FRANCE THE TROUCH OF THE WAVE by S. LAMPION & H.VALENTIN "This time we really seem to have reached the 'trough of the wave.' " This opinion, expressed by the employers' daily newspaper Les Echos, sums up the present situation of the French economy in a few words. After having been spared longer than the other capitalist countries, France has suddenly been hit by the consequences of the slowdown in world economic activity that began in the autumn of 1974. In the space of a few months, French capitalism has entered the most serious recession it has experienced since the second world war. I. Worst recession since the war
1. Industrial production had increased strongly during the first half of 1974, but during the summer it suddenly began to decline. The fall was about 10% between August 1974 and January 1975. The major industrial branches were successively affected, despite some variations over time. Between October 1974 and January 1975 production fell 12% in the chemical industry, 11% in the transformation of metals industry, and 7% in autos. Between November 1974 and February 1975 steel production declined 17%. The generalized furn in the economic situation was even more strikingly manifested in the underutilization of productive capacity. Only 17% of all companies are running at full production (as compared with 40% scarcely a year ago). The chemical industry is running at only 50% capocity. The scope of the recession has surprised the French bourgeoisie, which had believed it could escape the generalized slowdown in the major capitalist countries. For a long time the bourgeoisie dreamed of a possible upturn beginning in the summer of 1975. But in spite of the signs that are appearing in Germany and Japan, it is now obvious that there will be no serious upturn internationally before the end of the year. And that excludes any upswing of the French economy before that time. That is why the French bourgeoisie is now gripped by deep pessimism, which contrasts with the relative optimism with which it regarded the crisis up to several weeks ago. This pessimism is intersified by the short-term domestic prospects. Three key sectors are now in ex18 treme difficulty: steel, which for three months now has been running with its level of orders 30% lower than last year; construction, for which the employers' professional organization foresees a 20-25% slowdown in activity during the coming eight months; and automobiles, which experienced new sales declines in March and April, the overall decline during the past year (April 1974 to April 1975) standing at 35%. Generally speaking, inventory levels remain very high in the capital goods sector and in the consumer goods sector. While "incoming" stocks are dropping, it must not be concluded that there will be a rapid technical upswing. * In fact, the high inventory levels simply reflect industries' inability to find markets for "outgoing" stocks. Moreover, orders are continuing to decline, especially in the consumer industries, particularly because of a spectacular fall in foreign orders. As for investment, the growth rate for this year threatens to be negative (as compared with an increase of 7% in 1973 and of 3% in 1974). The most recent inquiry conducted by INSEE (Institut National de la Statistique et des Etudes Economiques - National Institute of Statistics and Economic Studies) predicts a probable decline of 34%. The French bourgeoisie is seeking above all to limit the damage. The various pump-priming plans announced during the past three months are aimed essentially at reassuring the employers: "The government will not allow a crisis of the 1932-35 type to develop. " The measures suggested are supposed to enable the economy to avoid too deep a deterioration of the situation; they call for steps such as stimulating the construction industry with credit facilities for housing construction, priming productive investments through public works programs and Fiscal deductions, and selectively aiding the export sector through interest rebates.
2. One direct consequence of the sharpness of the recession has been a spectacular rise in unemployment since the end of the summer of 1974. Ac*A "technical upswing" occurs when companies again begin to order goods so as to reconstitute their stocks.
