Economic Policy in France and Italy since the War: Different Stances, Different Outcomes?

By Boltho, Andrea | Journal of Economic Issues, September 2001 | Go to article overview

Economic Policy in France and Italy since the War: Different Stances, Different Outcomes?


Boltho, Andrea, Journal of Economic Issues


Fifty years ago, France and Italy had two very different economies. Though agriculture still loomed large in both, its weight in total employment was much higher in Italy (45 versus 28 percent in 1950). French income per capita (at purchasing power parity) was at the time some 50 percent above the Italian level, [1] and its territorial distribution was much less unequal than in Italy, where pre-existing wide regional income gaps between North and South had further opened in the inter-war years. Italy suffered from massive unemployment and underemployment. France, in contrast, was at virtual full employment; its industry enjoyed productivity levels a quarter higher than Italy's (Broadberry 1996); its exports of manufactures accounted for some 8 1/2 percent of world trade as against Italy's 3 1/2 percent, and so on. Today, many of these differences have either disappeared or greatly diminished--per capita incomes are close and so are levels of productivity, overall unemployment is similar (if at a very high lev el), and the value of manufactured exports is almost identical. Similarly, consumption standards and ways of life are much more uniform compared with the pronounced differences that prevailed at the end of World War II.

This movement from initial diversity to eventual convergence in major economic (and social) indicators is paralleled by a broadly similar movement from diversity to convergence in the nature and stance of economic policies. In the 1950s, for instance, France intervened massively in the workings of the economy. While interventionism was hardly absent in Italy, market forces were, almost certainly, given a freer rein. From the early 1960s to the early 1990s, Italian interventionism, if in fits and starts, tended to increase. French interference began, instead, a gradual retreat, cautious at first but more rapid from the middle of the 1980s onward. By now, both countries hold fairly similar views on policy making and have, of course, relinquished a number of important instruments to the supra-national authorities of Brussels and Frankfurt.

This paper's aim is to survey the course of the two countries' macroeconomic policies over this half century. The first section provides a bird's eye view of the main changes that have occurred during the period. The second section advances some explanation for why two broadly successful economies, which have faced similar problems and have increasingly come together in the framework of European unification, have, nonetheless, often framed their policy responses in different ways. The last section asks whether such different responses have resulted in different outcomes and puts forward a tentative assessment of the comparative record. A few concluding paragraphs summarize the main arguments.

From Divergence to Convergence--Five Decades of Contrasting Policies

While both France and Italy suffered occupation and destruction during the war, their immediate post-war responses differed. Both countries, of course, targeted reconstruction, but while France put the emphasis on the need for "modernization," Italy aimed at "industrialization," a choice of words that well reflected the two economies' levels of development. More importantly, France, from the very beginning, stressed the leading role of the state in this process through, in particular, a massive program of nationalizations and the launching of its first indicative plan (1947-52). Italy, in contrast, left a much greater degree of initiative to its industry, whose pre-war organization (into major private and public groups) was barely touched by post-war reforms.

These contrasting responses were largely a function of inter-war experience. France in the 1930s had been seen as the "sick man of Europe," a country afflicted by virtual stagnation, [2] or, as put in the French literature, malthusianisme, in which the broadly liberal order of the time seemed incapable of giving a guiding impulse to a conservative, or even outright retrograde, private sector.

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