: it allows us to predict what will happen to the EU in the future, and it also allows us to define EU more precisely, for example, in the federalist – intergovernmental axis, and thus help to clarify the power centres etc.

i)        Define neo functionalism

ii)       get the evidence on the neo functionalism

iii)     Get the evidence against neo functionalism. How much of this is for realism?

iv)     Evidence against realism

v)      Alternative theories

vi)     Conclusions – probably a mixture, but very hard to discriminate as to how much of a mixture.

Click here to see more economics,politics and school papers from me