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The Consequences of the Global Financial CrisisThe Rhetoric of Reform and Regulation$

Wyn Grant and Graham K. Wilson

Print publication date: 2012

Print ISBN-13: 9780199641987

Published to Oxford Scholarship Online: September 2012

DOI: 10.1093/acprof:oso/9780199641987.001.0001

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French Responses to the Global Economic Crisis: The Political Economy of “Post-Dirigisme” and New State Activism

French Responses to the Global Economic Crisis: The Political Economy of “Post-Dirigisme” and New State Activism

(p.206) 11 French Responses to the Global Economic Crisis: The Political Economy of “Post-Dirigisme” and New State Activism
The Consequences of the Global Financial Crisis

Ben Clift

Oxford University Press

Abstract and Keywords

This chapter analyzes French responses to the financial crisis, arguing that a ‘post-dirigiste’ interpretation predicated on an expansive notion of the state as actor in and enactor of markets best captures the qualitative shift in French state/market relations. Post-dirigisme incorporates how influential institutional and ideational legacies of the French dirigiste tradition continue to influence outcomes by generating anticipation of state action to shape the market. These distinctive traits leave footprints on French institutions and market structures, and the evolutionary trajectory of French capitalism. In analyzing the French political economy in the wake of the financial crisis in terms of ‘new state activism’, this chapter explores the French state as a ‘midwife’ of change in banking and the automobile industry. It uses post-dirigisme to explain French state responses to the financial crisis, noting how state actors, in concert with the elites, actively facilitated dominant market positions of French international champions.

Keywords:   France, political economy, Varieties of Capitalism, new state activism, market-making, post-dirigisme, Global Financial Crisis


When the crisis within financial institutions and global markets hit in 2008 and 2009, the only thing more striking than the vertiginous hikes in public expenditures to prop up the financial system and its institutions was the enormous range and scope of the new interventionism. The credit crunch thus brought the tensions within liberal international economic governance into sharp focus. After decades of triumphant neoliberalism, where policymakers put their faith in self-regulating markets, suddenly, the coordinates of economic policy rectitude were thrown into flux. This was true across the advanced economies, but in this chapter we focus on French responses and ask how, in the wake of these seismic events, should we interpret French state market relations?

Assessing France before the crisis struck, some operating within the Varieties of Capitalism (VoC) (Hall and Soskice, 2001) frame of reference noted liberal shift or drift within French capitalism, and used as appropriate comparators the liberal market economy (LME) model, or the British economy (Culpepper, 2005; Hall, 2006). Others placed more emphasis on the institutional and historical legacies of French capitalism, calling the current phase “post-dirigiste” (Levy, 1999; Cole, 2008; Howell, 2009; Massoc and Jabko, 2012). Such a characterization recognizes the substantial liberalization within the French political economy over the last thirty years, but notes nevertheless that “the post-dirigiste French economy continues to be strongly influenced by its (p.207) dirigiste history” (Massoc and Jabko, 2012: 11). This analysis of France in the wake of the current financial crisis argues that this “post-dirigiste” interpretation captures better the qualitative shift in state intervention in France, incorporating as it does the understandings of how the French dirigiste tradition continues to influence outcomes by generating anticipation of state action to shape the market.

As we demonstrate in analyzing French responses to the crisis, the “post-dirigiste” interpretation is at odds within the entire VoC frame of reference, predicated as it is upon an expansive notion of the state as actor in and enactor of markets not captured by VoC’s parsimonious account (Schmidt, 2002, 2009; Jackson and Deeg, 2008), with its silence on the state (Levy, 2006a, b; Hancké et al., 2007). Furthermore, in contrast to the rational choice underpinnings of VoC (see Hay, 2005), ideational factors, such as the mindset of French economic elites across the public and private sector and in particular their understanding of market rationality, are identified as crucial explanatory factors within the post-dirigiste account. These micro-foundations, the different conception of economic rationality operating in France, intervening between individuals and their material circumstances, were important aspects of French crisis response. Thus, the post-dirigiste critique of the liberal convergence thesis is both theoretically and empirically grounded.

One important theme of this chapter is how to understand the state’s role in advanced economies in the wake of the Global Financial Crisis (GFC). This is a broader, general issue for comparative political economy, with a range of scholars exploring “new state activism” in a more liberalized twenty-first century, noting that ideas of state retreat, erosion, and roll back are deceptive. In truth, as national economies and international markets liberalize, “the state also rises” (Cohen, 1996; Wright, 1997; Levy, 2006). In rethinking the French state and its place and role within the French political economy in the wake of the financial crisis in terms of “new state activism,” this chapter explores the French state as a “midwife” of change (Howell, 2009: 251), looking at institutional innovations in crisis response.

French crisis responses in banking and finance have involved new financial institutions and further internationalization, in a domain where France and its firms are well placed to compete, and the structure of the domestic market is shaped to facilitate their successful competition. Yet the upshot of this new activism may be reduced state influence over French finance, and indeed over France’s international financial champions. In the first section, we elucidate the notion of post-dirigisme by specifying its conditions of possibility, highlighting a number of key shifts within the French political economy and state market relations since the 1980s. The next section situates this account within extant interpretations of the evolution of the French political economy in the last twenty-five years. Thereafter, we spell out post-dirigiste (p.208) processes of market-making before exploring the explanatory purchase of post-dirigisme through analysis of the specific modalities of French intervention within the banking and automobile sectors.

