Heron's Eye: 14/01/09

Danny Morrison on how the intelligence services fought a dirty war against the IRA
"It was a bitterly cold January night in 1990 in Belfast and I was on my way to meet a man who had just confessed to being a police informer. Things were relatively quiet. There had been some raiding in the north of the city but there were no army surveillance helicopters in the air and I had encountered no checkpoints on the way to the rendezvous.

At the time, I had a high profile as national director of publicity for Sinn Fein, as the former editor of the party's weekly newspaper, a spokesperson for Bobby Sands during the hunger strike, and a former member of the Northern Ireland Assembly. In 1981, I had made the so-called "Armalite and ballot box" speech, which summed up what subsequently came to be the dual strategy of the republican movement and Sinn Fein's involvement in electoral politics. I was a familiar figure to most British journalists." [Guardian]

Jack Straw plan for private inquests back on agenda
"Jack Straw, the justice secretary, will today revive his plan to hold inquests that involve aspects of national security in private without a jury when the coroners and justice bill is published.

The controversial measure, which could be invoked in cases like those of British servicemen killed by American forces in Iraq and the shooting of Jean Charles de Menezes on the London tube, was shelved last month when it faced severe criticism during the passage of the Counter-Terrorism Act." [Guardian]

Helen Bamber: From Belsen to Zimbabwe
"I have worked in human rights for 60 years. I was a member of one of the first rehabilitation teams to enter the Bergen-Belsen concentration camp in 1945 and have since continued to help survivors of extreme brutality and human rights violations. At the Helen Bamber Foundation I see on a daily basis victims of torture, human trafficking for sexual exploitation, genocide and ethnic cleansing.

I find myself compelled to speak out publicly in response to comments by the immigration minister, Phil Woolas. Calling for a review of the Geneva conventions - which he described as outdated - Woolas argued that "a significant number of people who claim asylum are doing so for broadly economic reasons". " [Guardian]

Why the EU artwork is not what it seems
"As hoaxes go, this one is bound to be memorable. David Cerny, a Czech artist, admitted today that he managed to hoodwink the great and good of Brussels, and his own government, with a major artwork to mark the Czech Republic's six-month presidency of the EU.

When the giant eight tonne mosaic – supposedly the work of 27 artists from each of the EU member states – was unveiled at the headquarters of the Council of Ministers this week there was laughter as Slovenia was associated with masturbation and five Lithuanian soldiers were depicted urinating on Russia." [Guardian]

Click here to read more information on Mr Grimsdale, King Heron and Mobius

eGovernment: Some Thoughts on Public Health and the EU

Using eGovernment to improve healthcare provision is important in boosting accountability to citizens, modernising organisations and lowering costs.

The Internet’s potential as a giant portal to greater and more useful information creates unprecedented opportunity for patients to improve their input into public policy decisions and make decisions on their choice of care. Citizens can be made aware of the latest healthcare developments, such as the UK’s Darzi Review or be able to do research to search for the cheapest price of private healthcare insurance or even research into the benefits of non-critical treatment in other European countries.

eGovernment practices can be effective at improving quality of service and reducing the cost of provision. Firstly, modern communication tools result in EU agencies and organisations working more effectively together, breaking down the ‘silo culture’ of existing organisational procedures and encouraging joined up and more integrated EU health initiatives. Secondly, the costs involved in non-ICT based communications are significant, as the administrative and logistical costs can be huge. For example, modern electronic patient referrals in Denmark are now currently saving 1m a year.

Heron's Eye: 29/07/08

Harriet Harman denies plotting to bring down Gordon Brown

The term get off the pot or use it comes to mind when I think of Labour’s leadership issues in this parliament. Isnt the party in the exact same situation that it was in when they were hoping Tony Blair would voluntarily step down? [Guardian]

Clegg sights 50 Labour Seats

Despite underperformance at all the recent by-elections and London mayoral election the Lib Dem leader is highly optimistic for the party for the next election. [PoliticsHome]

Politicians Holidays

Michael White takes a look at politicians trying to look normal. [Guardian]

Tony Blair tipped for top EU post

New poll puts Mr Blair as frontrunner to become EU President. Is this a conspiracy to undermine the Lisbon Treaty? [Guardian]

Ken's comeback

Ken Livingston continues his electoral campaign, highlighting Mr. Johnson’s purging of women and ethnic minorities. [Guardian]

A law to label real fur - that should bring the voters back

Maire Antoinette digs the knife into New Labour. Why am I surprised that Polly Toynbee would be pick up on the issue of labelling real fur? [Guardian]

Road to nowhere

AC Grayling reminds us that hatred is not confined within the boundaries of religion or nationality. [Guardian]

From little acorns

Ed Pomfret cheerleads for a renaissance in new native forests. [Guardian]

