France:
Austerity is Austerity, No Matter How It’s Sold

Apr 30, 1983

At the end of March, the Mitterrand government in France announced a new program of drastic austerity measures. It introduced a package of tax increases, price hikes and government spending cuts which are intended to reduce consumer spending overall by an estimated 65 billion francs, the equivalent of two per cent of the French Gross National Product. We now see the socialist government in France, just as we have seen the governments in other countries doing, demanding sacrifices from the popular layers of the population, in order to defend the French economy against the crisis. Despite the fact that the S.P. (Socialist Party) and the C.P. (Communist Party) make up the French government, the policy it is carrying out is equivalent to that of Thatcher in England or Reagan in the United States.

What does it say about the French “socialist” experience which will reach its second anniversary this May?

Sacrifices, But By Whom?

The Mitterrand government stated that its drastic economic measures were necessary in order to defend the French franc and French trade. The foreign trade deficit of France has reached an annual rate of over 100 billion francs. The value of the French franc in relationship to other currencies continues to fall. In fact, the announcement of Mitterrand’s new austerity package was made shortly after a meeting of the finance ministers of the countries who make up the European Monetary System, a meeting where the French franc was devalued for the third time in the last two years. At this meeting, the Mitterrand government agreed to impose new austerity measures in France in order to avoid an even greater devaluation of the French franc.

That the French economy is in serious condition is beyond doubt. And that someone will sacrifice is obvious. But just who is it who will do the sacrificing?

Isn’t it reasonable that those who are responsible for the condition of the economy be the prime candidates? If there are problems in France today, it is the bourgeoisie and its profit system which is responsible. The French capitalists have not invested enough in production. With the crisis, they have found it more profitable to take much of their money out of production and put it elsewhere, including out of the country. If there is a high inflation rate, it means that the government has run up huge deficits in subsidizing the capitalists. Moreover, the capitalists continue to push up their prices in order to protect their profit margins. If the French franc is weakened it is because of these facts. And it is also due to the fact that financial speculators, in the front of whose ranks stand members of the French bourgeoisie itself, have taken advantage of the adverse situation to make additional profits by speculating against the currency.

Despite the fact that it is the functioning of the capitalist system that has created the crisis, and despite the fact that it is the actions of the capitalists that reinforce the crisis, the Mitterrand government has not demanded that the bourgeoisie be the class to do the sacrificing. Quite the contrary. The policy of the Mitterrand government in France, just like the policy of other governments around the world, has been instead to demand sacrifices from those who bear no responsibility for the economy, namely from the working class and the other poor layers of the population.

The specific measures of the new austerity plan make clear which class is served by the policy of the Mitterrand government – and it is not the working class. All the new taxes implemented are regressive in nature, placing the greatest burden on those who can least afford it. There is a new one per cent surcharge universally applied to income taxes to be used for the Social Security fund (which in France pays for health care, family allowances, as well as for pensions). There are new taxes on tobacco, which will increase the price by 25 per cent. Additional liquor taxes have increased the price by about $1.35 per bottle. A new special tax is to be added on gasoline, preventing any fall in the pump price despite the drop in world oil prices. Finally, even the mandatory “loan” required of the upper layers of the population, equal to ten per cent of the income tax due, will touch sections of the working class.

The price of state owned utilities will also rise: electricity, gas and passenger train rates will all go up an additional eight per cent. Increases in such necessities obviously weigh heaviest on the poor layers of the population.

New travel restrictions were introduced limiting the amount of cash a traveler can take out of the country to about $275 per adult. The media has given this measure a lot of play, as an indication of how the government is clamping down on everyone. But even here the class nature of the new measures can be seen. Business trips are exempted from the travel controls. And don’t we know how business and pleasure can be mixed when it is to someone’s advantage.

The recent currency devaluation may aid the capitalists to sell their goods overseas. But it makes the cost of imported goods more expensive to French consumers. Additionally, because imports will be higher priced, this gives the possibility to the capitalists to raise their own prices on domestically produced goods which they sell in France.

A Weak Attempt to “Relaunch Consumption”

This austerity program is merely the continuation, the logical outcome, of the government’s basic policy over the last two years.

