States and Markets French Financial Interventionism in the Seventies

Abstract

Political scientists and economists have been working at cross purposes over the past decade. While the former have been rediscovering the state, the latter have been rediscovering the marketplace. Among political scientists, statists have claimed that the state can intervene effectively in the marketplace in order to promote social stability and national interests. Among economists, on the other hand, neoclassicals have discounted the effectiveness of state interventionism, as advocated by Keynesians. The work of the neoclassicals, bolstered by the multiplication of liberalizing reforms in countries as disparate as the United States, Great Britain, France, and the People's Republic of China, suggests that the statist claim should be examined once again, but this time from a different angle. Statists have concerned themselves essentially with the power of the state to formulate and implement its policy preferences in the face of active opposition by influential and powerful societal actors. Economists, on the other hand, have concerned themselves chiefly with the prior question of the state's ability to influence the economic behavior of individuals, paying little attention to how the policy is formulated or whose interest it embodies. In this essay, I explore the recent history of French monetary policy to show that markets do indeed place effective limits on the power of the state. French monetary policy provides an ideal case for such a study. First, monetary policy is an issue that gives rise to little direct societal interference in policymaking for the simple reason that, unlike other issues such as taxation, individual actors find it difficult to assess what their interests actually are.' Second, as will become apparent, the French government possesses significant power over monetary and credit policy in France, extending not only to control over the growth of the money supply but also to the administration of interest rates as well as to discretionary control over the distribution of credit. Hence the identification of limits on the ability of the French to formulate and implement monetary policy has theoretical significance. The identification of such limits does not invalidate the statist perspective but rather suggests that it be amended in a manner that allows for an explanation of the current trend toward liberalization of economic structures and policies. The statist and neoclassical theses are not in formal contradiction with one another. Statists argue that states enjoy a significant degree of freedom to formulate and pursue their own policy preferences in the face of interference or opposition from societal actors, whether interest groups or social classes. For such freedom to obtain, two conditions must be met. First, those that represent the state's interests must be able to formulate their policy preferences free from the pressure of interested societal groups or classes.3 In other words, states must enjoy a significant measure of autonomy. Second, they must have the capacity to impose costs on societal actors if