Successful state run enterprise

Even after repeated rounds of privatization, a substantial share of France’s economy remains in state hands. In 2006, the state controlled ninety companies directly (representing 3.7 percent of total employment) and 755 indirectly (notably via the Caisse des Dépôts et Consignations, an institution nationalized just after the Second World War, which today functions something like a discrete sovereign fund). Its holdings include not only controlling interests like its 85 percent of Électricité de France, but also minority stakes—35.7 percent of Gaz de France-Suez and 27 percent of France Télécom. At the financial market’s 2007 zenith, its portfolio was estimated at 191.9 billion euros.
And in the aggregate, these companies not only cost taxpayers nothing, but may well keep taxes down. The state’s biggest fully owned enterprises, for example, are flourishing, even in this increasingly difficult climate. La Poste’s annual profits fell to a more than respectable 530 million euros in 2008. The SNCF (the state railway monopoly created in 1938 during the Popular Front) saw its profits drop from 1.1 billion euros in 2007 to 575 million in 2008—all the while employing 158,000 railway workers, charging passengers considerably less than Amtrak or its privatized British counterparts, keeping France’s carbon-gas emissions low, and operating what is one of the best rail systems in the world. Indeed, nationalized businesses are an important source of regular revenue for the state. For fiscal 2008 alone, the shareholder-state received no less than 5.6 billion euros in dividends from its holdings.
But nationalization’s benefits have been much broader than simple profits. Over the entire period since the Liberation, French planning’s record of creating employment and prosperity is considerably better than neoliberal critics would have it. The state has used planning as a flexible tool to restructure companies and save jobs, to create new industries from scratch and promote job growth, to soften deindustrialization’s blow to workers and their communities, and to orient transportation and energy policy onto more sustainable pathways.

Neither France—nor indeed Europe—would today have a robust civilian aircraft industry, employing hundreds of thousands of people in high-skilled, well-paying jobs, had the French state not taken the lead (with a 37.5 percent stake) in initiating the British-French-German Airbus consortium in 1966. The French government still owns 13 percent of a company that posted a $2 billion profit in 2008 and tallied its sixth consecutive year of building more planes than its competitor Boeing.

At a time when loss-making airlines in the United States have renewed their time-honored tango with Chapter 11, Air France’s recent history provides still more evidence that states can manage businesses just fine. Although the state ended its control of the airline when Air France merged with KLM in 2004 (in reality, a friendly acquisition of the Dutch company), it today retains a 17 percent stake in what is the largest passenger airline in the world, which netted nearly 750 million euros in profit in 2008. Far from being a consequence of privatization, these profits are a testament to prudent public stewardship: the year before the KLM merger, Air France had posted six consecutive years of profits. Nor has Air France built its economic health at the expense of its employees: powerful unions have earned its flight crews one of the most enviable compensation packages in the industry.

The story of Renault, publicly held from the Liberation until the 1990s, starkly belies the myth that nationalized companies can’t perform. When competition from Japanese competitors challenged French and American carmakers alike, and Renault’s losses began to mount, the government imposed a wide-reaching restructuring (entailing layoffs), which returned the company to profitability by the end of the 1980s. By the time the state began selling off its stock in 1990, becoming a minority shareholder in 1996 (it maintains a 15 percent stake today), Renault was in good health. In 2006, Renault employed over 125,000 workers and sold close to 2.5 million vehicles worldwide (making it bigger than Chrysler); it acquired an ailing Nissan in 1999 and turned it around. Although Renault has not been spared in the current downturn, its profits dropping to 599 million euros in 2008, these are numbers every American automaker would trade their SUV-assembly lines for in a heartbeat. State management is no small part of the reason why France today is home to profitable automobile manufacturers whose product lines are focused on small, innovative, fuel-efficient cars.