The Condition of Post-Dirigisme

The twenty-first-century French state retains an ambition to exert influence over how French capitalism evolves, just as its postwar precursor did (Shonfield, 1969). However, the French state has, since the 1980s, presided over dramatic domestic and international, institutional, and structural changes. Taken together, these saw the French state orchestrate and facilitate a thorough-going internationalization and substantial liberalization of French capitalism. The consequence of this is considerably reduced leverage for the French state over French political economy. This is Howell’s “paradox of French state intervention”; “the French state has used its powers to undermine dirigisme and reduce state capacity” (Howell, 2009: 231, 249–53). The constraints of this new international and domestic context are the crux of post-dirigisme. Although the term has been evoked before (Levy, 1999; Cole, 2008; Howell, 2009; Massoc and Jabko, 2012), here we spell out the key shifts which brought about this new phase of French state–market relations, and offer a new ideationally attuned take on the term.

The partial retreat from the postwar model of dirigisme in the 1980s heralded a shift toward liberalization, deregulation, and privatization (Hall, 1986; Schmidt, 1997; Levy, 1999). In macroeconomic policy, the 1983 U-turn abandoned Keynesianism for the neoliberal competitive disinflation strategy (Lordon, 1997). These changes instigated a protracted period of French capitalist restructuring. In the late 1980s, adjustment remained somewhat insulated from international competitive pressures by vestiges of dirigisme’s “protected capitalism” (Schmidt, 1996) logic. However, in the mid-1990s, this unraveled amid four key transformations within French capitalism which resulted from the profound changes begun in the early 1980s. These came to constitute the condition of post-dirigisme.

Firstly, ongoing large-scale privatizations changed the state’s size, its displacement within the economy as a whole, and its relation to the private sector (counterintuitively, increasing interpenetration of public and private elites). Secondly, the internationalization of French capitalism proceeded apace as large French firms engaged in transnational mergers and acquisitions, foreign subsidiary acquisition, and international joint ventures. This was a sea change from earlier French state antipathy, indeed hostility, toward foreign ownership of or participation in French firms (Michalet, 1997: 319–20). Some large French firms evolved in this period into highly internationalized (p.209) multinationals. Thirdly, there was a move to increased reliance on equity finance by French firms. Within this, partly fueled by French corporations’ overseas acquisitions, foreign equity ownership of French companies, especially by UK and US institutional investors, rose sharply (O’Sullivan, 2007: 426). The extent to which French equity is in foreign hands has become a distinctive feature of French capitalism. Fourthly, capital markets, and in particular corporate bond markets, were reinvigorated and profoundly reformed in the 1980s by a French state creating a more market-funded economy and a noninflationary national financial system (Lordon, 1997: 92–3). French bond markets were initially dominated by public and state activity, but by the early 2000s they had come of age and hosted extensive private activity by larger French firms. As a result, first the state and then the banks have progressively ceased to play their formerly central roles in financing French corporate capitalism.

These four shifts constitute the condition of post-dirigisme in France, which marks out a very different landscape from the postwar French capitalism mapped so expertly by Shonfield (1969). In their wake, French interventionism involves using more subtle, often informal, and sometimes novel modes of influence of private firms. Its character is today more “permissive,” helping the big financial players to help themselves, rather than the “directive” approach of earlier phases of French industrial policy (Hall, 2006). The logic of post-dirigisme involves the search on the part of French authorities for new modes of influence—both formal and informal—over economic development. This can be seen in comparative terms as part of a broader phenomenon of “new state activism” wherein the state acts partly as a “midwife” (Howell, 2009), enabling, facilitating, or orchestrating the creation of new institutions and practices within capitalism in pursuit if its “evolving” but not “eroding” missions (Levy, 2006b: 368). It still seeks to shape market outcomes and structures to advance the interests of French international champions, but contemporary French interventionism has had to become more sectorally selective. The historical characteristics of the French model of capitalism are important explanatory factors in determining where post-dirigiste activism takes place. The post-dirigiste activism of the French state operates along more market-conforming lines, although it is important to be mindful of the kind of market it is increasingly in conformity with.

