The Significance of the French States Adoption of Indicative Planning in 1946 - Essay Example

Economic History: The Significance of the French s Adoption of Indicative Planning in 1946 2007 Economic History: The Significanceof the French States Adoption of Indicative Planning in 1946 The issue of the significance of the French States adoption of indicative planning in 1946 is one of great importance and relevance, and there are many different matters within this which need to be addressed and discussed in order to properly understand, and this includes recognizing and understanding about the meaning and purpose of indicative planning, the distinctive features of French indicative planning, as well as the importance of the years between 1945 and 1975, and any and all other key and related issues. The aim of this paper is to thoroughly address and discuss all of the previously mentioned issues, in order to allow the reader to attain a much more informed and knowledgeable understanding on the subject matter at hand. This is what will be dissertated in the following. One of the most major market failures in the world is the presence of imperfect information, and indicative planning is considered as being one of the best attempts that can be used in order to bridge this information gap. Basically, the aim of indicative planning is "to improve the performance of the economy by the provision of better economic information: forecasts or targets are published but compliance with them is voluntary. The underlying logic is that the plan, via collective action, can supply economically valuable information which, as a public good, the market mechanism does not disseminate efficiently" (Young & Holmes, 2000). There are many different reasons as to why it is believed that we need this indicative planning, and namely: if there were complete and efficient forward markets there would be little need for indicative planning or any shared set of assumptions because enterprises could use such markets to hedge the risks attendant on their investment decisions; the economic forecasts embodied in an indicative plan give both buyers and seller's confidence that the general levels of demand for products and supply of materials would be forthcoming; by identifying early the existence of any oversupply or bottlenecks, investment behavior can be modified in a timely fashion and the incidence of market disequilibria reduced; and both business and consumers can benefit from exercise in collective and consistent market research, which is freely distributed to all the relevant actors in the economy. (He, 2007). In regards to French indicative planning, there are many other issues that need to be discussed here, and the theory of French indicative planning is an issue which is of primary importance; the founder of the French indicative planning was a man named Pierre Masse, and it was he who actually introduced the concept of information pooling, where planners carry out 'generalized market research', thus allowing a common view of the future, and "This research involves consulting with leading actors in the economy for their input, a process called concertation. After this step the elements of the plan are adjusted to assure coherence and to guarantee policy coordination. The goal is concerted economy" (He, 2007). The French adoption of indicative planning had many steps involved within it, and this begins around the year 1500, when France surpassed China as being the nation with the largest GDP in the world; Jean-Baptiste Colbert, who was the finance minister under Louis XIV at that time, was pursuing strongly for aggressive and comprehensive governmental policies, and in fact, during this time, Colbertism became a word that was used to describe interventionalist state activity. Similarly, in the 19th century, France was considered as being a 'late' industrializer, and policy was more directed towards the nurturing and protecting of the industry as a whole. In 1830 France was surpassed by the UK; in 1936 a leftist regime came to power, led by L'eon Blum, and resulted in establishing a Ministry of National Economy; and in 1940, Germany easily defeated France, and it was this defeat which in fact inspired the original introduction of indicative planning after the war, when the leader of the anti-Nazi Resistance, General Charles de Gaulle, headed up the government in the year 1946. The organization and planning of the French adoption of indicative planning is incredibly important here, and in France, the planning is carried out by whoever is in the position of Commission General du Plan (CGP, General Commission of Planning), of which was established in 1946, and which as well is subordinate to the Ministry of Finance. Then, "The concertation process is carried out by the Economic and Social Council, which has been concerned more recently with social issues such as education, women's rights, and income distribution. Also involved in concertation are the Modernization Commissions" (He, 2007). There are many different plans which have taken place over time in regards to the French adoption of indicative planning, and the First Plan (1946-1952) had one major goal, which was to gain industrial reconstruction from previous war damage. This plan more than any other later plan had a more command character, because CGP played an important role here in regards to the distributing of Marshall Plan monies based upon it. The plan also focused on six sectors in particular, those being: coal, electricity, steel, cement, agricultural machinery, and transportation. Then there was a Second Plan as well (1953-1957), and this plan was the one which basically introduced the concept of concertation, and as well the Modernization Commissions. Furthermore, both this and the Third Plan (1957-1961) were considered as being the most successful of all the plans, mainly because they were able to more properly introduce macroeconomic forecasting and produced better growth overall. The Fourth Plan (1961-1965) was one which included a variety of different goals from those before it, and this included expanded social infrastructure investment as well as emphasis on regional planning. With the Fifth Plan (1965-1970) "contained detailed microeconomic elements but had a macroeconomic focus particularly on international competitiveness and controlling inflation. Growth exceeded the target for the last time in a French plan, but was disrupted by the 1968 student-worker uprisings" (He, 2007). Following this, the Sixth Plan (1970-1975) fell miserably short of its goals after the first oil shock hit France in 1973; the Seventh Plan (1975-1980) tended to ignore microeconomic aspects entirely and as well sought to achieve macroeconomic balance alone and resulted in failure; the Eighth Plan (1980-1984) "had a microeconomic emphasis, pushing for high-technology development. This major focus was continued in the Ninth Plan (1984-1988)" (He, 2007). Finally, in the Tenth Plan (1989-1992), there was more focus on European integration and as well more of a preparation of France for the complete removal of market barriers in the EU on January 1, 1993. As we can see from this, the plan changed after the late 1950s, for a variety of reasons, namely because of how dramatically life in France was changing at that point, and consequently how drastically different things were after this point compared to the years before. From this review we are able to conclude a number of different things, several which are of particular importance and significance, such as the fact of how critical the issue of indicative planning is considered to be in France. The French adoption of indicative planning was a process in the works, which truly spanned over decades and which, although losing its prestige at a certain point and as well having the actual overall plan fail, greatly and positively influenced France in various different ways, particularly on an economic basis. Indicative planning in general is an issue which is studied in wider economic, social, historical and cultural context, particularly with an emphasis on French economic thinking and historical circumstances; furthermore, from the years of 1946 - 2003, principles, methods, tools, and institutions of this indicative planning truly experienced an incredibly important evolution which was characterized dramatically by the rising decentralization that was taking place across the world, and as well the shift that was present towards the so-called 'strategic planning'. France especially had to cope with the limited possibilities of planning in open economy, and through the role of France in regards to the construction of the European Union, there was a specific evolution of French economic policy which took place. From this we have been able to understand about why and how the French adopted indicative planning, as well as how positively or negatively it has worked for them over the years. We have also been able to see that there are many different solutions which could be presented to the problems in this type of situation, and only once these sorts of solutions are taken will France be able to get back to the high point economically and financially that it was once at. References He, H (2007). French Indicative Planning, online article retrieved March 30, 2007, from http://72.14.205.104/searchq=cache:UtOoJ6qgy5QJ:www.econ.umn.edu/hhe/TEACHING/ECON4337/Frencheconomy.pdf+french+indicative+planning&hl=en&ct=clnk&cd=1 Young, P. & Holmes, R (2000). The English Civil War. New York: Combined Publishing. Read More