De Gaulle's Glass House

While Charles de Gaulle has not hesitated to trumpet or try to exploit the vulnerability of the dollar, he has been strangely silent about mounting economic problems at home. Other Frenchmen are less reticent. Premier Georges Pompidou admits that the French economy has shown "a certain slowing of growth, even a stagnation of production." The usually docile Patronat--French equivalent of the National Association of Manufacturers--is so disturbed by the letdown that it has formally criticized government economic policies for the first time in memory. In Paris recently, a cartel of steel producers met to survey France's economic horizon, agreed to reduce steel production by 10% in 1965.

A Million Frenchmen Wronged. The most recent danger signal was a sharp January dip in automobile production, down 26% from a year ago. Textile production has fallen 10%, forcing many small firms into merger or bankruptcy. There have been other serious declines, ranging from 5% in metal products to 16% in construction materials. Exports are 8% below their 1964 levels, railway freight tonnage has decreased more than 5%, and the newspaper Le Monde estimates that a million Frenchmen have had their purchasing power reduced by dismissals or short work weeks.

Much of the slowdown stems directly from De Gaulle's dirigisme--direction from above--in the form of the economic stabilization plan imposed in September 1963 to fight inflation. By freezing most prices, curtailing credit and reducing tariffs, the government successfully slowed French price increases--which had been averaging 5% per year--to only slightly more than 2% in 1964. Another effect was to so discourage business expansion that the French economic growth rate, which De Gaulle aims to stabilize at about 5% annually, is likely to be only 3.5% .

Hard Times Can Help. De Gaulle feels that the downturn can actually benefit France by weeding out inefficient producers and encouraging mergers. This consolidation, high government officials hope, would create the larger companies that France sorely needs to compete more effectively against foreign industrial billionaires.*

The French Cabinet is debating whether it should impose firmer controls on the French economy. Influential former Premier Michel Debre is pressing for more controls; Pompidou and Finance Minister Valery Giscard d'Estaing argue for more free enterprise. Though the Gaullists see no compelling political reasons at the moment for relaxing the present unpopular controls, most Frenchmen are confident that relief will come later this year. Reason: the next French presidential election must be held by December, and De Gaulle will want his voters to be contented and prospering.

*There are 49 U.S., five German, four British and two British-Dutch companies with sales of more than $1 billion. France has none.

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