Post-dirigisme, as deployed here, entails appreciation of the ideational conditions within which change is animated by French corporate and state actors. This connects to O’Sullivan’s notion of “acting out change” (O’Sullivan, 2007) within French capitalism, which focuses on “the users of the financial system” who “play a crucial role in enacting the rules” (O’Sullivan, 2007: 394). Such nuanced attention to how French corporate and state actors respond to changing economic conditions contrasts with VoC’s tendency to “emphasize (p.210) rational, strategic behavior within a set of fixed institutions” (Jackson and Deeg, 2008: 688, see also Hay, 2005: 111–12). Post-dirigisme involves “a more contingent view of institutions” (Jackson and Deeg 2008: 694), and its ideational approach is built on assumptive foundations which involve two important departures from the convergence thesis within a VoC framework. Firstly, actors are not “bearers” of institutions following preprogramed scripts, but autonomous reflective actors able to reinterpret and recreate their environment (Campbell, 1998; Hay, 2005). They are “thinking actors,” as Schmidt’s discursive institutionalist approach contends, and their actions “make sense,” and need to be made sense of “within a given meaning context” (Schmidt 2009: 532–3). Such a view is consistent with recent ideational scholarship in political economy, which highlights how understandings of economic phenomena reflect agents’ “background ideational abilities,” and are consistent with “the ideational rules or ‘rationality’ of that setting” (Schmidt, 2008: 314; see also Campbell, 1998: 384–92).

Second, drawing on Polanyi, our account sees markets, firms, and the actors who run them in socially embedded terms wherein “economic action takes place within social contexts and is mediated by institutional settings,” recognizing that “socially embedded institutions produce a nationally specific logic of action,” and thus “common pressures may be refracted through different sets of institutions, leading to different sorts of problems and calling forth distinct solutions” (Jackson and Deeg, 2008: 683; see also Hay, 2004; Abdelal et al., 2010: 2). Here, we emphasize the ideational, as well as institutional, dimensions of this “refracting” process. Rather than there being a single, universal notion of economic rationality, this account differentiates between diverse ideational national traditions of economic thought, which are shaped by state traditions and decades of lived economic practice.

Thus, at its boldest, post-dirigisme involves a distinctive French conception of economic rationality, rooted in the nature of the social order in which the market is embedded. In France, elitist oligarchic networks continue to impart coherence to French capitalism, and this social milieu informs a distinctive French economic rationality. Massoc and Jabko, for example, note that the interpenetration of public and private in French capitalism inhibits the possibility of economic rationality or free competition being brought to bear (Massoc and Jabko 2012: 10–11). Economic rationality is socially constructed, and how firms “make sense of their economic interests” depends on “the historical and structural embeddedness of the relations they maintain with governments and competitors” (Woll, 2008: 8). Post-dirigisme incorporates in its explanation how French economic rationality is predicated upon an enduring anticipation of state action to shape market outcomes. As a result of these “background ideational” conditions, List’s key insight into political economy, that political intervention and the shaping of market outcomes are inextricably part of (p.211) capitalism, even liberal or free market capitalism, is more keenly appreciated within France than in some other European contexts. For List, “free trade” is not really free: “As long as some nations will persist in regarding their special interests as of greater value to them than the collective interests of humanity, it must be folly to speak of unrestricted competition between individuals of different nations” (List, [1841] 1974: 261).

French interventions reveal a distinctive economic rationality underpinning them, and this feeds through into the conception of the market, in turn shaping activism and intervention in state–market relations. There are, it is assumed, no such things as level-playing fields. There are consequently, compared to British neoliberal norms, or German ordo-liberal norms, far fewer scruples surrounding trying to structure market institutions and processes on terms favorable to key French players within international markets. Thus, a significant degree of partiality can be, and is expected to be, infused into post-dirigiste market-making.

The French State and French Capitalism

In seeking to characterize accurately the contemporary French political economy, given the historically particularly sizeable role for the state in the postwar economy of France’s trente glorieuses, comparisons to the dirigiste state of the golden age are inevitable. These can be illuminating, but it is important to be clear what we are comparing it to, and to avoid the “same as it never was” pitfall (Blyth, 2003). The coherence of the postwar dirigiste paradigm has been questioned by revisionist interpretations. An extensive literature questions the coherence of the picture advanced by Zysman, and a debate remains as to how much “glorious” growth was really due to indicative economic planning and strategic interventionism in industry creating “national champions” (see, e.g., Hayward, 1973: 180–7, 213–26; Guyomarch et al., 1998: 161–8; Loriaux, 1999: 241–7, 251–2; Levy, 1999: ch. 1; Hancké, 2001: 309–12; Clift, 2009).

Whether we are talking about historic, heroic dirigisme, or contemporary French state activism, the assumed coherence and cohesiveness of the French state actions is questionable. In the golden age as well as in the contemporary period, the state was not one and indivisible but deeply fragmented (Hayward, 1973, 2007). Furthermore, the dirigiste technocrats were often not steering the tiller but being “captured” by sectional interests within French industry (Hayward, 1986: 13, 16, 101; Loriaux, 1999: 264–5). While allowing politicians to avoid hard choices, this “agency capture” ultimately restricted the French state’s much vaunted autonomy. These are important qualifications to bear in mind when considering French state activism.

(p.212) As Howell rightly points out,

there are obvious dangers in emphasizing both the centrality of the state in this process of institutional reconstruction and the coherence and intentionality of its reform projects … states are rarely unitary actors … competing projects may exist in different state agencies, nor are they omniscient…there are dangers to attributing remarkable powers of omniscience, coherence, and effectiveness to the French state. (Howell, 2009: 250)

Thus, evidence of these characteristics in today’s state activism indicates continuity, rather than decisive rupture. We should not allow a rose-tinted caricature of French dirigisme during the “golden age” to induce an overstatement of the erosion of the state’s role and significance within French capitalism (see Schmidt, 2003, 2009).