The media's distorting lens

Paul Mason cautions on the language and intentions of the media when reporting criminal activity. The following CIF comments are recommended. [Guardian]

Click here for an introduction to Mr Grimsdale, King Heron and Mobius

Protectionism In Europe: The Effects Of Economic Integration On Domestic and International Barriers To Trade

The threat of continuous war coupled with the economic poverty of post war Europe forced European state leaders to look at newer methods of increasing wealth and guaranteeing political stability over the continent. The result was the European Union, an economic block without barriers to trade and capital, dispelling the ethnocentricity of the past and replacing it with cooperation. However, the removal of protectionism within Europe was not smooth, with states having to dramatically alter their economic and political processes in order to benefit from the reforms and save their industries from the tidal wave of free trade. However, protectionism does still exist, albeit with other trading blocks. National preferences also exist, and affect how Europe negotiates trade agreements with other nations.

Protectionism grew as a result of centralised governmental authority eroding the freedom and profitability of international traders. This peak of governments’ cross border dominance was the sixteenth century use of mercantilism, the belief that a country’s wealth increases through acquiring as much gold as possible through high import tariffs and export subsidies. This helped to protect domestic trade from a mercantilist neighbouring country, although this would be reciprocated by other government’s retaliating through raising their import tariffs and subsidising their exporters so that their country could improve its level of trade. Although mercantilist practices have declined over the following centuries as a result of academic criticism and political events its ideas still lived on, with European states having a history of preferring to open up new markets across the world using military means to establish colonies, rather than trade with each other.

The most significant catalyst for the weakening of this protectionist attitude emerged from the First and Second World Wars. The years of devastation and bloodshed forced world leaders to re-examine their visions of how it was possible to increase economic wealth and guarantee economic stability. As a result politicians opened their doors to business and academics creating new, unprecedented economic, political and social models.

One of the most significant and obvious examples of this is the European Union. The Economic Coal and Steal Community in 1951, whereby France and Germany sharing their coal and steel resources in order to guarantee political and economic interdependence became a blueprint for future political and economic cooperation. This culminated in the Maastricht Treaty of 1993, creating the European Union, which removed all internal barriers to trade and free movement of capital. Europe has now become the greatest experiment into the possibilities of economic cooperation through its open markets and a model for other continents such as the Pacific region, which is making tentative steps to examine the possibilities of economic integration as a result of the evident benefits of increasing international business through one larger trade block.

However, this has not been without costs. Protectionism is one of the most valuable tools that a government can potentially employ. The removal of these economic aids revealed gaps in European members’ economic policies. For example, France had experienced successful post war growth as a result of its dirigiste economic model of planned investment in heavy industry in order to create ‘national champions’ that could carry “the banner of France into world markets,”[1].

However, following the gradual reduction of trade barriers after the Treaty of Rome in 1957 France was left “saddled with huge coal, steel, shipbuilding and automobile companies that were absorbing public funds but which had substantial overcapacity and could not produce as cheaply overseas.”[2] A hangover of misallocation resulted in France not having enough medium sized and small companies to compete effectively enough with more dynamic European traders. The French model, which had been the guardian of traditional industry and the backbone of French social security was abandoned in 1983 by the Socialist Mitterrand Government, as “their policy was unsustainable economically”[3] The political instabilities created as a result in economic shifts from removing protection may also help explain France’s reluctance to allow for the EU’s tariffs on agricultural goods to be reduced, as France considers its agriculture to be the rock of French culture.

The Member States of the EU share a common tariff to external countries. Although limiting autonomy of individual countries, such as the UK in its attempts to retain stronger trade links with its former colonies there are obvious benefits to a unified policy. The combined economic size of $12,918,581m[4] makes it more effective at negotiating with foreign countries and achieving more acceptable conditions, albeit possibly at the expense of other nations.

As a trading block the EU is keen to maximise its interests. Although seeing the principle of free trade as important and worth promoting measures are in place with specific barriers to encourage FDI within the EU. For example, the import tariff for automobiles is sufficiently high to force American and Japanese car manufacturers, who would otherwise have a cost advantage to relocate many of their production facilities within the EU. This is because policy leaders consider that the benefits of maintaining a car manufacturing presence in Europe whether foreign or European owned outweigh the economic effects of higher costs and reduced supply for European consumers.

The problem for EU policymakers is how to work out when they should and when they shouldn’t use protective measures to save European industry. A contemporary problem is whether or not the EU should erect barriers to protect the European shoe making industry. European shoe manufacturers have had their profits eroded as a result of cheaper imports coming from Asia making it difficult to trade, with some companies struggling to break even. Some manufacturers have accused countries such as China of ‘dumping’ their goods on European markets through selling their goods below manufacturing costs in order to wipe out competition in the long run. This particularly affects the Southern European countries, where most of the factories are located.

