Why are the French different?

Brad Setser argues that France is the most “Anglo-Saxon” of the big 3 continental economies:

Not all aspects of the French model are working right now. ...But the established narrative that focuses on France's resistance to market liberalization - Anglo-Saxonization, so to speak - misses one key fact:  France, despite the absence of reform, has enjoyed domestic-demand led growth for the last ten years.  Sort of like the US. Germany has done more reform but has far less growth in domestic demand.  And Italy lags in all respects.

And Brad noted in comments on my post yesterday:

I agree that the source of France's recent growth (housing and related consumption boom) gives cause for concern, but I also find some of the (anglo-saxon) analysis on France's economy overly simplistic.

Which raises a fundamental issue: why is French capitalism so seemingly resistant to more open markets? Monica Prasad from Northwestern University offers a different explanation on French capitalism to the usual. Her September 2005 American Journal of Sociology article, Why Is France So French? Culture, Institutions, and Neoliberalism, 1974–1981 (PDF) argues that "the French pattern is not caused by adherence to cultural traditions of egalitarianism". Instead, she argues that France has adopted a “pragmatic neoliberalism” because in the postwar period it had adopted a “pragmatic state interventionism” designed not to further goals of social justice, but to turn an agricultural country into an industrial one.

In sum, the argument of this article is that the legacies of state-led industrialization in the postwar period created a resilient politicaleconomic structure that benefits business and the middle classes and increases loyalty to the status quo in France, and the exclusion of interest groups and the continued strength of parties and other political structures dampen political innovation in France.

Moreover, neoliberalism in the United States "required a remarkable degree of extreme political innovation which has not been possible in France". So what might create the conditions for change in France? Prasad concludes:

I suggest here that change will happen in France if and when it allows either party to present itself as a contrast to the unsuccessful policies of the other, can be modeled on successful changes in other countries, or generates consensus among experts. These are the conditions under which the autonomous state has historically been moved to action.

It's an interesting historical perspective, that you seldom come across often in economic circles.

Comments

[ivan]

Intersting analyses on taxes. Gives cause for some speculation. For instance, by shifting the system from income taxes towards payroll taxes (like Reagan did) or towards consumption taxes (like neoliberals in the U.S. are proposing) in the end we could be stuck with much higher taxes overall, although much more regressive. Is it that what neoliberals want?