Consider how successive governments used their stakes in France’s traditional smokestack industries to guide industrial reorganizations. Faced first with cheaper coal imports in the 1960s, and then opting in the 1970s to develop nuclear power, the government put in place a decades-long plan to wind down Charbonnages de France’s coal mining and power generation activities. The company gradually shrank its work force by relying exclusively on retirements and transfers to other public companies. From its peak in 1946, when Charbonnages employed 350,000 miners, to 2004 when the last coal mine in France shuttered its shafts, the company didn’t lay off a single worker. Though unemployment today remains higher than the French average in the old mining regions of northern and eastern France, this policy spared communities the social dislocation of abrupt shutdowns. A far cry from Thatcherite Britain’s brutal mine closures and bloody union-police confrontations.

Among the six largest industrial groups nationalized in 1982 (CGE, Saint Gobain, Péchiney, Rhône-Poulenc, Thomson, and Bull)—several of which were losing money before the takeover—all were turning profits by 1985. True, between 1982 and 1985 the state had to pump in forty-five billion francs to recapitalize them. But the nationalization balance sheet cannot be closed there. A 1990 report by the Cour des comptes—a French General Accounting Office with judicial teeth—showed that when the costs of nationalization and recapitalization are weighed against dividend income and privatization proceeds, the 1982-1990 cycle of nationalization/privatization had a net zero impact on government finances. Over the long term, Mitterrand’s nationalization adventure didn’t cost French taxpayers a centime.

Nationalized industries and five-year plans may transgress the treasured tenets of neoliberal orthodoxy, but they didn’t stop France from enjoying three decades of sustained economic growth and prosperity. In the period between 1950 and the first oil shock in 1973, recalled in France today as les trente glorieuses (the “thirty glorious years”), its economy grew at the impressive clip of 5 percent a year (while United States growth averaged 3.6 percent), unemployment was virtually unknown (2 percent in France, compared to 4.6 percent in the United States), and French women and men experienced dramatic increases in their standard of living.

The move away from state ownership was not in fact born of a rational economic calculus but rather of specific political choices. From Chirac’s praise of Ronald Reagan and Margaret Thatcher in the 1980s to Nicolas Sarkozy’s emphatic embrace of the American free market model in the 2007 elections, the Right’s antipathy toward nationalizations has been fundamentally ideological.

Opting for austerity in 1983, Mitterrand abandoned wage indexing, reined in government spending, and loosened capital controls in order to avert another devaluation, keep the thrifty directors of the German central bank happy, and move forward the negotiations that culminated in the 1992 Treaty of Maastricht and the creation of the European monetary union. Although Mitterrand himself never renounced his nationalizations, the strict free market rules imposed by Maastricht and subsequent EU treaties committed member states to privatization.

Originally posted by KazetNagorra
Interesting that you come up with France, a country with a bloated government bureaucracy, a business climate plagued by frequent strikes and a horribly low social mobility on par with that of the US.

Originally posted by finnegan
I am tired of American ideologues repeatedly parroting claims about public sector enterprises and government planning in the economy. I have decided to refer to one useful article - written in 2010 - that sets out some of the achievements of the French public sector. [quote]Even after repeated rounds of privatization, a substantial share of France’s econom ...[text shortened]... e market orthodoxy which presently holds us all (especially in the US and the UK) in its thrall.

Originally posted by vivify
While I personally am not against the public sector, I should remind you that the issue isn't whether or not state-run businesses can be economically successful, but whether or not the state can be trusted to not abuse rights of the people. The fear (mostly held by U.S. conservatives) is that the more we really on government, the more certain it is that a democracy will erode into some type authoritarian state.

Originally posted by vivify
While I personally am not against the public sector, I should remind you that the issue isn't whether or not state-run businesses can be economically successful, but whether or not the state can be trusted to not abuse rights of the people. The fear (mostly held by U.S. conservatives) is that the more we really on government, the more certain it is that a democracy will erode into some type authoritarian state.

Originally posted by vivify
While I personally am not against the public sector, I should remind you that the issue isn't whether or not state-run businesses can be economically successful, but whether or not the state can be trusted to not abuse rights of the people. The fear (mostly held by U.S. conservatives) is that the more we really on government, the more certain it is that a democracy will erode into some type authoritarian state.