In lieu of an abstract, here is a brief excerpt of the content:

France The Centralized Market Economy and Its Alternatives Chapter 5 Unlike most European economies that quickly sought to reduce their reliance on centralized forms of economic governance after World War II, French governments significantly expanded the scope of such designs. Through a comprehensive reform program of key economic institutions and the introduction of a dense fabric of formal and informal institutions that were designed to foster joint planning and adaptation within and between the public and private sectors, French governments exercised great control over corporate strategy. Scholars and policymakers widely credited these reforms for transforming the “pointillist character” (Ehrmann 1957, 320) of the country’s economic landscape from one defined by a large number of small firms to one in which large manufacturing firms were the dominant engines of economic growth and employment (e.g., Shonfield 1965; S. Cohen 1977; Fourastié 1979). Though French governments would continue to play a major role in shaping the country’s economic trajectory, the centralized system of governance that is so closely associated with post-war France proved relatively short-lived. Even before they were declared the source for the country’s “thirty glorious years” of economic expansion (Fourastié 1979), key building blocks were eroding as pivotal sections of the industrial sector became unable to credibly commit to the type of corporate strategies championed by French governments. During the late 1950s, changes in the international economy and foreign policy decisions originally designed to reinforce the domestic reform agenda gradually served to undermine the ability of governments to ensure sufficient support within the national business community for industrial strategies based on a centralized model of governance. Attempts to further centralize economic governance in later decades proved unsustainable and led governments in the mid-1980s to introduce decentralized forms of governance that bore similarities to the coordinated model of capitalism. However, by the late 1990s, the emphasis on such designs had been abandoned and greater weight was placed on ones associated with the liberal market economy. Through a process of institutional recombination, the French market economy gradually emerged as a hybrid system of governance. By the 2000s, the French economic model combined 100 Chapter 5 institutional forms in the financial and corporate governance domains that had significant similarities to those found in liberal market economies with designs in the industrial relations and innovation systems where legacies of centralized governance coexisted with decentralized designs introduced in the 1980s. In advanced market economies, governments attempt to achieve general goals such as economic and employment growth by shaping the incentives of firms to adopt particular product market strategies. The nature of corporate strategy and adjustment is key to processes of structural transformation and to whether governments will successfully maintain or attain levels of economic growth that ensure political stability.There are, however, important differences in the particular means employed by governments that favor centralized and decentralized modes of governance and in the type of coalitions they build within the business community. Governments employing the former exercise great authority through statutory and fiscal means and have typically used subsidies and extensive ownership stakes to directly influence corporate strategy in a narrow set of sectors. They have also tended to shape corporate strategy through numerous constraints on the market for corporate ownership and to orchestrate mergers as a means of establishing large lead firms that smaller ones have been compelled to follow. In contrast, governments relying on decentralized models have generally sought to establish support within the business community through institutions that have been designed to align the incentives of a broader set of sectors to pursue complementary corporate strategies, including the financial and manufacturing sectors. In practice, differences between centralized and decentralized models have meant that governments moving from the former to the latter arrangement have had to find functional replacements to the role played by public authorities in resolving coordination problems, including in the provision of capital and in support for industrial innovation. In France, where the transition toward greater reliance on decentralized forms of governance began in the 1980s, the type of business coalition that could consolidate such a shift was slow to emerge due to the legacies of earlier reforms. Only in the early 2000s, decades later than its large industrial neighbors, had such a coalition formed and the conditions emerged under which a hybrid system of governance characterized by extensive decentralization was sustainable . This chapter examines the nature of institutional development in key economic domains during the early post-war period, the 1970s and 1980s, as...

Share