cording to the statistics of INSEE (which counts only those seeking employment who are registered with the National Employment Agency), the number of unemployed rose 72% between the end of August 1974 and the end of April 1975. During the same period offers of employment dropped 97%. According to trade-union sources, 1,200, 000 workers are now unemployed. Never have there been so many people unemployed in France. Even in 1935-36, at the height of the economic crisis, unemployment never exceeded 800, 000. This phenomenon is further aggravated by three factors. First, the considerable increase in partial unemployment. According to the Ministry of Labor, more tan I million working days were lost in February 1975, that is, eight times as many as in February 1974. It is certain that the real figure is much higher, because government statistics count only partial unemployment under forty hours a week. Second, the mass layoffs that have occurred during the past six months have not (yet) been ordered by the largest companies, which have until now preferred to resort to reductions in working hours. Third, the rise in unemployment has developed even though the immigration of foreign workers (who represent 7% of the active population) had practically stopped beginning with the second half of 1974. Short-term prospects for employment are very bad. Beginning with the end of June, 300,000 young people will enter the job market. In view of the crisis of the French economy (which is compounding a long tendency - observable since 1968 - toward insufficient creation of jobs in comparison to available labor resources), these 300,000 young people threaten to immediately augment the 1,200,000 presently unemployed. Since the government had sworn that in no case would unemployment reach the figure of 1 million, the whole bourgeois press has now been compelled to recognize the gravity of the situation. That is why the government is going to announce, before the end of May, a series of measures aimed at stimulating the creation of jobs, especially in the public sector. But this plan will in no way be able to reduce the level of unemployment before several months. The prospect of a million and a half unemployed by autumn 1975 thus appears certain.
3. In spite of the recession, price increases, which reached 15% in 1974, are continuing at an annual rate of about 11% (+2.7% during the first quarter of 1975). The French bourgeoisie is crying victory at the slowdown of inflation, and it is probable that the rise in prices can be limited to about 10% this year. But this slowdown seems to be essentially due to conjunctural and international factors (the tendency toward less rapid inflation in all the countries affected by the crisis, the decline in raw material prices), rather than to the effectiveness of the "anti-inflation" plans that have proliferated since December 1972. If the French price index is analyzed over a period of several months, it can be seen that its small increase is attributable solely to a relative decline in industrial prices.
The government's objective is to bring the rate of price increases down to 0.6% a month. Probably this goal will not be reached. For one thing, the big price increase obtained by French farmers from
Brussels (that is, from the Common Market) will have repercussions on the price index during coming months. For another, certain prices for services will soon go up after the raising of the faxes that had been imposed on them. Finally, the increase in oil prices at the end of the year will have inevitable consequences on price increases in France.
More generally, inflationary tensions will once again be violently manifested in the event of an economic upturn.
4. The foreign-exchange situation remains an essential problem for the French bourgeoisie. Since the increase in petroleum prices, French exports have become incapable of covering the increased value of imports. The 1974 foreign deficit, which was 34,000 million francs (about US$8, 500 million), would be intolerable for the economy if it continued at such a level for several years. For this reason, a rapid reduction of the deficit has become the major aim of the government's economic policy, and even of its foreign policy. During the past three months, several factors have favored the government's aims in this area: the fall in real terms of the price of imported oil and row materials; the slowdown of economic activity in France, which has limited purchases of basic products, and the halting of investment programs, which has reduced imports of capital goods; the purchases made by countries of the East and by oil-exporting countries, notably Algeria; and significant sales of agricultural products. If nothing were to upset this situation, the foreign deficit in 1975 could be brought down to 15,000 million francs, that is, 19,000 million francs less than last year. But this situation will not last long. In fact, of this 19,000 million francs, more than 14,000 million would derive from the improvement of the trade balance with the countries of the East, the oil-exporting countries, and the countries of the zone of the franc. The countries of the East and the oil-producing countries, as customers of France, are presently running deficits. They will therefore soon be led either to reduce their purchases or to raise the prices of the products they are selling.
