France economy from 1997-2000
Introduction
During the First World War, the seizure of its basic industries by German made the economy of French to be critically hurt. As the French credit continued to collapse, the French government decided to lend some money from the United States and use it to purchase manufactured goods and food staff (Copleston, 2003). The arrival of thousands of U.S. soldiers also resulted to increase in government expending for building materials and food. On the other hand, forced labor and the use of volunteers was the strategy that the French government used to solve the problem of labor shortages. Because of that, national debt increased steadily from 66 percent to 170 percent of GDP (gross domestic product). Inflation also become severe making the value of the franc to continue decreasing as compared to the value of the British pond.
- What did the government do during this time to either help or hinder the economy?
In order to steer economic growth, better economic planning was instigated. The main focus of the first economic plan was on various economic activities such as transport, steel, agriculture, cement, and energy equipment. The second economic plan was to foster more and better scientific research, urbanization, housing construction, and development of manufacturing industries. The French government also signed a treaty with the United States which enabled it to obtain a new loan from the U.S. to finance those activities (Robert, 2012). Nationalization of industries was allowed without any political positions. In order to assist in reconstructing the French Economy, the value of all the resources that were stolen and smuggled into Germany were also recovered using the Monnet Plan. Ideally, during this time, better production strategies, political and economic innovations are also some of the factors that enabled the country to gain international status.
- List the policies that were put in place by the government
- a) Fiscal policy – the fiscal consolidation that the French government used was ultimately accompanied various structural reforms that were perceived to have the potential of fostering economic growth. The reason for that is because economic growth was regarded as being one of the crucial elements to enhance thriving fiscal adjustments through reducing the budget deficit and maintain price stability. As a result of that, economic growth rose steadily just because of the substantial depreciation that were initially implemented prior to the commencement of wage moderation and fiscal consolidations (Copleston, 2003).
On the other hand, although economists perceived that the French could not have had the opportunity to increase the exportation of its products; it continued to experience steady economic growth. As much as structural reforms were concerned, economic growth was enhance through lessening labor market reforms as well as opening free markets for commodities and services. The objective behind that was to increase the level of competition which in return was to foster employment creation as well as productivity growth (Robert, 2012). Moreover, targeting wage bill and social spending was also regarded as being one of the most conducive means to enhance fiscal adjustments and limiting other factors that could hinder economic growth.
- b) Monetary policy – Initially, monetary policy that the French government used were aimed to increase the rate of unemployment whenever it was perceived to have dropped below the recruitment threshold. As a result of that, it made policy-makers to come up with successful strategies, such as expansionary monetary policies that could enable them to revive the economy into full employment. According to the views of the economic activists, monetary policy could result into a heated economy but the self-correcting mechanism enabled the French government to reverse the course which in return generated economic stability. It is this reasoning that made the money supply in the economy to develop at a steady rate (Francois, 2014). Consequently, it was possible to respond to short-term and long-term objectives, for instance, exchange-rate and output growth considerations so as to stimulate the growth of the economy.
- c) Supply policy – economically, supply policies are meant to spur economic growth through increasing the supply of goods and services, lower their prices, as well as increase the rate of employment. Between 19th Century and 20th Century, the French government came up with the supply policy to boost the supply of agricultural products into the market so as to moderate the existing socioeconomic inequalities. Taking into account the inflationary pressure, the escalating public debt, as well as the external and internal imbalances that were experienced during that time, supply policy was important because it enabled the government to retreat from direct economic interventions to adopting better market-oriented economic strategies, as well as privatizing vital state companies (Cette et al., 2017).
- What was the intended impact of these government policies?
Fiscal policy, monetary policy, and supply policy was meant to spur economic growth. As compared to other nations during the economic recession, the use of these policies enabled the French economy to stabilize its economy through increasing its GDP. Although it was a slow process, these policies were meant to increase the rate of employment, particularly among the youth (Francois, 2014). Moreover, as a means of increasing government tax, using these polices was to enable the government to increase consumer purchasing power through exports and imports. In order to modernize the economy as well as encourage economic growth, government expenditure was also to be managed as much as possible using tight labor markets and tax cuts. Accordingly, these policies were intended to ease the growth of capital investment and encourage industrialization (Robert, 2012).
- What was the actual impact of the government policies?
The use of the formulated French government policies were meant to steer economic growth through imposing economic controls on public and private business and on government instruments, for instance, taxation. One of the impacts of these policies was to make the merchants to depend on state protection against overseas competitors as well as extend the country’s affairs abroad. Moreover, the use of these alternating policies allowed the French government to have the potential of building an economy in which technological and industrial advances could be enhanced (Sutton, 2007). This also in return assisted in maintaining and protecting employees’ privileges and security. Initially, the erasing the debt the country had with United States enabled it obtain new loans to reinvest more in other economic activities such as financing industrial activities. Such policies also widened international market for exportation (Quinet, 2006).
Conclusion
Continued productivity of a country is what is perceived to have the potential of increasing its GDP (gross domestic product) which in return improves the living standards of its citizens. Despite that, the microeconomic policies that the French government came up with managed to encounter the negative effects of the great depression that was caused by inflation, labor shortage, and resource scarcity, poor technological advancement, and so on. As the level of productivity continued to increase, it made the country to have a competitive advantage.
References
Cette, G., Corde, S., & Lecat, R. (2017). Stagnation of productivity in France: a legacy of the crisis or a structural slowdown?. https://doi.org/10.24187/ecostat.2017.494t.1916.
Copleston, F. C. (2003). 19th and 20th century French philosophy. London: Continuum
Francois, C. (2014). An Economic History of Modern France. Routledge Press.
Quinet, E. (2006). France: avoiding competition. Competition in the railway industry: An international comparative analysis, Edward Elgar, 81-110. https://books.google.co.ke/books?hl=en&lr=&id=VFy5TuUoWOcC&oi=fnd&pg=PA81&dq=France:+avoiding+competition&ots=BlxLTTLuc3&sig=Hv-uIGbB2v4vAt4fLOryKwiB7Ws&redir_esc=y#v=onepage&q=France%3A%20avoiding%20competition&f=false
Robert, L. (2012). French Liberalism in the 19th Century: An Anthology. Routledge Press
Sutton, M. (2007). France and the construction of Europe, 1944-2007: The geopolitical imperative. New York: Berghahn Books.
