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Economy, Overview

Until the early 20th century, France was still largely a nation of small farms and family-owned businesses. After World War II (1939-1945) the French government nationalized several business enterprises—especially in energy, finance, and manufacturing—and it introduced a series of national development plans intended to modernize the economy. These reforms, along with European economic integration, helped secure a period of sustained economic growth in the quarter century following the war. Today, France is one of the world’s leading economic powers, ranking fourth within the Organization for Economic Cooperation and Development (OECD), behind the United States, Japan, and Germany. It is also the leading agricultural producer in western Europe. In 2000 France’s gross domestic product (GDP) was $1.29 trillion, and per capita income was $21,980.

Successive French governments have promoted varying levels of intervention in the economy, including state ownership and control of key industries. In 1982 the Socialist government initiated a new program of nationalization. At the peak of this program, 13 of the 20 largest firms in France were owned by the state. The election of a center-right government in 1986, however, led to a reduction of state ownership. During the 1990s the government continued the process of privatization, selling off a variety of state-owned enterprises and reducing its holdings in others.

The economic integration of western Europe in the second half of the 20th century had a powerful influence on the French economy. France was a charter member of the European Coal and Steel Community (ECSC), a cooperative organization founded in 1951 to establish a free-trade area for coal and steel products. This organization merged with the European Economic Community (EEC) and the European Atomic Energy Community (EAEC) in 1967 to form the European Community (EC). Today, France is a member of the European Union (EU), a successor of the EC that promotes economic integration and increased cooperation among European nations. European Union members share a common economic area composed of nearly 400 million consumers. The creation of a single market required France and other EU members to remove national barriers to the free movement of goods, services, capital, and people. French businesses long protected by trade barriers have been forced to become more competitive to withstand foreign challengers and to take advantage of new opportunities. In many sectors of the economy, the single market has spurred businesses to restructure and modernize their operations.

France faces several important economic problems in the early 21st century. One is the nation’s persistently high unemployment rate. By the mid-1970s, as national economic growth slowed, the unemployment rate began to rise steadily, surpassing 10 percent in 1985. From 1991 to 1999 the unemployment rate never fell below 10 percent. Efforts to lower unemployment, including government legislation in 1998 to reduce the official working week to 35 hours, had limited success. The slowing economy has also made it more difficult for French governments to maintain the traditionally generous social welfare benefits available to the country’s citizens. Reforming the welfare state in a socially equitable manner remains a major challenge for France.

 

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