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FRANCE Further, the United States will seek to take over markets that are important for French foreign trade in the areas of sales of arms and agricultural products. In 1974 the trade balance in agricultural products had been 11,000 million francs in favor of France. This surplus has tended to decline since the beginning of 1975 under the effects of a reduction in export capacities and of the greater availability and competitiveness of American wheat. Finally, the expansion of sales of capital goods (up 30% in 1974) was mainly in sales to nonindustrialized countries. Current predictions suggest that there will be a decline in sales to these countries during coming months. II. Employers' plan for the crisis
5. Confronted by a recession that it was unable to avoid, the French bourgeoisie allowed the crisis to deepen for six months, with the aim of "skimming off" the least productive elements of the industrial apparatus and the labor market. Nevertheless, this policy has its limits. The big employers especially can only be uneasy about a general and prolonged contraction of markets. That is why they are vigorously waging a campaign for the government to take a number of measures to support investment. Nevertheless, it is not a matter of genuine pump-priming plans, which under present conditions could only aggravate the foreign deficit and cause the loss of advantages recently won by companies against the workers. Over the long term, the essential obiective of the French bourgeoisie remains achieving a lasting stabilization of the increase of real wages and of the consumption levels of the workers. For the past six months this has entailed a very tough attitude against workers struggles. During both the postal strike last November and the Renault strike in March the bourgeoisie clearly showed how far it would go in pushing back the workers and the workers leaderships that wanted to challenge the employers' plan for the crisis. A powerful anti-working-class offensive was unleashed that allowed the bourgeoisie to make significant gains, although no decisive victory against the working class was won. In this respect, the regime and the employers have been able to rely on the disorientation of the working masses. In many sectors fear of unemployment has been a powerful brake on the development of mass responses to the attack of the employers. Moreover, the leaderships of the workers movement have refused to organize real resistance to unemployment and attacks on buying power. During the Renault strike, as during the postal strike, the Communist party, the Socialist party, and the trade-union lead20 erships openly demonstrated their refusal to centralize the struggles against the Giscard-Chirac government, the guarantor of the employers' plan for the crisis.
6. It will soon be one year since the French workers began paying a very heavy price for the economic crisis. For the first time since 1968, buying power has fallen noticeably. In fact, beginning with the third quarter of 1974, the rate of increase of hourly wages, which had been very high during the previous six months, slowed down considerably. Moreover, because of the slowdown of economic activity, the average length of working hours has clearly dropped off. The conjunction of these two factors has led to a fall in buying power, which has been uneven among various sectors but can be estimated at nearly 1% a month on the average. To take the example of the last quarter of 1974, the rate of increase in hourly wages stood at 3.7%. Price increases during the same period amounted to 3% according to INSEE (3.8% according to the Confédération Générale du Travail - General Confederation of Labor - the CP-dominated trade-union federation). If the trade-union sources are taken as a base, it becomes apparent that there was at least a stagnation of buying power. But account must also be taken of the estimated reduction in working hours, which was approximately 1.6%. Because of the system by which French workers are paid, the hours thus lost had been paid at the bonus rate for overtime hours, and the average decline in buying power over the entire quarter was thus on the order of 2.2%. This figure conceals real losses of more than 5% in some industries. The social consequences of unemployment are particularly serious. The number of unemployed workers receiving compensation from unemployment insurance amounts to scarcely one-quarter of all the workers unemployed (260,000 at the end of March out of the 1,200,000 unemployed). On the average, unemployment compensation payments amount to only two-thirds of gross wages. In this respect, the French bourgeoisie has been strongly and loudly satisfied with the agreement signed by the employers and trade unions on October 14, 1974. This agreement was supposed to provide for guaranteeing that workers laid off "for economic reasons" would receive an income equivalent to 90% of their wages for a period of one year. But at the end of March, because of the many inroads the employers made against application of the agreement, the number of workers actually benefiting from the agreement came to 29, 000 — that is, barely 2% of those unemployed. In the case of partial unemployment, the compensation paid is often very low, Basic compensation comes to 6 francs per hour lost, while the minimum hourly wage is 6.95 francs. Montover,
the hours lost over and above forty hours had been paid at time and a half; the effects of this can be seen in the many working days lost in some companies. During February and March the bill came to an average of nearly 1,000 francs for the professional workers of Renault and Ford-Bordeaux. Finally, the palpable reduction in the standard of living can be measured in the volume of consumpfion. In one year (from the first quarter of 1974 to the first quarter of 1975) the consumption of French workers declined 10%. The decline was especially apparent in spending on clothing (-7%), electrical appliances (-18%), and everything related to health care and housing. The latest inquiries conducted among retail merchants confirm a fall in the volume of consumption. This has to be seen as related to an increase in precautionary savings, which always occurs during a period of economic crisis.
