The public sector in France, which represents the firms that are controlled by the government, has been for a very long time a huge sector, with staff that represented in the 80s more than 10% of the whole labor market. Given the importance of this public sector in France, I am interested in identifying the reasons that justify the 90s trend to end with the nationalisation era and to enter a new cycle based on the privatization of the companies that had been previously taken under control by the government. First, it is necessary to identify briefly the main steps of the two privatization periods: 1986-1993 and 1997-2000. Then, it is interesting to focus on the economic and financial consequences of these measures. This study will especially focus on the importance of such a policy in the development of the stock exchange market, and the opening to world markets that occurred consequently, especially in capital markets. Just to conclude, I will explore the future of privatisation in France trying to understand why it may be adapted to some sectors but not to all of them.
So as to get a better understanding of the functioning of the French public sector and of the privatisation policies that were implemented in the last few decades, we need first to define the concepts that we are going to use and to discuss.
Nationalisation consists the property transfer of a firm to the national collectivity, either exchanging it with indemnisation, or as a sanction . Concretely, national collectivity is commonly represented by the government and therefore it becomes the new owner in case of nationalisation. Getting shares in a firm is a policy close to privatization but there is no public ownership in that case.
Privatization deals with either the property transfer from a public owned firm to individuals, or with the introduction of a new management style in a company that would then be ruled according to market rules (that assumes that the firm looks for the best possible profits). In this study, we will principally deal with the first aspect (from public ownership to private ownership) but Renault is a good example of a firm that was nationalised in 1945 but that has always been ruled according to the market rules. In the most common sense – the first definition – privatisation occurs as a part, even a small one, of a firm's social capital. And then the firm adopts a new logic: to satisfy its individual private owner and therefore, maximize profits.
In 2004, it was recorded by the INSEE that among the 1,300 firms that are public owned, 170 firms have been privatised and have been taken under the control of private entrepreneurs. Therefore, it has also recorded that the French Public Sector is now employing some 4% of the whole workforce. It seems important to note at this stage that the decrease in the number of public owned firms is much less important in the sector of equipment goods and intermediary goods than in the tertiary sector, energy one and transports one. For instance, the Government still has a major part in EDF-GDF (Electricite-Gaz de France/French Electricity and Gas provider).
[...] These privatizations indeed seemed necessary because of the necessity for main French firms to enter the international market and to compete on a global scale -1995 This second privatization policy concerned 280,000 employees and by selling parts of its capital to private investors, the government earned 106 billion francs. During this period, the government proceeded to real privatizations; it means that it did not only sell parts of its capital but allowed private investors to take control of some main banks and energy companies. [...]
[...] On the other hand, the reduction in the labor cost seems to be one of the priorities in most privatization processes and this goal is reached by cuts in the workforce and the subcontracting of some activities. Then, an increase in productivity often appears as another major goal and consists restructuring the organization so as to make the work conditions more flexible Future of privatizations Though the future of privatisations is not surely predictable since it is much linked with the political changes and the reaction from the citizens as a whole, we may assume and expect some important challenges that privatised companies may have to face in the next few years and decades[4]: Enhance corporate governance that is today quite reduced though developing in France since the government still has specific means of actions in the economy and through the numerous crossed participations that it has in big French firms. [...]
[...] And then the firm adopts a new logic: to satisfy its individual private owner and therefore, maximize profits Evolution of the privatization policies First let us have a look at the current situation of the public sector in France, this will serve as a basis so as to identify and describe the different steps of the privatization policy that led to its current situation Current situation of the French public sector In 2004, it was recorded by the INSEE[2] that among the 1,300 firms that are public owned firms have been privatised and have been taken under the control of private entrepreneurs. [...]
[...] Source: World Bank statistics http://rru.worldbank.org/Privatization/Methodology.aspx After a long period of supremacy of the nationalization policies after the war so as to ensure the recovery of the national economy and to build infrastructures (as illustrated on the graph), France knew two main privatization policies. Before these policies, the impact of public owned firms was already much more important in France than in most countries of the world. For instance, in 1986, the proportion of the workforce represented by public owned firms was four times more important in France than in Japan and in Canada, and also superior to Germany, Sweden, Great Britain and Italy. [...]
[...] In addition, these privatisation policies also have a huge impact on the international position of the French economy; they represent a way to adapt to the liberalisation of the world exchanges. Consequently, there is no doubt that privatisation policies have a huge impact on the economy and represent a way to transform it profoundly, as the French example illustrates it. Indicative bibliography by Oboulo.com: Privatization: Successes and Failures (Initiative for Policy Dialogue) by Gérard Roland and Joseph E. Stiglitz (2008) Privatization: Financial Perspectives (Advances in Financial Economics, Volume by M. [...]
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