He Really Meant It

By Henry Muller

True to his word, Mitterrand moves to nationalize key companies Franc,ois Mitterrand intends to be remembered as a man who keeps his promises. Since his election last May, France's Socialist President has launched proposals to increase public benefits, raise taxes on the rich, return power to local governments, abolish the death penalty and slow down the West's most advanced nuclear energy program. Last week, fulfilling a pledge so controversial that many Frenchmen thought Mitterrand might actually back off, his ministers approved the most sweeping takeover of private industry seen in Europe since the immediate postwar years.

The draft that emerged from the regular Wednesday morning Cabinet meeting will give the government control of 36 private banks and five of the largest industrial firms in France.-- Since the Socialists hold 286 of the 491 seats in the National Assembly, the bill is sure to be approved and to add to the nationalizations imposed in France after World War II. Thus by year's end the French government will control more than 90% of all banking assets (up from 60% before Mitterrand's election) and some 17% of French industry (up from 12%). Private shareholders will be compensated generously according to a complex formula based on each company's stock price, assets and profits. Total cost to the taxpayer: up to $9 billion.

The concerted efforts of conservatives to get Mitterrand to change his mind failed. Throughout the summer, businessmen had lobbied Premier Pierre Mauroy, Finance Minister Jacques Delors and Industry Minister Pierre Dreyfus, all moderates who were thought to consider the nationalization plan excessive. The Conseil d'Etat, a 199-man body that advises the government on the constitutionality of legislation, warned that it might be discriminatory to take over French companies while leaving foreign ones in private hands. But Mitterrand remained loyal to a central plank in the Common Program he signed with the Communists in 1972. Declared the President last week at his first press conference since taking office: "We thought the government of France had the right to decide what is and what is not to be nationalized." And he showed no remorse about arousing the ire of entrepreneurs. Said he: "I don't care whether I please them or not. My concern is to promote the welfare of France."

The Socialists invoke dubious economic theories to justify their action. According to Mauroy, the new state enterprises will enjoy the autonomy that has ensured the success of companies already in the hands of the French government, such as Renault (see box). But conservatives and a good number of Socialists doubt that Mitterrand will give the new state companies the same free-enterprise hand Renault enjoys. Central to Socialist doctrine is the view that the state should use nationalized industries to catalyze growth of an economy plagued by stagnation, record unemployment (7.7%) and rising inflation (14%). By controlling the banks and turning the investment tap on and off for the state sector, Mitterrand' economists argue, the government can avoid the cyclical swings that produce inflationary booms and job-destroying recessions.

Yet even many Socialists concede that Mitterrand's primary motive is political. Wholesale nationalization is a pet project of both his own party's Marxist left wing and of the Communists, who hold four seats in the Cabinet. Mitterrand believes that co-opting their ideas is the best way of weakening these potentially troublesome allies.

Torn between former President Valery Giscard d'Estaing and his rival, Paris Mayor Jacques Chirac, the opposition is too fragmented to put up much of a fight when the issue comes up in Parliament this month. So far, the vacuum has been filled only by former Premier Raymond Barre, whose ponderous oratory and demeanor symbolized economic discipline during the Giscard years. "The nationalizations are a source of uncertainty for our enterprises and a brake on investment and exports," he scolded. "This experience is going to show that nationalized businesses are costlier than private ones."

Meanwhile, there were signs that Mitterrand was ending his honeymoon with the French electorate and that the bloom on the Socialist rose was beginning to fade. Inaugurating France's new, high-speed train last week (see SCIENCE), he was greeted with polite applause but no great enthusiasm. Hecklers bearing placards at stations along the way included members of the Confederation Franc,aise Democratique du Travail, a union that enjoys close links to the Socialist Party. Their message: workers still expect Mitterrand to deliver on his promise of lowering unemployment and reducing the work week to 35 hours. The leftist press too has begun to be concerned that Mitterrand's ideological commitments may be getting more of his attention than the harsh realities of a troubled economy. "These first 120 days have too often left an impression of drift and improvisation," the pro-Socialist daily Le Matin editorialized. "We are waiting for the head of state to focus on the priority of priorities: overcoming the economic crisis."

At his press conference, Mitterrand declared that he had not only the will but the time to fulfill his promises: his term runs for seven years. But he cannot wait that long to meet the challenge of his office. As Le Matin put it last week: "Now that everyone is convinced Mitterrand intends to keep his campaign promises, the question is not whether he can produce the reforms but whether he can master them." --By Henry Mutter. Reported by William Blaylock and Sandra Burton/Paris

--Electrical parts manufacturer Compagnie Generale d'Electricite; chemical firms Rhone-Poulenc and Pechiney Ugine Kuhlmann; conglomerate Saint-Gobain-Pont-a-Mousson; and electronics giant Thomson-CSF. To be covered in a separate bill:

takeovers of the Dassault-Breguet aircraft company, two steel producers and three companies partly owned by U.S. and West German interests.

With reporting by William Blaylock, Sandra Burton/Paris

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