Such an exaggeration of dirigiste coherence in the 1950s and 1960s, combined with an overstatement of state retreat in the 1990s and 2000s, underpins the interpretation of French capitalist evolution since the early 1980s which sees it as emulating the liberal market economies of Britain and the United States. Peter Hall charts a shift from “state-led modernization” in the 1950s and 1960s to “market-led modernization” from the 1980s onward (Hall, 2006: 7). He sees the 1983 U-turn as a decisive “repudiation of dirigisme in favour of economic strategies oriented to market competition” (Hall, 2006: 6). With the state unable to dictate pace and outcomes of change, “what France has been experiencing is not dirigisme in disguise, but something quite different” (Hall, 2006: 8). Hall notes that France has liberalized some domains more fully than some European neighbors, and “in doing so, it has dismantled the most forceful system of dirigisme in Europe” (Hall, 2006: 21). Hall goes so far as to claim that French capital markets are becoming tolerant of hostile takeovers, and that “France has come to resemble a liberal market economy more than the coordinated market economies on its borders,” such that “the nation has moved somewhat closer to the modalities of the British economy” (Hall, 2006: 21).

This chapter takes issue with the liberal convergence interpretation, and argues that more of the dirigiste edifice endures than meets the eye. Contrary to Hall’s interpretation, dirigisme’s vestiges and legacies, notably the interpenetration of public and private elites (Cohen, 1996), continue to exert powerful influence over French state–market relations. This, as noted above, profoundly effects conceptions of the market and economic rationality within French capitalism. Hall may be correct to note that “industrial policy is more diffuse and less directive than it was 30 years ago,” that it operates more with the grain of market, and that “there is a more pronounced market logic to the processes whereby public resources are distributed” (Hall, 2006: 13). Yet, it is crucial to bear in mind the kind of “market logic” with which French state activism exhibits increased conformity. It is a distinctively French version of (p.213) the free market, infused with partiality, and reproducing market dominance for big French players domestically and internationally.

In this way, the ideational take on post-dirigisme provides the underlying micro-foundations of the rejection of the idea that the French economy now approximates an LME model, or British capitalism. While it may be true to say that ideas of freer competition and operating with the grain of the market and following economic rationality are more acceptable and prevalent in France today, it is a mistake to extrapolate from this—as Hall does—that the French economy approximates the modalities of the British economy (Hall, 2006). This is because these terms and themes have different meanings in each context.

Post-Dirigisme and New State Activism

The French state retains a degree of influence over the economy unusual among the advanced economies, even as liberalization has been unleashed within the French political economy. These pathologies of state activism were amply demonstrated in responses to the current crisis, even if the nature and form of state intervention has evolved. The reasons for anticipating “new state activism” coexisting with liberalization, internationalization, and freer markets before, during, and after the current crisis are familiar. The model of the pure, free, or self-regulating market, in the twenty-first as in the nineteenth century, is built on a myth (Vogel, 1996; Crouch, 2005; Levy, 2006a, 2006b). Polanyi’s Great Transformation demonstrated how “regulation and markets, in effect, grew up together” (Polanyi, 2001 [1944]: 71), and the nineteenth-century “liberal state” which he described was in many ways the architect and author of the misnamed “self-regulating” market, and central to the processes of regulation without which it could not have existed (Ibid. 146–7).

Free market capitalism, even of a liberal or neoliberal kind, requires extensive and continuous state intervention, albeit constrained by the rules sustaining the market order, what Wilks terms the “economic constitution” (Wilks, 2010: 731–5), including, in the UK case, elements such as the “Green Book.” The present crisis and the multiple and highly visible forms of state interventionism it has provoked have made this more obvious, but the underlying causes of political interventionism in the economy have roots that extend far beyond the “subprime crisis” and the ongoing turbulence it has unleashed within financial markets. Indeed, the GFC and the dramatic responses to it merely put a magnifying glass on a permanent feature of liberal market capitalism. From a Polanyian perspective, which emphasizes the state’s role in setting the rules and framework for market activity, state intervention is necessary for the governance of, indeed the existence of, markets. “No market economy separated from the political sphere is possible” (Polanyi, 2001 [1944]: 205; (p.214) Krippner and Alvarez, 2007). State intervention, as Levy puts it, “is not just a one-shot deal,” the state “does not simply set up” market regimes, “it also helps them to adapt” (Levy, 2006b: 374).

We noted above the centrality of embeddedness of markets to a post-dirigiste account. Taken seriously, embeddedness makes the dichotomizing separation of state and market of “state-economy dualism” impossible (Block and Evans, 2005: 505). This is a useful corrective to the dichotomous opposition of the ideal types of state and market. As Krippner and Alvarez note, “the mutual constitution of state and economy” means that, “for Polanyians, the notion that markets could exist outside of state action is simply inconceivable” (Krippner and Alvarez, 2007: 233; see also Block, 2003). Thus, state and market are co-constitutive, and it simply does not make sense to think in terms of either state or market given the “ubiquity of state intervention” (Perraton and Clift, 2004: 209). Block’s notion of the “always embedded market economy” underlines how markets are always politically embedded and require rules and institutions, such that “it becomes impossible to imagine how the economy would run if only the state would cease its unnecessary meddling” (Block, 2003: 301). This was very well demonstrated by the statist dimension to crisis responses across the advanced economies, including the most liberal ones.

