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Socialist deregulation in the 1980s: a case study of state–market relations in financialization

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Abstract

This article focuses on a pivotal period in the trajectory of the French economy, during which the system of financing the economy shifted from a government-based system to a market-based system. To this end, it analyzes a set of monetary and financial reforms developed and implemented between 1984 and 1986 by the cabinet of the Minister of Economy and Finance Pierre Bérégovoy and the Treasury administration. Based on a corpus of archives from the ministerial cabinet and the Treasury department, it examines a series of deregulation measures taken by the Socialist government that laid the foundations for the financialization of the economy in the 1990s. It also highlights France's unique approach to reform, which focused on a controlled and organized opening of capital markets. It shows how these reforms gradually transformed the role of the state in the economy by introducing liberal mechanisms based on competition and negotiability, contributing to a form of depoliticization of decision making. The article raises the question of the links between the state and markets and highlights the bureaucratic role of senior civil servants working out of the public eye, even though the policy was ostensibly designed to curb monopolies and rents with a view to "lowering the cost of money" for the least favored members of society. As such, it serves as an excellent case study of state–financial market relations for larger comparative reflection about “financialization.”

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Notes

  1. The question of the role of indirect or direct finance in financing the economy is a classic and long-standing issue in economics (Gurley and Shaw 1960). In indirect finance, banks serve as intermediaries between buyers and sellers. In direct finance, the financial markets connect agents with financing needs and agents with financing capacities.

  2. The governments of Pierre Mauroy (1981–1984) and, especially, of Laurent Fabius (1984–1986).

  3. That of Jacques Chirac.

  4. Hay's argument is that politicians feel that the extent of economic globalization limits their ability to take autonomous decisions, and accept to give priority to economic competitiveness to the detriment of citizens' demands.

  5. Jean-Charles Naouri (office director and coordinator), Thierry Aulagnon, Jérôme Fessard, André Gauron, Bertrand Kramer, Gilles de Margerie, Jean-François Pons and Jean-François Stoll (technical advisors).

  6. In the 1980s, the term financialization was not yet used. The notion appeared in the 2000s (Krippner 2005; Epstein 2005) and became key to characterizing the contemporary evolution of developed economies (Boussard 2018).

  7. The second phase began in the 2000s with the emergence of new non-bank financial players (hedge funds, pension funds, private equity funds) and corresponds to a new mode of accumulation, based on private investments made outside the market.

  8. From 1971 onward, the monetary system established after the Second World War was unilaterally abolished by US President Richard Nixon. The international regime of fixed exchange rates was replaced by a flexible system which involved close monitoring of the money supply in each country.

  9. Documents consulted: B-0063989/1; B0064192/1; B0064192/2; B0064193/1; B0064196/2;

    B0064197/1; B0064866; B-0064868/1; B-0068016/1; B0068017; B0068019/1; B0068019/2; B0068020;

    B0068020/1; B0068020/2; B-0068024/1; B0068031; B-0068655/1; B0069342/2; Z16910; Z16911; Z16925;

    Z16926; Z16928; Z16942; Z16944; Z16950; Z16958.

  10. Documents 19,870,449/1 and 19,870,449/8.

  11. Documents B0064192/1; B0064192/2; B0064193/1; B0064196/2; B0064197/1.

  12. For example: Crédit Agricole covered the needs of the agricultural world; the Fonds de Développement Économique et Social (FDES) addressed the nationalized sectors (energy and transport); Crédit National financed the equipment industries; Crédit Foncier dealt with the building sector; the Caisse des Dépôts et Consignation managed the needs of public housing (HLM), etc.

  13. Previously, the credit control system had been used episodically (in 1958–1959, 1963–1965 and 1968–1970).

  14. For instance: Caisse des dépôts et consignations, Comptes chèques postaux, Caisse autonome d'amortissement, SNCF, but also Crédit national, Crédit foncier, Crédit agricole, Crédit populaire, the départements and municipalities.

  15. They fell from 287.5 billion francs in 1984 to 224.3 billion in 1986 (a reduction of almost one-third).

  16. Speech to the National Assembly, 19 November 1985 (Ménard 1998).

  17. Instruction No. 2–84, dated December 5, 1984.

  18. CAEF, Direction du Trésor, code B0068017, unsigned memo entitled "Quelques remarques sur le rôle de Paris comme place financière intermédiaire."

  19. Laws of July 11, 1985, and December 14, 1985.

  20. Computer-assisted trading system.

  21. CAEF Archives, the Treasury, code B0068017 (April 6, 1976).

  22. In economic terms, the authors of the White Paper argued in favor of a direct finance system based on financial markets, rather than an indirect finance system based on bank credit. However, there is no consensus in the economic literature as to the superiority of the market-based system over the bank-based system (Levine 2002, 2005). This is particularly true now that the boundary between the two systems is increasingly blurred, the banks having themselves become essential intermediaries in the financial markets (Hardie and Howarth 2013).

  23. While the word deregulation is never used, these two terms appear 11 and 41 times, respectively.

  24. This would explain, on the one hand, the involvement of the French government, in 1979 under Valéry Giscard d'Estaing, in the creation of the European Monetary System (EMS), which instituted a mechanism of fixed exchange rates between European currencies (Duchaussoy 2011), and, on the other hand, the reluctance—and ultimately the refusal—of the Socialists, once in government under François Mitterrand, to leave the EMS, contrary to what they had announced in their program (Eloire 2020; Eloire, Dallery, 2023).

  25. CAEF Archives, the Treasury, code B0068017 (1 April 1977), "Réflexion sur des mesures en faveur de la Bourse des valeurs."

  26. CAEF Archives, the Treasury, code B0068017 (20 November 1984), "Interconnexion du marché monétaire et du marché financier."

  27. J.-C. Naouri, Bérégovoy's staff director and coordinator of the White Paper, holds a PhD in mathematics.

  28. Jacques Delors (UE), Henri Chavranski (OCDE) and Michel Camdessus (FMI).

  29. Quote from an interview with J.-C. Naouri.

  30. A rapidly developing financial technique in France in the early 1990s.

  31. CAEF Archives, the Treasury, code Z16925 (8 August 1985), by D. Bruneel.

  32. Through tables: tables of financial operations, tables of long-term financing.

  33. CAEF Archives, the Treasury, code Z16926 (July 26, 1985), by D. Bruneel, “Réflexions sur la création d’instruments de placement à court terme négociables.”

  34. A statistical indicator to account for credit and money in circulation.

  35. CAEF Archives, the Treasury, code Z16926 (31 July 1985) by Y. de Gaulle, “La création d’instruments de placement à court terme négociables remet-elle en cause la logique de notre actuelle politique monétaire ?”.

  36. INSEE statistics.

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  1. Université de Lille, Clersé, Bâtiment SH2, Campus Cité Scientifique, 59655, Villeneuve d’Ascq Cedex, France

    Fabien Eloire

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Eloire, F. Socialist deregulation in the 1980s: a case study of state–market relations in financialization. Fr Polit 21, 269–294 (2023). https://doi.org/10.1057/s41253-023-00218-z

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