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Government Subsidies in France

Nicolas Brimo

“Un Secret d'etat: l'aide publique a l'industrie.” Les Temps Modernes 416(March 1981):1578–1588.

French democracy, Nicolas Brimo observes, has a special fondness for secrecy, and nowhere is secrecy guarded more jealously than when questions are raised concerning government subsidies to private industry. No one, for example, is quite certain how much direct and indirect state aid entrepreneur Marcel Dassault has received to equip the French air force and to export his Mirages jets around the globe.

Government in France has, according to Brimo, ingeniously organized itself to foil the curiosity of journalists and parliamentarians concerning industrial subsidies. As part of this organizational smokescreen, aid to private industry may take 7 specific forms, be channeled through any of 24 budgetary tracks, and be distributed by no less than 23 separate committees. The Ministry of the Budget does issue an annual report disclosing subsidies to nationalized enterprises, but no such report exists for aid to companies in the private sector. Even within the economic agencies of the French government, ignorance and confusion reign. The task force on Public Expenditures, a branch of the General Commissariat of the Economic Plan, grudgingly admits “its inability to measure the effectiveness of these interventions (subsidies)” because of the diverse character of the aid.” In addition, “the beneficiary of such interventions is not always identifiable with certainty...or lack of information.”

Brimo contends that a more detailed knowledge of public aid to the private sector would be particularly instructive at a time marked by a resurgence of classical libral ideology—often raucously supported by prime recipients of state subsidies. Taking the pulse of the time, former President Valery Giscard D'Estaing loudly publicized his liberal philosophy, while downplaying the embarrassing fact that whole industries in France (metals, weaponry, ship building) and entire regions (the North, Loraine) survive only through massive state aid.

A classic case of government obfuscation in the area of industria aid centers around a report issued in 1978 by Herve Hannoun, a state financial inspector, Hannoun's report represents the only attempt by a government official of the Fifth Republic to arrive at some estimate of what the state was expending directly or indirectly on private industry. Only five typed copies of the 70 page report were produced in January, 1979. The Elysee Palace quickly placed the document under top secrecy. Nonetheless, by September 1979, a leak revealed the principal conclusions of the “rapport hannoun“—complete with figures and names.

In brief, the document reports that six industrial groups which account for less than 10% of the increased value of French industry receive 50% of government sub sidies. These six groups employ only 10% of the industrial work force, account for only 11% of exports, and but 2% of the total investments in industry. Four of these six groups are privately owned.

The report further demonstrated that, without public assistance, none of these groups could have registered profits. Ignoring the government policy objective of employment stimulation through sub sidy, the six groups have not expanded their manpower and, in some cases, have actually reduced it. Despite in creased state aid, private industry increased its investments in the French economy by a mere 17% from 1970–1979, while during the same period state enterprises more than doubled theirs.

All in the name of “liberalisme,” the leaders of the Fifth Republic have poured mounting sums into private industry, increasing its profits while producing stagnating investments and declining employment for the nation. An unsuccessful policy based on false premises, the subsidy program to industry nonetheless received the staunch support of Valery Giscard D'Estaing, often described by his supporter as “one of the