However, as many have pointed out textiles are not a priority of China and it is highly unlikely that they would bother coordinating a strategy for such a mature market. The Danish Minister for Economic and Business Affairs highlighted the lack of real proof and highlighted how the domestic market was attempting to ‘capture’ EU regulators. He cited that with a 40% tariff on shoes the average cost of shoes would rise from €67 to €87, a 25% increase. He also felt that the fact that the European traders would gain €100m a year whereas European consumers would lose around €975m, a year as a result of higher shoe costs and consequentially it was not in Europe’s interests for there to be a tariff, despite the fact that this could result in a decline of shoemaking in the EU.[5]

Even though Europe does not have trade barriers to encourage free trade and movement in capital it would be churlish to assume that protectionism is dead in Europe. Protection and national interests still exist but the scope has become narrower for policymakers. Government leaders can not influence their own protection barriers but countries such as France will still endeavour to put agriculture first and Southern European countries will still lobby for tariffs on shoes, despite knowing that it will be to the detriment of most Europeans. However, the absence of trade barriers has created an unprecedented period of peace in Europe, as countries are given more incentives to cooperate rather than compete with each other.

This report was written by Jonathan McHugh in April 2006

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[1] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p171

[2] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p175

[3] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p253

[4] http://en.wikipedia.org/wiki/European_Union (apologies for use of currency)

[5] Financial Times, February 20, 2006

Compare EU Lobbying And Domestic Lobbying Using Two Different States

Development
In the last thirty years increases in the size of the EU and its regulatory influence have resulted in a growth in the amount and the nature of lobbying by private groups, public organisations and governmental actors. Currently, there are something around 15000 lobbyists in Brussels of various sizes and geographical interests.

The dominant actors of the sixties were the groups corresponding to the original intentions of the European Coal and Steel Community and then the European Economic Community. However, the EU’s changing role has resulted in a ballooning of lobbying. Since the 80s single market integration was a catalyst for the growth of lobbying, as private firms and local communities sought to protect their existing markets and communities from potentially damaging reforms. Now lobbying extends to the environment, home affairs, and foreign and security policy.

However, there are concerns that further enlargement will overcrowd debate and cause imbalances, as the EU institutions will have less and less time to listen to individual concerns, thereby reducing the substance of consultation. This is particularly so as it is unlikely that there will be a significant increase in staff relative to the enlargement.

The growing importance of EU policy is now making some national interest groups more Eurocentric or begin to look at issues from a more European perspective, rather than continuing to define problems in purely national terms

Private Lobbying
The largest actor, with over 1,000 organisations and over 250 lawyer groups, consisting of private economic and business interests, the largest of which are the chemicals industry (150), and food and drink (140) as a result of CAP.

There is a preference for ‘pan European’ economic interests, as they tend to get consensus easier than more national centric lobby groups

There is a strong presence of companies from outside the EU, especially the US because of the high levels of investment in Europe.

Public Lobbying
Over 300 public organisations reside in Brussels. The most active are environmental, public health, human rights, and animal welfare NGOs such as Greenpeace.

The EU encourages the smaller organisations and often offers funding as a cost effective way of getting research without the need for a more expensive official research departments. However, groups such as Greenpeace refuse this as they feel that this affects their impartiality.

Government
Brussels has government representation from national embassies and local lobbies. Currently there are over 360 groups of which there are 167 connected non-EU embassies.

EU member states are extremely well represented, especially regional governments, of which the German Lander is particularly influential. However, this has created friction between national and local government, as there are often different priorities. For instance, Scotland’s Highlands and Islands region had to fight to keep its funding in the 1990s. Currently Gordon Brown is trying to coordinate the regional development fund that it receives from the EU.

It has been suggested that EU lobbying allows for issues ignored on a domestic level can get a second change through EU lobbying.

Lobbying
Linguistics is required: French and English are a minimum but also German, Spanish, and even Dutch.

Unlike countries such as the US the lack of a strong party system results in political campaign funds having little effect on political decision-making.

The introduction of new technology has made its presence felt in Brussels, with email being used more extensively than other political capitals and the mass of information on the internet allowing for ease of research. This is felt to be particularly useful to pan-European trade associations which have a huge logistical problem in trying to secure a unified position.

However, face-to-face contact is still important, with a system in place allowing lobbyists the optimum amount of access within the EU parliament. Trips between Belgium and Strasburg are seen as a useful way of forging contacts, through networking on the four hour train journey, over the fine local food and hotel lobbies.

