Macroeconomic Policy in France and Britain

Abstract

The comparison of events in Britain with the experience of other major industrial countries can make an important contribution to debate about policy alternatives. Within Western Europe such comparisons are especially apt since a number of countries of similar size, at broadly the same level of economic development, face many of the same problems and opportunities. The main purpose of the study reported here is to draw lessons for Britain from the experience of France, and to see to what extent the lessons one might be tempted to draw are the right ones bearing in mind the differences between the two countries as well as their similarities.

Advanced Country Experiences with Capital Account Liberalization

“…Although the controls certainly succeeded in dampening certain categories of short-term 38 Government involvement in the economy was extensive. This nationalization process added companies accounting for around 15 percent of industrial activity and raised government control of the banking sector to 85-90 percent (Barker, Britton, and Major, 1984). speculative flows, they did not alleviate the downward pressures on the exchange rate while the substantial balance of payments financing need remained.…”

Manufacturing Productivity Levels in France and the United Kingdom

“…6O'Brien and Keyder (1978) estimated labour productivity in agriculture at about half of the British level in the period 1875-84, whereas Craft's productivity estimate for industry in France was at 85 per cent of the British level for that period (Crafts 1984); see also Nardinelli 1988. Although the French 'indicative' planning system evolved over time from detailed micro-economic interventions during the first plans to medium term planning in the later plans, it is in strong contrast with British post-war stabilisation policies which ranged from Keynesian-inspired policies at one time to monetarist recipees at the other; see, for example, Hough (1982) and Barker, Britton and Major (1984). For example, information about food products is collected by the statistical service of the Ministry of Agriculture (SCEES), but only for physical quantities and not for sales values.…”

“…Both France and the United Kingdom have been slow in adjusting their industrial structure from traditional industries, such as textiles and steel, to innovative and capital intensive industries, for example engineering and chemicals. (16) This is also reflected in the low skill-intensive nature of these country's exports (see Barker, Britton and Major 1984;Turpin 1989). Of course, one should not neglect the successful performance of some French firms in market niches such as nuclear energy and armaments, and of British firms in, for example, instrumental engineering, but the effect of these success stories on the overall performance of each country's manufacturing industry seems limited.…”