The French Plan

...The oecd's Economic Policy Committee recently called on the United States to spur its economy, even at the risk of a temporary increase in the budget deficit...

...Today Europe—including Britain—is still borrowing from American technological know-how, but the United States has been compelled to strike out into underdeveloped technological regions...

...Moreover, action by the Credit National, the basic authority for the distribution of medium-term funds by commercial banks, strongly influences the adaptation of investment programs to fit the framework of the central plan...

...Consisting of 11 volumes of prose and statistics, and dealing with everything from mining and transport to manpower and trade balances, the Plan was the most comprehensive survey ever made of the French economy...

...The fourth French plan takes rather a dim view of this argument...

...Europe was confronted with an immense salvaging operation...

...But in France, where both the United States and Britain are hoping to find panaceas for their own ills, the very same conditions existed until relatively recently, and yet the growth rate increased...

...Don't think nobody ever made me.' For her, growth was a mystery—something that just happened...

...and its labor shortage had reached a dangerously low level...

...Thus, when the latest French plan calls for productive investment to rise by 28 per cent by 1965, and OECD analysts recommend increased investment in new plant and equipment for the United States, the prescriptions may be similar but the patients' symptoms are radically different...

...It involved the combined efforts of some 1,000 industrialists, labor leaders, civil servants and independent experts, whose function was to insure that the limited resources available would be concentrated on the expansion of six key industries: coal, steel, cement, electricity, agricultural machinery and transport...

...Yes, other countries can profit from France's example...

...With a 7 per cent annual growth rate, West Germany has so far done well without central planning...

...In the United States it absorbs the attention of President Kennedy, while in Britain one of the first acts of the new Chancellor of the Exchequer, Reginald Maudling, was to attend a meeting of the National Economic Development Council and wrestle with the problem of how to increase the national rate of growth by an annual 4 per cent over the next four years...

...In France, to take but one illustration, the automobile industry is at present ignoring the advice of the planning authorities by adding capacity faster than the planners think the demand outlook justifies...

...But the fact that its booming economy has also begun to lose momentum and the Germans themselves are beginning to look to the French experience suggests that the United States could profit by doing likewise...

...balance of payments was at a particularly low ebb...

...But regardless of nomenclature, imitation is still the sincerest form of flattery...

...its overseas investments had been drastically reduced...

...In addition, the plan's success depended on the French agreeing to a reduced standard of living: Roughly a quarter of the national income was to be devoted to a program that would not produce any consumer goods in the immediate future...

...growth rate of 4.5 per cent was too ambitious, claimed that the critics were underestimating the powerful incentives in productivity created by postwar technological advancements...

...When the French steel industry decided to raise the prices of some of its products, the Government saw its wageprice stabilization program endangered and its entire fourth plan in jeopardy...

...For while the rate of French economic growth has been undoubtedly higher than either the British or American, postwar France took off from a starting point that the two Anglo-Saxon countries had already left behind...

...The Bank's members admit that America's present policy of easy money is designed to spur domestic recovery...

...Perhaps the most important feature overlooked by those who shy away from planning is that in France and other countries it is the business community that does the planning along with labor and government...

...balance of payments...

...Who, then, is the wiser judge, and who the better planner...

...Each particular problem was studied, the merits of various possible solutions assessed, and then conclusions were voluntarily given practical effect...

...There is ample European experience to show that the possible internal restraint of a tighter money policy can be alleviated by fiscal and other policy means," the Bank reported...

...As it had no legal means of forbidding the increases, the Finance Ministry threatened to close the capital market to the companies concerned...

...Many European economists feel that American interest rates should be pushed up in order to curb the flow of dollars overseas and thus reduce the deficit in the U.S...

...Despite an occasional dispute, French industry for the most part tends to go along with the planners...

...And insofar as it refers to the United States, it is a tacit recognition that planning exists there, too: on the Federal level in the formulation of monetary and defense policies...

...planning is essentially decentralized...

...However unsound the operation of an individual economic unit may be, they argue, the free market mechanism will put a break on it before the whole economy is made to suffer...

...Morris Harth is a freelance writer, based in Paris, who specializes in European economic affairs...

...While it expressed no preference for either stimulus, the Committee's emphasis on caution betrays its doubts about the interest rates themselves...

...The Bank for international Settlements favors higher interest rates, claiming it would not only attract foreign investment funds to the United States but keep funds at home as well...

...and on the state, county, city and district levels for more local matters...

...The Committee suggested that the stimulus could be provided by either a tax cut or higher spending, but its members urged "caution" in extending credit and setting interest rates...

...One notable exception occurred during the French steel dispute last April (which, incidentally, failed to attract world-wide attention as did the one in the United States...

...Unlike the rigid planning associated with the Soviet Union, where the Government assigns specific quotas and schedules to each unit of production, the French had all segments of the economy participate in drawing up the program...

...What remains to be seen is whether one country's planning scheme is necessarily suitable for another...

...There are many independently conceived and executed projects, and sometimes they conflict...

...Economists in both countries are turning to France, whose impressive 4.5 per cent average annual growth rate in the past decade has caused eyes to gleam with envy...

...A fourth plan, which got under way even before receiving Parliamentary approval late in July, calls for a four-year target of a 24 per cent increase in overall production and an increased annual growth rate of 5.5 per cent...

