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France is one of the four West European trillion-dollar economies and is the worlds number four economic powers in terms of GDP. France matches a growing services sector with a diversified industrial base and substantial agricultural resources. Industry generates one-quarter of GDP and more than 80 % of export earnings and because of this France has generated a budget surplus of $ 20. 9 billions based on 1995 data. (web). The government retains considerable influence over key segments of each sector, with majority ownership of railway, electricity, aircraft, and telecommunication firms. Following World War II Frances industrial sector was virtually destroyed at the hands of Nazi Germany.
Because of this, the United States pumped millions of dollars into Frances economy under the Marshall plan, which was designed to restore Europe and prevent it from falling to the hands of the emerging Soviet Union. Military hero Charles DeGaulle established a provisional government whose goal was to nationalize major industries including Renault and Citroen motor companies and three major banks. A General Planning commission was established by combining efforts of businesses and civil servants to rebuild industry. This was an example of businesses cooperating with bureaucrats in order for France to modernize and once again become a flourishing economy, which it once had prior to WWII. During the 1960 s a movement of mass consolidation of businesses continued in order to create a streamlined efficient business sector.
This is expressed by the slashing of three of the five auto companies France possessed as mentioned earlier. The creation of the hyper mache whipped out inefficient corner shops in order to compete with foreign firms. Attention of the economy was focused on high-growth industries. In 1973 decline began as industrial growth decreased one per cent per year as unemployment toped 10 % for most of the 80 s and 90 s where 150, 000 industrial jobs where lost yearly.
Inflation reached 10 % from the mid 70 s to 80 s effecting primarily the steel and auto industries that where established to compete with foreign firms. No post 1974 government has been able to jumpstart Frances economy. The biggest question one may ask is why did this nationalization not work? The Chirac administration has been gradually relaxing its control over these sectors since the early 1990 s. The government is slowly selling off its holdings in France Telecom, in Air France, and in the insurance, banking, and defense industries, along with the privatization of 65 unprofitable firms.
Meanwhile, large tracts of fertile land, the application of modern technology, and subsidies have combined to make France the leading agricultural producer in Western Europe. A major exporter of wheat and dairy products, France is practically self-sufficient in agriculture. The economy expanded by 3 % in 1998, following a 2. 3 % gain in 1997. Persistently high unemployment still poses a major problem for the government, which ranges from 8 - 12 % (web).
France is hesitant t from cutting exceptionally generous social welfare benefits or the enormous state bureaucracy, preferring to trim defense spending and raise taxes to keep the deficit down. The Jospin administration has pledged both to lower unemployment and trim spending, pinning its hopes for new jobs on economic growth and on legislation to gradually reduce the workweek from 39 to 35 hours by 2002. France joined 10 other EU members to launch the euro on 1 January 1999 (web). Frances GDP purchasing power parity is $ 1. 32 trillion (1998 est. ), a real GDP growth of 3 %, and a purchasing power parity of $ 22, 600. Frances GDP consists of 2. 4 % in agriculture, 28. 4 % industry and 69. 2 % services as of 1997. France continues to be a welfare state where 45 % of the nations GNP are taxes and government expenditures.
France spends more on healthcare then any other European country. (web).
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Research essay sample on Purchasing Power Parity Foreign Firms