This research was written by Jonathan McHugh in January 2005

References

• Elizabeth Bomberg and Alexander Stubb - The European Union: How Does It Work? Oxford University Press, 2003
• Michelle Cini European Union Politics Oxford University Press 2003

Is Economic Interventionism Dead? Illustrate with the comparison of France and another European country

The last twenty years have seen a significant shift in the styles of French and UK economic interventionism. Since the Second World War their governments’ emphasis on ‘national champions’, public utilities and heavy control of credit gave them a strong influence on their society. However, global shocks in the 1970s and increasing levels of foreign trade put strains on their respective economic models. Their responses to these challenges differed, with the UK having a more ideologically lead shift in political and economic thought, whilst France had a more reserved and more practical acceptance or compromise to the economic problems posed. As a result both the UK and France have significantly less levels of interventionism, with independent central banks, privatised industries and a market led approach to the economy. This essay will document these shifts in policy and explain France’s and the UK’s reasons and also how economic interventionism is not dead but the tools of intervention have merely changed.

The Success and Decline of Domestic Direct Economic Interventionism

France

Since the 1940s France has been “inspired by a desire to modernise French industry in the wake of the Second World War,”[1] and developed a dirigiste economic model in which the state was responsible for modernising the economy for fears “that small businesses and antiquated firms would not be able to compete effectively against German and American firms as trade expanded in the post-war world, the French policy-makers of the 1940s and 1950s used the resources of the state to encourage French industry and agriculture to increase the scale of production through mergers and acquisitions, to shift capital and labour into high-technology sectors, and to eliminate less efficient producers in favour of firms that could prosper on international markets.”[2] President Charles de Gaulle, one of the architects of the plan described these firms as “national champions carrying the banner of France into world markets,”[3] with Hall asserting that he believed that “the geopolitical power of the nation would depend on its economic strength.”[4]

To implement the strategy, “the state established a planning system that set investment and production targets for major industrial sectors in consultation with leading firms, and successive governments used their influence over large, state-owned banks to channel resources to firms identified as most promising.”[5] There was a negative attitude toward foreign investment, with “discouragement, even opposition to the introduction of multinationals in France,”[6] with Godt describing it as the ‘American Challenge’. This was because numerous large American firms came to Europe to buy companies and set up their own commercial networks and factories, with the movement having “a determining influence on industrial restructuring in most of the European countries.”[7] This is because the French “for reasons of national independence, declared its hostility to these takeovers,”[8] such as Poclain-Tenneco and Bull-General Electric through “an unpleasant climate which often did turn American firms away from investing in France.”[9]

As Hall points out, the modernisation was highly successful for a prolonged period, as “the French economy grew faster than any other in Europe during the 1950s and 1960s,”[10] aided by the “highest rate of investment after Japan.” [11] As a result, France developed a “powerful presence in steel, armaments, aircraft, consumer goods and agricultural products.”[12]

However, from the 1970s cracks started to show in the dirigiste model. France’s policy of protecting its markets from global trade with protective barriers had left French firms lazy and uncompetitive. Agreements such as the 1957 Treaty of Rome forced France to “reduce its barriers to trade and face more intense foreign competition.”[13] This left France very vulnerable as France lost its domestic market share to imports and “the nation found itself saddled with huge coal, steel, shipbuilding and automobile companies that were absorbing public funds but which had substantial overcapacity and could not produce as cheaply overseas.”[14] This was a hangover from firms having been “orientated towards producing more rather than producing more competitively”[15] as a result of it being difficult for officials “to select the products and production processes which would be competitive on world markets.”[16]Also, as France put most of its resources in ‘national champions’ there was “an insufficient web of high-performance, high technology medium-sized firms, strongly orientated towards exports”[17] compared to Europe.

This was made worse by France’s use of devaluation and generous loans. Perez felt that the industries captured the banks as French officials were “continually under pressure to expand the exemptions granted to specific users under the encadrement du credit system”[18] because “of the manner in which financial dirigisme had been used to defuse social conflict through selective expansion of credit in the post-war period.”[19] This use of credit had allowed industries to make poor investments with little consequence. Flanagan expands on this idea, explaining how the use of the credit system coupled with devaluation to neutralize wage increases “resulted in a highly unstable labour market marked by heightened worker militancy and wage explosions (in 1962-63 and again in 1968) which simply outpaced the government’s attempts to restore profitability by allowing domestic prices to rise faster than world prices.”[20] Perez even felt that without the increasingly international context “the policies that interventionism had been created to serve were thus producing the domestic political conditions for its abandonment.”[21]