Thus, there is no contradiction between the coexistence of new and even rising levels of state activism and market liberalization at both the international and domestic levels. As Jonah Levy puts it, “while old forms of state intervention may be discredited and cleared away, new interventions often emerge to take their place. The state also rises” (Levy, 2006a: 2). Levy identifies “new missions” of state activity. These missions, moving from “market direction” to “market support,” may be “corrective” or “constructive”; in each case, what is at hand is “the state’s innovative capacity … forging new state policies and regulations for a new competitive environment” (Ibid. 3). Thus, “market support is not synonymous with state withdrawal,” rather “the move towards the market has generated a raft of new state missions” (Ibid. 3).

Deregulation, of course, involves not simply removing restrictions but active reregulation; the huge raft of legislation and directives required to institute the Single European Market exemplifies this (Vogel, 1995). More fundamentally, market-making is often casually associated with neoliberalism and ordo-liberalism, and assumed to equate to policing competition through antitrust measures. However, market-making is not one-dimensional, but a differentiated and varied set of processes and activities, going well beyond regulating competition. All “free” markets are deeply politically conditioned by pervasive, almost ubiquitous market-making regulation over wages, pollution, product and process standards, and so on (Polanyi, 2001; Fioretos, 2009, 2011; Farrell and Newman, 2010), to the extent that “virtually no price … is (p.215) free from politics” (Chang, 1999: 197). After all, “market construction is an active undertaking” (Levy, 2006b: 380).

This has always been a facet of markets and capitalism. What the “new state activism” approach throws into relief is the qualitative change in these market-making interventions. They are today less “market-steering” and more “market-supporting” and include “making labor markets and systems of social protection more employment friendly,” “recasting regulatory frameworks” and “expanding market competition” (Levy, 2006a: 3). The character of this new state activism and market-making interventionism in each national case is likely to vary according to national institutional and ideological particularities. This chapter shares Levy’s “dynamic and activist perspective on state intervention” (Ibid. 4), and seeks also to “see the changing place of the state in a more variegated light” (Ibid. 10) than standard “retreat of the state” arguments. It identifies, through exploration of the French case, more missions of new state activism.

French post-dirigisme and New State Activism: The Bank Bailout

The current financial crisis and global economic downturn provide a contemporary example of the strength of new state activism as a policy reflex within the French “post-dirigiste” political economy. In this section, we explore how French financial capitalism has been reconfigured in the wake of the crisis. It is noticeable that the “new state activism” of which the banking bailout is an example is highly selective, and is only viable in certain sectors of the economy, given their particular and contingent institutional configurations and historical conditions. In the case of banking, these include the long and very well established habit of French state intervention in the banking sector which is subject to a high degree of regulation (Shonfield, 1969; Zysman, 1983; Massoc and Jabko, 2012: 12). This has left its imprint in the form of intimate links between the French financial elite and the state. Thus, some rather “old” features of French capitalism—the small number of key players involved, combined with the well-established modalities of interaction in this sphere, made banking ideally suited as a site for “new” state activism.

First announced by Sarkozy in October 2008, the bank rescue plan aimed at restoring confidence and liquidity into the French financial system, as well as recapitalizing and restructuring some troubled banks. After some angry exchanges with the European Commission,1 who initially vetoed the plan, proscribing the use of state aid to allow banks to increase their lending books, a revised plan was approved. The final rescue plan allowed banks to issue preferred shares as collateral to government money in addition to subordinated debt, and to convert already issued debt to shares. Recapitalization (p.216) involved boosting the capital ratios of six large French banks—Banque Populaire, BNP-Paribas, Caisses d’Epargne, Crédit Agricole, Crédit Mutuel, and Société Générale—through two €10.5 billion tranches handed out in December 2008 and January–February 2009 (EC, 2008; Hardie and Howarth, 2009; Ministère de l’Economie, 2009; EIU, 2010; Massoc and Jabko, 2012: 17–18).

There was certainly a highly statist dimension to the France banking bailout, and from a “new state activism” perspective, it is important to delineate what is novel, and what is more familiar within French responses to the GFC. One or two aspects recall the postwar heyday of dirigisme, others are consistent with the practice of post-dirigiste restructuring in the 1990s and 2000s. On the reminiscent of postwar dirigisme side of the ledger are practices of “pantouflage,” or the seamless transition from senior political to private sector office (Suleimann, 1978: 226–30). This was demonstrated by Sarkozy putting placemen into key positions in newly merged and restructured banks (Pérol at CEBP, Mariani at Dexia). More broadly, the small number of key players involved in shaping the plan shared close personal ties, forged at France’s “grandes écoles.” In this respect, the French banking bailout demonstrated the ongoing oligarchic elitist and networked character of French capitalism. It is clear from this that, despite claims to the contrary (Hardie and Howarth, 2009), the “financial network economy” described by Morin a decade ago (Morin 2000) is still present in France.