7. For big capital the economic crisis is permitting economic concentrations that correspond to the big operations of financial concentration during the past several years. This development has been much less spectacular than the financial one, because it is a matter of internal reorganization of trusts. But the consequences are much more serious for the workers: layoffs and transfer of units of production and therefore of personnel. Péchiney-Ugine-Kulmann, Boussois-Souchon-Neuvece l, Saint-Gobain-Pontd-Mousson, and many other firms are taking advantage of the crisis to eliminate the mosaic of small companies that had made up these big trusts and to create divisions according to product that are better adapted to control and profitability. In other sectors that have been hit full force we are seeing concentrafions directly linked to the crisis: Peugeot-Citroen in the auto industry, UNIC and a Dutch group in trucks. The consequences of this restructuring for the workers will be felt only in two to three years. Nuclear power has become a key sector because of the structural energy deficit of the French economy. This is leading the government to promote a massive and rapid development of nuclear energy, in defiance of all safety regulations. The Cresot-Loire group, which is developing the Westinghouse subsidiary in France, was finally acquired by the Be gian EmpainSchneider group after a long financial battle. This will allow for a significant restructuring of the nuclear engineering and large-scale boiler-making industries. At the same time, De Wendel is reorganizing the Lorraine steel industry around Sollac, as the steel industry in the North has been reorganized around Usinor and Paribas. It is not easy to estimate to what extent these shifts also reflect modifications in the relationship of forces within big capital or, particularly, to detail which sectors of monopoly capital are supporting the Giscard regime. It can be noted that the privileged alliance between the state and the financial group organized around the Banque de Paris et des Pays Bas has been broken down and that the section of finance capital represented by the Suez group was only too pleased with the change in the presidency. An important role seems to have been played by Suez, the section of finance capital controlled by the state, and EDF (the nationalized utilities company, which has presented the government a plan for restructuring industry in accordance with the needs that will be felt in all areas concerned with nuclear development. If this plan is adopted, it will have considerable consequences in many industrial branches that are still very dispersed. EDF in particular wants to remedy the present situation under which only 40% of the demand for industrial products used in the construction of nuclear power plants con be met within the national territory. Before the crisis, the French economy had succeeded in raising itself to fourth place among capitalist economic powers, after the United States, Germany, and Japan. Until the oil crisis, the French employers lived in the euphoria of a rapid growth of investment, production, and export. But then the crisis generated consciousness of the contradictory conditions of the 1968-73 phase of expansion. (See the article, "The Moment of Truth, " INPRECOR, No. 16/17, January 16, 1975.) The debates that are now going on around the preparation of the seventh plan show that certain forces are determined to slow down a disorderly accumulation that radically compromises reestablishing the profitability of firms. Bank activity must become more selective as well. There is no longer any question of an anarchic distribution of credit, which aided the survival of marginal sectors and nurtured a demand for goods on the domestic market, thus reducing export capacity. Generally, French big capital knows that it has to give up some of the political and economic ambitions it developed during the Gaullist era. It is seeking to guarantee itself certain niches in the world market (the arms industry, off-shore platforms for undersea oil exploration) and is giving up defending its other positions, allowing foreign capital to acquire French companies (Roussel-Uclaf, for instance). France is a second-rank imperialist power. Plunged into crisis, it seems to have resolved the problems of inflation and the balance of payments deficit less badly than Italy or Britain. Nevertheless, the unstable equilibrium it has attained would be unable to resist an offensive of the working class. The workers, after waiting for several months, are now waging more and more numerous struggles that threaten in the short term to challenge the French bourgeoisie's attempts to get out of the crisis without suffering too much damage.
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