French economy its organization and principal economic sectors

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 numerous business enterprises—especially in energy, finance, and manufacturing—and it introduced a series of 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. A member of the Group of Eight forum of highly industrialized nations and of the Organization for Economic Cooperation and Development (OECD), France is home to the world’s fifth largest economy, behind the United States, Japan, Germany, and the United Kingdom. It is also the leading agricultural producer in western Europe. In 2005 France’s gross domestic product (GDP) was $2.13 trillion, and per capita income was $34,935.50.

Overview of the French economy

The postwar economic integration of western Europe 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 and political cooperation among European nations. European Union members share a common economic area composed of some 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, like many other EU members, uses the euro, the EU’s common currency. Successive French governments have encouraged varying levels of intervention in the economy, including state ownership and control of key industries. In 1982 the Socialist-led government of president François Mitterrand initiated a program of extensive 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 parliamentary majority in 1986, however, led to a reduction of state ownership. During the 1990s and early 2000s, the government continued the process of privatization, selling off a variety of state-owned enterprises and reducing its holdings in others. Despite these measures, the public sector as a share of GDP remains higher in France than in any other country to adopt the euro. In addition, France’s progress in opening its domestic markets to foreign competition as required by the EU, especially in the energy sector, has been slow, inviting criticism and legal challenges from the EU.

France faces several pressing economic problems in the early 21st century. One is the nation’s persistently high unemployment rate. By the mid-1970s, as the postwar economic boom 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. The unemployment rate stood at 9.9 percent in 2004. Efforts to lower unemployment, including government legislation implemented in 2000 to reduce the official working week from 39 hours to 35 hours, had limited success. As a result, in 2004 the government announced plans to ease the rules to give employers and employees more flexibility.

The lack of vigorous economic growth has also made it more difficult for France 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 in the decades ahead. Encarta