...Where growing markets in Europe call for more and more producers' plant and equipment, the durable goods industries in America find that the replacement demands they depend on are shrinking...

...After the War, the countries of Western Europe forged ahead by borrowing technology already created by the United States and, to a lesser extent, by Britain...

...The fact that the British complained of too little technical skill while the United States could boast of having it in abundance illustrates one of the pitfalls before both countries when they look toward France for a solution to their growth problems...

...But they must remember that their problems are not necessarily the same and that French solutions cannot always be imitated...

...The flotation of debt issues above the equivalent of $200,000 requires official approval, while the Ministry of Finance, as the chief collector and distributor of savings used as investment, can resort to such financial incentives as premiums, bonuses and guarantees...

...To this the businessmen ask, what would happen if a central planning authority were to decide that while the public was consuming more it was enjoying it less...

...Reconstruction of all other industries not absolutely essential to meeting the production targets of these six was to wait (though successive plans have since gone beyond the basic industries and scheduled an increasing growth pace for industry as a whole...

...At the same time, the Kennedy Administration, replying to charges that the President's target of a long-term U.S...

...From the American standpoint, the main problem to consider is not whether imitating European planning will mean cutting the ground out from under private enterprise— which in Europe has never been more successful—but whether the European experience can be effectively applied to the United States economy...

...and from the standpoint of a nation's economy, growth is recognized to be something more than a matter of mere happenstance...

...After several months of negotiations, the steel manufacturers finally obtained official approval for the increases, having convinced the Government that their prevailing price lists—the lowest in the Common Market—did not provide them with sufficient financial means to implement their investment plans...

...For one thing, there is the Government's pervasive influence on the French capital market...

...A firm hoping to avail itself of statecontrolled finance is therefore unlikely to disregard the guidelines drawn by the planning authorities...

...When Britain created the National Economic Development Council earlier this year, the then Chancellor of the Exchequer, Selwyn Lloyd, defined its function as one of removing obstacles to growth, among which he listed lack of technical skills and inadequacy of training arrangements...

...France's industrial progress lagged behind that of both America and Britain...

...To this day French businessmen are participating in planning with enthusiasm...

...Insofar as that European experience includes France, it has been the result of Government-inspired planning...

...Ideally, the conflicts are resolved through the mechanism of the market place...

...The economists attributed Britain's even slower growth rate to the fact that the country's economy was not sufficiently competitive in export markets...

...Before any plan could be made to work, the budget would have to be balanced and the system of tax collection improved...

...Meanwhile, in Italy, where the growth rate in the last 10 years has even exceeded that of France, the Government has declared its intention of introducing a form of economic programming...

...And no matter how much it spends on research and development, the U.S.' highly industrialized economy is finding it increasingly difficult to speed up technological improvements...

...American officials tend to see this as defeating the avowed goal of domestic expansion, though some find this fear exaggerated...

...There is no conclusive proof that planning will of itself provide the stimulus to an already affluent society...

...While the Government has no legal power to force an individual company or industry to implement the plan, it nevertheless has powerful means of persuasion at its command...

...The result was a plan calling for fewer controls than were instituted by the Conservative Government in postwar Britain...

...These advancements, the Administration believed, would give rapid momentum to the economy over the next 20 years provided full employment was maintained...

...But in the U.S...

...In a sense this begs the question, for in effect judging is precisely what the business community itself does...

...That the exercise is not altogether unwelcome is shown by the attitude of Belgian industry, which has signified its willingness to cooperate in a system of planning designed to raise the sluggish Belgian growth rate to 4.4 per cent a year through 1965...

...It is at this point that critics shy away from centralized planning, largely because of the fear that it will replace the impartial play of the market in which the business community traditionally places its confidence...

...One can reflect in effect," it states in its introduction, "that the consumption goods society, which colors certain aspects of American life and which has found in the United States its most penetrating critics, turns in the long run to futile satisfactions, themselves generators of malaise...

...Last April, for example, economic analysts of the 20-nation Organization for Economic Cooperation and Development (OECD) in Paris unanimously agreed that the slow, 2.5 per cent rate of growth averaged by the United States since 1929 was due to the inadequate pressure of demand...

...Who would judge which satisfactions were futile and to be discarded as not essential to the fulfillment of the plan...

...Nevertheless, they insist that if the result of such a policy is to produce a net outflow of capital instead of contributing to internal recovery, it means maintaining a margin of unused domestic resources—either because the capital is exported rather than invested at home or because it prevents more internal stimulus by other policy measures...

...The word "programming" is favored in both countries to avoid offending the business community...

...When General de Gaulle first summoned Jean Monnet in November 1945 to draw up a plan for France's economic recovery, the man now known as Mr...

...Today the problem occupies minds more mature than a small child's...

...By the same token, Europe is just emerging into the age of mass markets to which the United States long since adapted itself...

...The Monnet Plan—or, as it was officially called, the First Plan for Modernization and Equipment— was born on January 3, 1946, and went into effect the following year...

...In the United States the Ford Company ignored the warnings of the Government—and much of the business community—when it decided to spend $350 million in buying out its British counterpart at a time when the U.S...

...Is there anything in the French experience for us, they wonder hopefully, only to come up against a general consensus that says, "Yes, but...