Perez felt that “the French economy has suffered from overinvestment or delayed adjustment in certain sectors benefiting from protective measures, monopoly situations, or state financial aid.”[22] Godt agrees with Perez’s assertion that France was investing enough “but that she invested badly,”[23] citing the over reliance of low-wage producers in textiles and that France “did not invest properly in response to the new conditions of the international environment that the problem of external constraint appeared.” Hall felt that planning had “been effective for building infrastructure in basic sectors”[24] and that economies of scale were achieved. However, the investment in high technology industry had underperformed, as “firms in semi-conductors and consumer electronics failed to build viable enterprises, as Japanese and Americans made better technological choices and began to set market standards.”[25]

France’s last attempt to maintain dirigisme was with the Socialist Mitterrand government, with a last attempt at redistributive Keynesianism in 1982-83 through increasing state aid to industry from 35 billion francs in 1981 to 86 billion francs in 1985 and increasing the minimum wage “hoping to stimulate enough economic demand to jump-start French growth.”[26] This was as a result of the policy makers struggling to come to terms with the aforementioned problems and discovering “that no matter how much they tried to reflate the economy, levels of private investment stagnated because the debt-loads of French firms had become too high and their profits too low to accommodate investment.”[27] For instance, productive investment collapsed from 14.5 per cent in 1974 to 12.4 per cent in 1980[28] and France was “marked by successive periods of decline (1974-76 and 1980-84) and periods of slowed recovery (1977-9 and 1985-87).”[29] This was exacerbated by the OPEC oil crises in the 1970s, where the cost of a barrel of oil increased from $1.80 to $11.60 a year in 1974.

It eventually became apparent to Mitterrand that “the post-war dirigiste policy program of state-led economic development was no longer doing what the Gaullist discourse of French economic prowess, growth, and grandeur had initially promised.”[30] And so in 1983 the Socialists accepted that “their policy was unsustainable economically, and jettisoned the discourse along with the policy program.” Schmidt argued that Mitterrand’s changes, unlike the changes brought about by Thatcher were “a matter of necessity, cognitively right but normatively difficult to legitimate, given its lack of fit with post-war socialist values.”[31]

The UK

With its guiding principles of Keynesian demand management providing both high employment and low inflation the UK economy had comparable economic successes to France until the 1970s. Similar interventionist policies were employed in the form of “an industrial strategy, state ownership, a policy of ‘picking winners’ and an extensive system of subsidies to firms, industries and regions.”[32]

However, by the 1960s chancellors had become too confident about their abilities to control the economy, using inaccurate forecasts to estimate how the economy would perform and using imprecise policy instruments to anticipate them. This created what became known as the ‘Stop-Go Cycle’, where the government would constantly make very minor alterations to the economy in order to create the desired results.

Up until the 1970s there was little criticism of Keynesianism policies despite concerns with the Stop-Go Cycle, as there was stable inflation and it was considerably lower than the rate of growth. However, from the 1970s this appeared to be breaking down as inflation was starting to spiral out of control, creating stagflation, where both unemployment and inflation were increasing. Like France this was partly as a result of trade unions capturing the government, their employer and being able to raise their wages too high in order to defuse social conflict. For example, the government was supporting ‘lame duck’ industries, such as Rolls-Royce and British Leyland, as the benefits of subsidising an industry were considered more important than the economic decline of areas dependent on a sole employer.

This spiral of inflation was worsened significantly by the oil crises and affected the UK more than France. Schmidt argued that the oil shock “had added major inflationary pressures to long-standing economic problems related to monetary instability and industrial decline, which in turn only exacerbated spiralling labour unrest that, after a brief hiatus from 1975 to 1977, culminated in the massive strikes and work stoppages of the ‘Winter of Discontent.’”[33] Unlike other countries which had operated restrictive policies in order to pull down inflation during the oil crisis of 1973 the UK inflated the economy to deal with its slower growth. This backfired, as the UK experienced one of the larger declines in GDP and higher levels of inflation, which also lasted longer than other countries. As a result Keynesianism was undermined and people were encouraged to consider other economic solutions.

Like France ending dirigisme the UK also dropped its Keynesian approach for practical reasons, such as the Labour Government of the mid 1970s accepting monetarist reform in exchange for a $3.9 billion loan from the International Monetary Fund. Callaghan’s speech to the Labour Party Conference in 1976 was described by Smith as sounding “the death knell for post-war Keynesian policies and ushered in the new era of monetarism.”[34]

However, it was not until Thatcher’s election in 1979 did monetarism gain ideological teeth, encouraged by the largest political swing since Clement Atlee’s Labour party in 1945. This gave the monetarist reformers the confidence to reduce the role of the state through a market based approach and so reduce the amount of economic interventionism. Infact, examining the far greater collapse in orthodox economics and the greater social friction occurring in the UK with the ‘Winter of Discontent’ that we may be able understand more clearly why the ideological shift in the UK was greater than in France.

