World: What the Common Program Means

If the left should win power in the French elections, predicted Economist Otto von Fieandt, “1978 will be the year of the free lunch.” He might have added that it would be the costliest lunch in French history. Many analysts who have dissected the left’s platform, or Common Program, believe that it will cause severe economic problems and gravely disrupt France’s relations with the rest of Europe. Even some Socialist thinkers accept this analysis—if not publicly.

What, in fact, would be the economic consequences if the Common Program were actually introduced? Some views from the experts:

Wages The Socialists’ and Communists’ promise to raise the minimum wage 37%, to $500 per month by April 1. A study by the business magazine L ‘Expansion indicates that these and other proposed wage increases would average 20% in 1978, boosting inflation to 18% by the end of the year (see chart). Moreover, the hikes may cause 300,000 to 400,000 bankruptcies and boost unemployment from its present level of 4.6%. Clearly, businesses in France that are already having difficulty making ends meet will not be able to pay the higher wage bills.

Welfare Benefits The left has agreed upon a package that would include an immediate 25% increase in allowances to families with children; an immediate rise in the minimum income of France’s elderly from $190 to $270 per month; a 30% increase in minimum monthly unemployment benefits, to $250.

Socialist Leader Francois Mitterrand claims that the 1978 price of the wage and welfare package will be $8.3 billion. Premier Raymond Barre contends that the entire Common Program would cost $32.7 billion. According to Barre, Mitterrand is “a pyromaniac masquerading as a fire fighter,” whose extravagant schemes will destroy the center-right government’s economic achievements.

Nationalization This is the issue that split the left last fall. In its original plan, the Common Program called for the nationalization of nine giant French companies as well as all banks. When Communist Party Chief Georges Marchais insisted that the takeover of the nine companies also include their 1,450 subsidiaries, the Socialists refused, and the leftist coalition fell apart. Marchais also demanded a system of workers’ councils in public and private industry that would virtually guarantee control by Communist-dominated unions. The Socialists, somewhat more moderate in their approach, simply argue that limited nationalization will stimulate capital investment in French industry because the state will have far greater control over capital and credit. Nonetheless, the head of France’s top businessmen’s organization, Francois Ceyrac, calls the Common Program “a formidable menace to companies and to the entire economy.”

Overall, most analysts foresee ripple effects almost beyond imagining. The prospect of a leftist victory has already caused a flight of capital abroad; if the Socialists and Communists won—and reconciled their differences—the left would have to engineer tough new restrictions on capital flow and, to save jobs, erect new tariff barriers. Such protectionism would isolate France within the European Community and gradually cut the country off from its trading partners. Even for Frenchmen, that is a prodigiously high price to pay for a free lunch.