To be sure, the socialist government maintained that it had a different policy than the right in France, and different than the likes of Reagan or Thatcher. When Mitterrand first came into office, the answer he gave to the economic crisis was to “Relaunch Consumption.” If Reagan’s answer was to give money to the capitalists and let it “trickle down,” Mitterrand’s answer proposed to let it “trickle up.” Mitterrand proposed to defend and even to raise substantially the standard of living of the working class and the poor, and through this to stimulate a recovery. In so doing he proposed he could at the same time defend the interests of the bourgeoisie.

What Mitterrand did not answer, however, was the critical question: namely, how, in the face of the crisis, could the government increase the standard of living of the working class and the poor, if it weren’t willing to attack the interests of the bourgeoisie?

For the first few months in office, the Mitterrand government introduced a number of social measures in the direction of increasing consumption, though on a much more limited basis than promised. The minimum wage was raised, as were the amounts paid for some social programs like family allowances, housing allocations, and aid to the handicapped. A regulation allowing for a 39-hour work week was instituted. However, while ordinarily in France such measures are overseen by the government, in this particular case the implementation of the reduction, and whether or not the hour would be paid, was left up to negotiations at each company. Additional plans towards a 35-hour work week, which was the campaign promise, have been postponed indefinitely. An additional fifth week of vacation time was introduced. The retirement age was reduced to 60 years of age, though the amount of each pension was reduced between 14 and 28 per cent. A government jobs program hired 55,000 workers in 1981, though Mitterrand campaigned on the basis of a program for 210,000.

These measures alone would hardly have been sufficient to raise the standard of living of the poorer classes so that consumption could have been “relaunched.” But even the effect of this was dampened by a number of governmental actions which directly lowered the standard of living of the popular classes. In the first year, the government raised heating gas prices 24 per cent, electricity 26 per cent, railroads 20 per cent, and public transportation around Paris by 14 per cent. Surcharge taxes were also raised. The tobacco tax went up 22 per cent, the automobile insurance tax doubled to 12 per cent, and the tax on gasoline raised the total price by over 20 per cent. The general value added tax was raised as well, increasing the prices of all manufactured goods.

By the time the government had finished, most of the impact of any of the increases in the social programs had been eliminated. Even the government’s most optimistic calculations put the increase in disposable income for 1981 at only 3.2 per cent. And of course this small increase included the sizeable amounts of money given directly and indirectly to the bourgeoisie. In any case, if the program was actually intended to solve the economic crisis as claimed, we can only say it did not. Production continued to stagnate, unemployment remained high, and inflation continued to rise.

“Priority to Investment”

With the deepening of the crisis, the Mitterrand government soon dropped any pretense that it had a solution to the crisis which did not attack the working class. Mitterrand admitted, by implication, that he could not defend both the bourgeoisie and the working class. With the deteriorating economic situation, the bourgeoisie wanted their profits to be guaranteed and defended. Mitterrand responded positively to their wishes, and announced a new program in June of 1982. As Mitterrand himself stated it, “We are entering the second phase of our action. Consumption alone is insufficient. That could perhaps be dangerous. Inflationary factors are at play without anything to oppose them. Investment completes policy. Priority to investment.”

It is not that Mitterrand had by any means previously ignored the interests of the capitalists. Right from the beginning of his term of office, he implemented a tremendous plan of aid and subsidy. First of all, there were the nationalizations of some companies. Despite the fact that these nationalizations were portrayed as an attack on some capitalists, they were quite the contrary. Those capitalists who were nationalized were able to liquidate their fixed capital during a time of stagnation, and thus have it available to move around into other more profitable investments. And these capitalists were paid very handsomely by the government. Over 40 billion francs was turned over to them, compensating them at a value higher than the stock of these corporations was selling for on the market.

In addition, various forms of aids, subsidies, loans, regional development funds, job and modernization funds, export credits, etc. have been given to the capitalists by the government. Officially, the amount spent out of the government budget in 1982 for such aid was 35 billion francs. But according to the businessmen’s newspaper Les Echos, which is about equivalent to the Wall Street Journal, the state gave private industry between 70 and 100 billion francs. In November of 1981, the Prime Minister of the government, a member of the S.P., said, “Never has a government mobilized such an amount of financial resources for jobs and investments by industry.” An official of the CGT, the union federation attached to the C.P., calculated that already in the first year and a half, the S.P.-C.P. government paid out more to industry than Giscard and his government of the right had done in all seven years of their term.