Reform and Evolution of Domestic Economic Interventionism

France

The new imperatives of the French economy involved modernization and increased competition. There was a privatization of state banks and industrial enterprise and large deregulation. For example, there was virtually complete deregulation of prices, services, new rules on competition, reduced labour-market rigidities and the abolition of prior administrative approval for lay off and deregulation in the fields of transportation, telecommunication and energy. Hall suggested that the government moved away from macroeconomic interventionism to microeconomic policies, “aimed at the supply side of industry, to improve economic performance.”[35] However, Hall did emphasise that supply side policies were nothing new but the “nature of those policies has changed dramatically.”[36] There was also a shift from the larger ‘national champions’ to small enterprises which Hall felt were “much more effective creators of employment and often had a flexibility to weather macroeconomic storms that large firms lacked. As a result, an increasing share of the industrial budget has been earmarked for small enterprise.”[37]

These reforms resulted in a reduced burden on businesses, with a cut in corporate tax of nearly 20 billion francs[38] and the elimination of credit volume controls and an accelerated deregulation of the banking system. The transformation of banking was huge, with Godt finding it “none the less spectacular, given France’s deeply embedded traditions of administered financing.”[39] Previously the state had played a direct role in investment, and levels of credit. Now the French system is one in which markets have replaced government agencies and “for the most part French companies have to find capital on world markets.”[40]

Many French firms have experienced huge increases in productivity and are now the most profitable in continental Europe.[41] Despite these successes with the market France still feels the need to invest in some of its ‘national champions,’ spending as much on Credit Lyonnais as it had on the Channel Tunnel.[42] France is also “regularly criticised within the EU for its spending plans and interventionist policies which continue to rely heavily on public sector employment and public subsidies to private businesses.”[43]

The French model has successfully moved away from its dirigiste past, with heavy state intervention, and the market’s increased role. However, in order to sweeten such sweeping reforms successive governments provided “interest-based incentives for those affected by economic restructuring.”[44] As Schmidt points out, “the Socialists did not in any way address the seemingly logical contradiction between an emphasis on belt-tightening neo-liberal policies and expansive social policies. But neither did subsequent governments, including the right-wing neo-liberal government in power between 1986 and 1988 which, despite the Thatcherite discourse, continued high social spending while reiterating its commitment to social solidarity even as it claimed to seek to increase individual responsibility, innovativeness and independence while engineering a retreat of the state.”[45]

In correcting the mistakes of focusing on industries with low skilled labour France has made considerable investments in improving the skills of the labour force. Between 1988 and 1991 spending on education increased by 25 per cent. By 1994 more than 63 per cent at the relevant age took a baccalaureate compared to 28 per cent in 1980.[46] As Hall points out, “few nations have managed to increase the skills of their workforce to this extent in such a short period of time.”[47]

Despite the end of dirigisme the contradiction of reduced economic interventionism but increased welfare highlight the fact that France’s reforms have been of a more practical nature and not as ideologically driven as in the UK. The increased use of social welfare and investment in areas such as education show how the French government does still intervene considerably in the economy, but that the methods have changed.

UK

Thatcher’s reforms were an attempt to make the UK a more self-reliant society, “from a give-it-to-me to a do-it-yourself nation; to a get-up-and-go instead of a sit-back-and-wait-for-it Britain,’ and the recognition that inequalities were necessary to encourage the ‘spirit of entrepreneurship’”[48] There was going to be no pussyfooting from such an ideologically driven government, with large levels of privatization from the 1980s in order to increase competition and shake up the market. There was also a movement away from the welfare state to a more laissez faire approach, as there was an ideological movement from equality to incentive focused equity.

However, a consequence of the privatisations was an explosion in the amount of regulation, to combat fears of market inefficiency and firms abusing their monopoly status, especially the utilities where there were concerns that the operators would abuse their social responsibility. Despite the decline in direct economic interventionism and social provisions the increase in regulation was creating problems, with the OECD concluding that “the regulatory task of designing a pro-competitive system of regulation based on the separation of potentially competitive and natural monopoly sections of this type of sector was an unfamiliar one for governments and presented enormous technical and economic difficulties.”[49] For instance, as a result of huge mutual and overlapping interests between regulators there were between 14,000 and 20,000 regulators in 1997, with annual costs between £700m, and £1bn.[50]

However, this issue was not tackled until 1999 when the Labour Government merged departments, such as the electricity and gas regulators and unified fire safety. There was also a move from the more aggressive style of giving demands to firms and public organisations to the “light touch enforcement of regulation.”[51] Hood described it as an aspiration to combine “the iron fist of Draconian central interventionism with the velvet glove of self-regulation,”[52] As a result there was a transfer of the main thrust of legislative effort onto areas of higher risk and underperformance and areas of low risk or strong performance were given less stringent reviews. For example, in 1997 OFSTEAD (the regulator for education) allowed plans for less stringent inspection of the best performing schools. This streamlining of policy although resulting in less regulatory interventionism actually turned the threat of regulation into a policy tool and thus the government could use threat of regulation as a means to intervene in the economy.

