The problem with France’s rediscovered dirigisme

The problem with the French government’s nationalization threat is only the timidity of this rediscovered dirigisme

The Socialist government is threatening to nationalise a €400m (£323m) steel plant in eastern France, unless the Indian-born billionaire Lakshmi Mittal agrees to sell it to a private buyer. Mittal’s company, ArcelorMittal, the world’s biggest steel-maker, wants to close or sell two blast-furnaces at Florange in Lorraine but to hold on to other profitable activities at the site. France insists that the whole complex must remain open under a single owner, or the blast furnaces won’t find a buyer and hundreds of high skilled jobs will go.

The nationalisation plan comes amid tense relations between the French government and Britain’s richest man. French Industry minister, Arnaud Montebourg, said earlier this week that Mittal was “no longer welcome” in France. He later backtracked somewhat after being reminded that the company employs 20,000 people in 100 odd sites around the country. But Montebourg remained critical of “Mittal’s methods” and referring to pledges on investment and production, talked of his “broken promises, blackmail and threats.”

Employers’ lobby Medef is screaming that an “expropriation” of ArcelorMittal would be “an attack on private property”. The plan is not only a throw-back to the 1970s, it is revolutionary, the London Mayor Boris Johnson has claimed.

Yet after the bank nationalisations carried out in a number of western counties since the 2008 financial crisis, the idea of state intervention and ownership shouldn’t shock anyone. And what applies to finance ought to apply to other sectors, including manufacturing, which is now facing a real crisis in France, as elsewhere in Europe (bar Germany).

Paris has received support for its plans from across the political spectrum. This is an about turn from only a few months ago when right-wingers and many in the Socialist party, including  Montebourg himself, were opposed to the idea. But following continued campaigning by unions and the rising threat to France’s industrial base, there is now broad agreement that the government has central a role to stop it.

But if this state activism is a huge step forward from the laissez faire approach typified in Britain since the days of Margaret Thatcher, and the privatization binge that followed elsewhere, it has huge limits. The proposed nationalisation is “temporary” – a compulsory purchase to allow the site to be re-sold to a private buyer – and there’s no industrial plan underpinning it. It will leave the new owner facing the same problems as ArcelorMittal, and sooner or later it will react in the same slash and burn manner.

The European market for steel has decreased by almost 25% in five years, mainly because of the drop in activity in its two main markets: construction and automotive.

At Florange, in addition to its two blast furnaces, there is a cold steel processing line, which produces sheet for the automotive industry. Even accounting for customers in Germany, where the automotive industry is still doing pretty well, the plant has seen its market shrink to the point that for many months, the blast furnaces Florange have been dormant.

With prospects not improving, ArcelorMittal, as a rational capitalist, decided to close them, as it has done for other facilities in Liege or Madrid. The heavily indebted group has decided to focus on offering the most cost effective equipment and close the other, hoping, by reducing the supply of steel on the European market, to raise prices and so profitability.

The group intends to maintain the ‘downstream’ activities of the plant, which manufactures the plates, using steel produced in its plant in Dunkirk, where costs are lower.

Mittal knows that the blast furnaces alone won’t find a buyer because they have will not have the ready markets (including the activities Mittal wants to maintain ownership over) But if the government gets its way, he argues, the Dunkirk plant will lose some of its customers (the plants that used the raw steel, which are to be wrapped up in the sale of Florange). And since thousands of French jobs depend on them, he’s got a point.

In a context where, thanks to simultaneous austerity programmes across the Continent, there is a lack of demand for raw steel, whoever owns the plant, and however the final deal comes out, jobs are on the line. Longer term, and assuming growth returns, this demand may come back, but in the meanwhile the French state, if it gets its way, may simply be creating a competitor to Mittal’s Arcelor (and its French employees), and other steelmakers in the region, in what will be a dog eat dog struggle for survival.

There could be a different way. The nationalisation threat could be designed to force ArcelorMittal’s management to implement an industrial ‘conversion’ plan to think creatively about developing new products and markets, and so offer a more promising future for employees.

This is precisely what is needed in neighbouring Italy, where privately owned steelmaker Ilva, an environmental disaster, is on life support with the government (after much union pressure, including widespread strikes) stepping in to stop closure and the loss of up to 20,000 jobs. Similarly to Paris, Rome has no long term plan as to the future of steel and the kind of manufacturing industry it should sustain.

Of course, even when armed with such a vision, capitalists may not play ball with government, or demand in return state incentives that politicians won’t be able to justify, as public funds end up lining the pockets of large shareholders and millionaire top executives.

So in France and elsewhere the question of nationalisation as a permanent feature of the manufacturing sector is raised.

Some in France have already thought about this. It is called ‘ecological’ conversion or planning, and was championed by the radical Left Front and Jean Luc Melenchon during the Presidential election earlier this year.

Now growing in popularity among France’s trade unions battling to defend industry jobs, this would see steel and connected industries from energy companies to shipbuilders and car manufacturers brought back into public ownership to guarantee jobs and a future for manufacturing and the skills base that makes any nation wealthy. And it would fast track the greening the economy, emphasizing public over private goods and consumption.

How would this be financed? Isn’t France in financial straits?

The answer can be found in figures published in a ‘counter-budget’ launched earlier this month by Melenchon’s Left Party (partner of the French Communist Party in the Left Front), which showed around €100 billion could be raised annually by a fairer approach to tax alone – suppressing tax give-aways and loopholes, tackling evasion and avoidance, and imposing a permanent, more comprehensive wealth tax that France’s super-rich can well afford.

Such a radical approach still only has minority support, and will have to be fought for, including against the standard-bearers of the neo-liberal agenda in Brussels and Frankfurt. But Paris’ more muscular attitude to the rich (after its 75% tax on incomes over 1 million euros) and now with corporations – a result of union and Left Front pressure – shows an important shift has already taken place. Amid all the gloom, the door is ajar to genuine hope and progress for millions of ordinary people. And a concerted collective push might just take France – and Europe – over the threshold.