It is true that the Mitterrand government introduced, at least formally, a few new taxes on the wealthy and on the capitalist enterprises. Before last June the government carried out a lot of propaganda around these taxes, mainly to give the impression that the government was demanding sacrifices not only from the workers, but from the bourgeoisie as well. But, in fact, given the loopholes written in the new taxes, and given the countervailing effect of reductions in other taxes, the net result was minimal. It is very difficult to put a figure on these taxes, as those who are in a position to do the estimating have vested interests. But even taking the estimates of the government, which are most likely on the high side, the net result was an increase amounting to between 15 and 20 billion francs – a small sum compared to what the government has given the capitalists in all the other ways.

After June, there was no doubt that the working class was being asked to sacrifice. The Mitterrand government began its “second phase” by declaring a step which even the right wing in government did not take during the inflation of the whole last decade. Between June and November of last year, there was a wage and price freeze ordered by the government. And as is always the case with such freezes, the workers lose out. Wages are guarded automatically by every boss, but prices go uncontrolled. The freeze cost the French workers nearly another two per cent of their income to inflation.

At the same time, they announced a number of other measures to be imposed on the working class and the poor. In the name of reducing the budget deficit, social programs were attacked. Workers’ payments for Social Security and for unemployment benefits were raised, at the same time the benefits in these two areas were being reduced.

This first austerity program, of course, protected the benefits of the bourgeoisie. But it did not work, if its purpose was to solve the crisis – the proof is that within nine months the government had need of a new austerity program. Neither can this new program affect the crisis, since there is nothing in it which requires the bourgeoisie to invest in production, nothing which prevents the government from running up inflationary deficits.

Changing Labels Doesn’t Change Society

Today the question is simply put: who will pay the cost of the crisis. To this question, there is an alternative answer available to the policy defended by the S.P.-C.P. government.

If the government wanted to reduce the inflation, it would cut back the subsidies to the capitalists, thus eliminating the main cause for the budget deficit which causes the inflation. Moreover, it would prevent the capitalists from raising their prices, not to mention the prices the government itself controls directly through the nationalized industries. If the government wanted to increase productive investment, it could force the capitalists to do so, under the threat of losing their capital if necessary. If the government wanted to compensate for the balance of payments deficit, it could prevent the capitalists from speculating and from taking their money outside the country. Today it is estimated that French capitalists have stashed some 600 billion francs in the banks of Switzerland. This alone is over seven times the balance of payments deficit! There is no lack of alternatives.

The Mitterrand government, however, has made clear it will not attack the interests of the bourgeoisie. In making this fundamental choice, the S.P.-C.P. government demonstrates clearly that it is a bourgeois government, just like governments in England or in the U.S.

The French experience over the last two years shows, once more, that it is impossible to defend both the interests of the working class and those of the bourgeoisie at the same time. Despite all the claims that are made in the name of socialism, in the name of the left, if the government does not attack the interests of the bourgeoisie it has no alternative but to attack the working class. This is always the case, but it is more apparent in a period of crisis.

For the last two years, the French Ministries have been led by members of the Socialist Party and the Communist Party. But the experience during this time shows that who holds the governmental positions changes nothing fundamental in society. First of all, the same state functionaries remain – that is those who really construct and implement policy. But more important, the bourgeoisie is still in control by function of its economic power. It is this class, and not the governments which serve it, which decides the direction of bourgeois society. In fact, the difference between a right government and that of the left comes down only to a difference between labels.

This change in labels may be of value to the bourgeoisie. The fact that the S.P. and above all the C.P. have significant ties with the working class through the union apparatuses they each control, has helped create illusions on the part of the workers in the government. And these ties made the task of the government easier in the last two years, and in the future could be the means of containing the working class, if such a need arises. The left government offers to the bourgeoisie a weapon that a right government cannot give. If nothing else, finally, the change in labels helps the bourgeoisie in maintaining electoral illusions in the population, that somehow voting can make a difference in the policy of the government.

The experience of the Mitterrand government has demonstrated all too well, however, that for the working class a change in labels provides no answer to its problems.