Since the Major Government there have been experiments with Public Finance Initiatives, whereby the marketplace is used to provide public goods in refuse collection, hospitals, prisons and more recently the London Underground. Although this measure is intended as a withdrawal of the governments role in society the agreements, regulation and government aid result in more economic interventionism than even privatization. For example, the government is obliged to bail out companies with huge losses, such as the part privatised air traffic control system (NATS) which received £30m in 2002 as a result of reduced passenger numbers following the September 11^th terrorist attacks.

The first act of the Labour Government was to announce the independence of the Bank of England in order to wash its hands of errors such as the Lawson boom and leave control of monetary policy in the hands of the experts rather than interfering politicians. There has also been no intervening in the exchange rate as a result of the Major Government being burned in 1992, so now governments find it difficult to hide poor economic performance with devaluations.

New Labour was not concerned with reversing the monetarists’ economic shift significantly when they came to power in 1997, and was prepared to “junk Keynes wholesale and accept the new right consensus that budget deficit manipulation only disturbs the natural rhythms of the economy”[53] and also being “no longer committed to universal state ownership and the re-nationalisation of the privatized utilities, but rather stresses the importance of firms and industries which are recognised as world-class competitors in several sectors, characterised by high technology (R&D intensive) and high value-added processes and skills.”[54] The commitment from a left wing government to not directly intervening in the economy shows a clear signal that old style economic interventionism is dead, although the regulatory effects is its adept replacement, especially more so than France considering the more developed nuances in the UK.

However, there has been a shift towards welfare again, with the introduction of the minimum wage and the New Deal. Despite this the increases in welfare are not as significant as in France, as Labour have ignored wage demands from an ideological standpoint. However, like France there has been a significant investment in education, with Ruth Kelly, a Labour MP claiming that public investment was to be “larger and more sustained than at any time since the 1940s”[55]

Effects of the EU on Economic Interventionism

France

Since the 1990s the growth of European policy developments “began to conflict significantly with dominant perceptions of French state identity and ideological constructions,”[56] as European Competition policy clashed with the “dominant French perceptions of appropriate state intervention in the economy.”[57] The creation of the single continental market in 1992 removed 300 barriers to trade in France. It had effects on France’s subsidies to ‘national champions’, with the Rocard Government being obliged to make Renault pay back part of its subsidy, creating the “principle that the French Government had henceforth only a very limited freedom to support its public sector,”[58] Machin even felt that European integration ended the run of ‘national champions’, as it “ran against the entire logic of the Single Market.”[59]

However, Howarth disagrees, suggesting that “European integration and policy developments (for example, the creation of CAP) were acceptable to the extent that they served French economic and foreign policy objectives and reinforced – or at least did not undermine or fundamentally alter – traditional dominant perceptions of French state identity.”[60] The response of France has been to attempt to extend “state activism to the European level by calling for improved economic policy coordination, joint reflationary economic strategies, the creation of an interventionist European policy, the loosening of the EMU constraint, the reinforcement of EU social policy and fiscal policy harmonisation to prevent perceived tax competition by certain EU member states.”[61] Howarth goes on to explain how this was in order to reinforce domestic policies and “should be seen as an extension of ‘modernising’ interventionism, the motif of Jospin’s ‘Modern Socialism’.”[62] Levy extends on this point, asserting that “The expansion of state intervention is not merely a social imperative but a measure of France’s capacity to preserve its sovereignty and identity in an increasingly integrated, interdependent world.”[63] However, there are limits to the France’s influence, with Jospin unable to renegotiate the Stability Pact in the Amsterdam Treaty.

UK

Thatcher’s approach to Europe was very mixed, being committed to open markets and borders and a chance to “extend laissez-faire capitalism to the continent in the case of the Single Market.”[64] However, she also viewed Europe as a threat, fearing an “extension of continental-style state interventionism through the Maastricht Treaty, both with the Social Chapter, which would “introduce collectivism and corporatism at the European level.”[65]

Blair’s commitment to European integration was more evident with his granting the Bank of England independence and opting into the Social Chapter of the Maastricht Treaty. However, the legacy of euro scepticism following Black Wednesday has prevented Blair from making strong moves towards joining the euro or taking as strong a lead in Europe as France dies and assert its influence on economic policy.

The UK has made huge savings through pooling its research with other European countries on programmes such as Airbus, Concorde, the European Centre for Nuclear Research, ESPIRIT (an IT programme), the European Space Agency and a series of joint defence ventures. This has avoided huge duplicative costs and enabled the UK to invest in programmes which it otherwise may not be able to fund by itself.