A second familiar element was the logic of international champion creation and advancement, an instance of what Levy terms “constructive” new state activism (Levy 2006b: 368). However, unlike postwar dirigisme, the means to this end included bank-rolling further international mergers and acquisitions, indicating that the international champion advancement at hand within the bank bailout is of a decidedly post-dirigiste character. The internationalization of the French financial sector since the 1980s has been built upon the initial historical conditions and the regulatory context of the French banking sector which inhibit foreign competition. This logic of selective, perhaps “neo-mercantilist,” liberalization continued in the bank bailout of 2008–9. A concentrated banking sector, which got off relatively lightly in the crisis (due to historical conditions of French capitalism—low household debt, universal banking, limited investment banking), was well placed to compete internationally, and exploit opportunities for international expansion presented by the crisis.

The clearest example of the French state’s international champion-building ambition, co-opting private interests in the pursuit of dominance in the lucrative financial services industry, is BNP-Paribas. This is the largest French bank, and it plays a key role along with AXA at the heart of France’s reconfigured networks (partial remnants of an earlier “protected capitalism” logic) which provide coordination and some protection from hostile takeover for (p.217) large French firms. BNP-Paribas asked that the second bailout tranche be brought forward. In the spring of 2009, the state became the largest shareholder in BNP, holding 17 percent of nonvoting shares. The day after the hastily advanced refinancing, BNP announced its takeover of sections of Fortis Bank (Hardie and Howarth, 2009: 1033; Massoc and Jabko, 2012: 28). Thus, the French government was actively providing financial assistance enabling BNP-Paribas to exploit the crisis in pursuit of aggressive external expansion as hard-hit German and British banks retreated. This state-sponsored international champion advancement made BNP-Paribas the largest bank in the eurozone (EIU, 2010: 13).

The bank bailout also involved the French state in new modes of interventionism, creating new kinds of institutions to facilitate its ongoing influence.

In a post-dirigiste age, the role of the French state has changed, but it is no less important…the state no longer directly organizes economic activity and its direct regulatory role has lessened…the importance of the French state now is its capacity to reform institutions in such a way as to encourage different practices…the state has acted as a midwife. (Howell, 2009: 251)

Illustrative of the state’s role as “midwife” of new institutions and practices, the French government’s banking bailout involved inventing new kinds of financial bodies to transfer funds to struggling banks. Lurking behind this was a desire to create new mechanisms of influence over large financial firms. There were two key institutions corresponding to the two key elements of the economic and financial relaunch plan—the Société de Prise de Participation de l’Etat (SPPE), which was to provide capital to troubled banks, and the Société de Financement de l’Economie Française (SFEF), whose role was to assist credit creation in the wider economy. Thus, the French post-dirigiste state was the midwife of some novel financial institutions which enabled it to continue its informal influence in the French banking sector and French financial capitalism.

Amid the global economic crisis stymieing international credit markets, the French state’s influence was briefly augmented. French banks needed state finance to restore their credibility and their balance sheets. This was a slight return for the institutionally allocated credit logic of earlier dirigisme (Zysman, 1983), with the French state acting as gatekeeper—controlling access to credit for large firms who, under the conditions of the crisis, had nowhere else to go. However, the changed context of heightened international capital mobility and the expansion and deepening of international financial markets since the 1970s (i.e., the condition of post-dirigisme) meant that the terms of engagement were very different. Gone are the days of the French state as dirigiste “gatekeeper” pulling all the strings and inducing big French firms to do its bidding.

(p.218) The post-dirigiste state was reinventing the means by which it supported its key strategic sectors. Distinct from all the other bank rescue plans in Europe, the SFEF is a mutual institution; its funds are held in common, 66 percent by the big banks and 34 percent by the French state. This enabled using global financial markets, and the state guarantee which backed the bonds issued, to reduce the price of borrowing on the international money markets. This novel mutual structure, incorporating the state guarantee backing the activity, was a way to finesse the propping up of banks to avoid falling foul of state aid prohibitions (EC, 2008). This made for inexpensive and much needed financing for the banks which had nowhere else to turn. The mutual structure idea originated with the bankers who were the key authors of the rescue plan—as a means not to individualize the share issues, and thus to help protect the most fragile banks and to destigmatize resort to the funds (Massoc and Jabko, 2012: 12). It served bank interests—the state guarantee which the SFEF delivered came cheaper for French banks than for any other in Europe (Massoc and Jabko, 2012: 25). The state for its part could use 20 percent of the funds created to lend to struggling industries.

The SFEF was instrumental in providing credit and funding in French banking and the wider economy—with the state guarantee providing the confidence that private actors and international markets could not, at the time, deliver. However, the return to prominence of the state as institutional allocator of credit proved short-lived. The SFEF was mothballed as international credit and financial markets recovered and then bounced back after the seismic shocks of 2008–9. The ongoing search for “new missions” (Levy, 2006) is all part of new state activism and post-dirigisme. This is partly because some new missions—such as this one—prove to be transitory.

Another novel dimension of the bailout was the “permissive” quality of the regulation, and the extent to which the inspiration for institutional innovation originated not with French state actors but with the key financial elites. This all reflects a state not dictating to but seeking the cooperation of big financial players. For all Sarkozy’s postcrisis bluster about the need for a re-moralization of capitalism, and the need to tame the morally bankrupt excesses of finance capital, in practice, no sanctions and few conditions were imposed on French banks in the context of the bank bailout. In relation to remuneration, where Sarkozy had much to say on bankers’ bonuses, there was a one-off “exceptional” tax, but no rules or regulations were forthcoming as a quid pro quo for state support. The nature of state participation in bank refinancing, taking up exclusively nonvoting shares, reflected this. This is even true in the Franco-Belgian bailout of Dexia, where the Belgian state got voting shares. What is more, the state did not seek any board level representation within the rescued banks. In general, the bailout involved a lack of obligation on the big French banks.

(p.219) The French state was acting in concert with the big banks, demonstrating how the French state’s role in the economy had changed compared to the postwar period. Even at the height of the crisis, the state was not dictating to the big banks. The amount of money distributed by the SPPE, the two tranches of €10.5 billion, and how that money was divided up followed very closely the recommendations of the big bankers. This gives us an insight into what kind of institutions, and market structures, French post-dirigiste market-making delivers. The whole process is predicated upon the ongoing intimate interpenetration of public and private elite spheres (Massoc and Jabko, 2012) which has undergone successive phases since liberalization began in the early 1980s (Cohen, 1996: 233–4). The “permissive” interventionism and selective liberalization approach to international champion creation captures the paradoxical essence of French post-dirigisme and its intervention in, but not control of, the market economy. The new balance between state and market involves more autonomy for private actors. The French state was helping the big financial players to help themselves.

Automobile Industry Rescue Package

The other sector singled out for intervention amid the crisis was car production: Sarkozy’s February 2009 plan de relance rescue package for the French economy in general and the car industry in particular (in the face of delocalization by Peugeot of French car production to Czech factories). The channeling of funds here reveals another instance of the post-dirigiste state as midwife. The financial architecture of the French state was reconfigured in 2008. This involved a reorganization of the Caisse des dépôts et consignations (CDC), the large state-owned bank, which runs, among other things, state pension funds, has for decades invested on behalf of the state in infrastructure and development projects (EIU, 2010: 9, 12–13). The very substantial financial assets of the CDC have long been deployed strategically by the state, investing to buy up stakes in large French firms deemed in the national interest. This role was enhanced and revamped in November 2008, when the CDC acquired a €20 billion French Sovereign Wealth Fund (FSI) to “support strategic [French] firms during the crisis.”

Intervention in the car industry is partly explained by the place of the automobile industry in the French economy. The car industry is one of France’s key manufacturing industries, important in terms of employment, exports, and the balance of trade (nearly one in two French cars are exported, with 85 percent of exported French cars going to other EU countries). It is also a significant hub of private R&D in France, crucial in its own terms and for the positive technological externalities (OFCE, 2009: 2).

(p.220) Sarkozy’s “car pact” had three key objectives. It sought to offer, in the short term, support for demand and jobs in the car industry. The second, longer term aim was to form part of an industrial policy geared toward ensuring the future of a strategic hi-technology industry. Thirdly, and related to the second, it sought to encourage the production of cleaner cars. The total funds dedicated to the package amounted to €9 billion. It involved a €6.5 billion commitment to help Renault and PSA Peugeot-Citroën (with innovation and clean technology R&D). This financing of large development programs to develop cleaner cars took the form of cheap five-year loans at 6 percent (not 10+ percent market rate), offered in return for commitments on “doing everything possible to avoid redundancies” while in receipt of state funds. The significant increases in funding support, Sarkozy made abundantly clear throughout the negotiations, were conditional upon commitments to preserve jobs, not to close any factories in France. Furthermore, he intimated a further conditionality that supported firms could not delocalize production outside France for products to be sold on the French market. The EC raised its eyebrows at some of Sarkozy’s comments, and reigned in French aspirations to blatantly flout the EU internal market rules, but nevertheless authorized the French scheme in February 2009 (Wilks, 2009: 279–80).2

A further €600 million, channeled through the FSI, was earmarked to fund new equipment through a modernization fund, thus doubling financial support for subcontractors. The fund to help equipment suppliers rise to the competitive challenge of low-cost producers was jointly financed by the French state, Renault, and PSA. Sarkozy’s pact also entailed a doubling (to €2 billion) of financial support channeled through the SFEF designed to boost consumer lending to increase car purchases. This built on December 2008 measures to offer refinancing to PSA and Renault, and to incentivize buying cleaner French cars.3