This report was written by Jonathan McHugh in March 2005

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[1] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p171

[2] Ibid. p173

[3] Ibid. p174

[4] Ibid.

[5] Ibid.

[6] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p109

[7] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p109

[8] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p109

[9] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p109

[10] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p174

[11] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p119

[12] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p174

[13] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p175

[14] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p175

[15] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p174

[16] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p174

[17] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p120

[18] Perez S.A Systemic Explanations, Divergent Outcomes: The Politics of Financial Liberalization in France and Spain (International Studies Association) 1998. p776

[19] Perez S.A Systemic Explanations, Divergent Outcomes: The Politics of Financial Liberalization in France and Spain (International Studies Association) 1998. p776

[20] Flanagan R, Soskice DW and Ulman L Unionism, Economic Stabilization and Incomes Polices: European Experience.(Brookings Institution). p23

[21] Perez S.A Systemic Explanations, Divergent Outcomes: The Politics of Financial Liberalization in France and Spain (International Studies Association) 1998. p777

[22] Perez S.A Systemic Explanations, Divergent Outcomes: The Politics of Financial Liberalization in France and Spain (International Studies Association) 1998. p777

[23] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p119

[24] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p175

[25] Zysman, J Governments, Markets and Growth (Cornell University Press) 1983

[26] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p175

[27] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p181

[28] cited from Godt Policy Making in France (Pinter Publishers London and New York) 1989. p119

[29] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p119

[30] Schmidt VA From State to Market? The Transformation of French Business and Government (Cambridge University Press) 1996

[31] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p253

[32] Curwen P, Hartley K, Hooper N and Marshall P Understanding the UK Economy Fourth Edition (MacMillan Press Ltd).1997 P446

[33] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p258

[34] Smith D The Rise and Fall of Monetarism (Pelican). 1988. p65

[35] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p181

[36] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p181

[37] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p182

[38] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p119

[39] Godt Policy Making in France (Pinter Publishers London and New York) 1989. p124

[40] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p178

[41] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p180

[42] Cited from Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p178

[43] Milner S Globalisation and Employment in France: Between Flexibility and Protection? (Modern Contemporary France) 2001. p335

[44] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p254

[45] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p254

[46] Cited from Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p179

[47] Peter Hall, Jack Hayward and Howard Machin Developments in French Politics (The Machmillan Press Ltd) 1994. p179

[48] Hedetoft, Ulf and Hiss, Hanne Taking Stock of Thatechism (Department of Languages and International Studies) 1991

[49] OECD Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance (Paris) 2002. p100

[50] Cited from OECD Regulatory Policies in OECD Countries: From Interventionism to Regulatory Governance (Paris) 2002. p22

[51] Regulatory Reform: The Government’s Action Plan Internet (www.cabinetoffice.gov.uk/regulation) 2003.

[52] Hood, James and Scott Regulation of Government: Has it Increased, is it Increasing, Should it be Diminished? (Blackwell Publishers Ltd) 2000. p283

[53] Arestis P and Sawyer M The Economic Analysis Underlining the ‘Third Way’ (New Political Economy) 2001. p257

[54] Curwen P, Hartley K, Hooper N and Marshall P Understanding the UK Economy Fourth Edition (MacMillan Press Ltd).1997 P447

[55] Kelly R Response to Will Hutton (Political Quarterly) 1998. p103

[56] Howarth D The European Policy of the Jospin Government: A New Twist to Old French Games (Modern and Contemporary France) 2002. p355

[57] Howarth D The European Policy of the Jospin Government: A New Twist to Old French Games (Modern and Contemporary France) 2002. p355

[58] Hall P, Hayward J, Machin H Developments In French Politics (The Machmillan Press Ltd) 1994. p314

[59] Hall P, Hayward J, Machin H Developments In French Politics (The Machmillan Press Ltd) 1994. p314

[60] Howarth D The European Policy of the Jospin Government: A New Twist to Old French Games (Modern and Contemporary France) 2002. p354

[61] Howarth D The European Policy of the Jospin Government: A New Twist to Old French Games (Modern and Contemporary France) 2002. p357

[62] Howarth D The European Policy of the Jospin Government: A New Twist to Old French Games (Modern and Contemporary France) 2002. p357

[63] Levy J. D. France: directing adjustment, in Scharof F. and V. Schmidt Welfare and

Work in the Open Economy. Volume II. Diverse Responses to Common Challenges (Oxford

University Press) 2000. p. 331

[64] Schmidt VA The Politics of Economic Adjustment In France and Britain: When Does Discourse Matter? (Journal of European Public Policy) 2001. p259

[65] Busch, Andreas Central bank independence and the Westminster model (West

European Politics). 1994. p53–72.