However, if the institutions to channel the funds were novel, the logic underpinning the automobile bailout appeared less so. There was talk of exploiting the opportunity of a move to greener technologies in car production, and the exploitation of positive externalities from investment in cutting-edge technologies of the future—with the French automobile sector leading a shift to new growth areas of green technology. Yet, skepticism remained as to whether this involves strategic long-term investment, or propping up an industry locked into overproducing unwanted and insufficiently green cars. Car sales were particularly hard hit by the financial crash, partly because most cars are bought on credit, so the credit crunch dried up demand. Trends in the European car markets suggest a long-term decline in demand. The car pact presupposed a sharp rise in demand for cars which was not likely, partly because the kinds of cars they want are not those coming off production lines and filling inventories. In recognition of these market difficulties, the credit rating agencies downgraded Renault and PSA in February 2009. Firms (p.221) cut production, and cut R&D as well as long-term investment. PSA planned to shed 11,000 workers (two-thirds in France) in 2009.

Too many of the wrong kind of cars being produced reflect that large car firms are slow to respond to changing consumer taste. Furthermore, more efficient smaller cars are predominantly produced in Renault and Peugeot’s Eastern European plants, with production of less in vogue models concentrated on French soil. Thus, the funding perpetuated, rather than solved, the industry’s problems. The lending was conditional upon nonclosure of factories in France and job security; yet, given the changing market conditions, car-producing firms arguably needed to cut fixed costs to improve their internal balance sheets, so sites arguably needed to close (OFCE, 2009). Sure enough, once the scrappage scheme elapsed, French car sales dropped significantly in early 2011.4 A different set of initial conditions and historical, institutional, and market factors explain why this kind of state activism was not “new” enough. For all the aspiration to achieve long-term industrial policy goals, the car industry is a highly “delocalized” hi-tech industry. This undermines ambitions for supporting national champions and building up national R&D capacity in the new knowledge economy. Schumpeterian investment in innovation is likely to leak out and creates jobs abroad. This all smacks of the French post-dirigiste state “picking losers” as the revisionist literature criticized the earlier dirigiste state for doing.


The GFC of 2008–9—the vulnerabilities it revealed and the instabilities it unleashed within the advanced economies, and most importantly the responses it provoked from states—is a very revealing episode in seeking to understand contemporary state–market relations within twenty-first-century capitalism. In France, governmental crisis responses, especially in the banking sector, were revealing of Howell’s “paradox of French state intervention.” Today, the post-dirigiste French state is more of an enabler, helping big French business to help themselves; yet, it remains distinct from the UK enabling state in its comfort with highly oligopolistic competition, its nonattachment to notions of level-playing fields. The French economic constitution reflects these different conceptions of the market. The French state is also distinctive in the interpenetrated public and private networks through which its intervention is enacted. The transient state institutions created to help the big banks exploit international champion advancement through internationalization in the context of the crisis served only to make them stronger still. Gone are the days of the French state as dirigiste “gatekeeper” of strategic finance pulling the strings and inducing big French industrial firms to do its bidding. The upshot of further (p.222) internationalization of French finance and French capitalism is that the French state will have still less direct influence and control in the future.

The crisis and its aftershocks underlined another important feature of post-dirigiste intervention: its highly selective nature. The banking and car bailouts analyzed here operated according to very different dynamics. State activism is differentiated according to particular conditions in different sectors, and this tells against an internally homogenous account of French capitalism of the kind traditionally associated with comparative capitalisms analysis. The source of those initial conditions is, more often than not, the historical and institutional particularities of French capitalism—reflecting the influence of past practices which “post-dirigisme” identifies. The legacies of dirigisme, notably enduring elitism, and habits of state “tutelle” were crucial to the banking and financial sector interventions.

But what kinds of market structures does the French state, acting as “midwife” in pursuit of its “new missions,” assist the birth of? While Hall may be correct to highlight the emergence in France of state policies “in favour of economic strategies oriented to market competition” (Hall, 2006: 6), the more interesting question is: what kind of market competition? The condition of post-dirigisme gives rise to a variant of large-scale corporate capitalism where markets are highly consolidated, impervious to foreign penetration, and dominated by a small number of large French players. In the bank bailout, French state market-making regulation and intervention has continued to infuse the financial sector with a degree of partiality which favors large French financial firms. This reflects the French post-dirigiste variant of economic rationality, which involves two key elements. Firstly, it rests upon a conception of appropriate market configuration dominated by a few national or international champions wielding significant market power. Secondly, that market is embedded in a social context of close-knit elitist networks and an interpenetration of public and private spheres at the summit of French capitalism. Both these important elements inform the post-dirigiste restructuring of French financial capitalism. All this is indicative of the kinds of markets the French make. As the financial crisis hit France’s financial sector and its big banks, Sarkozy recruited his close political confidants to run large rescued French banks whose merger he orchestrated, and bank-rolled international expansion for other friendly banks. In this way, the ideational particularities of post-dirigiste market-making left their imprint on the crisis responses enacted by the French state.


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(1.) Brussels blocks French bank bailout, Financial Times, November 28, 2008.

(3.) “L’Etat débloque 7,8 milliards d’euros pour le secteur automobil,” Le Monde, February 9, 2009.