Social Democracy and the Capitalist Crisis: Mitterrand's New Austerity Drive IN the third week of June, barely a year after President Mitterrand had come to power and days after he had announced his blue print for recovery, at Versailles, France's Socialist Government opted out of its strategy of reflationary expansion. The event marked the unsuccessful culmination of what was undoubtedly a bold experiment at combating recession and unemployment through Keynesian deficit spending and consumer-led expansion, in a world where most capitalist countries were pursuing contractionary monetarist policies. Ever since they took office the Socialists had made the task of reducing unemployment their central objective. With this end in view, the government had resorted to a massive expansion in public spending, a 20 per cent pay rise for two million low paid workers, and an initial one hour reduction in a 40-hour working week. This reflationary package was part of an overall strategy to retrieve France from its state of crisis. The point of departure of that strategy was the view that the persistence of the crisis was not a result of the anarchy of capitalism as a system, but pursuit of incorrect monetarist policies As one of President Mitterrand's advisers is reported to have put it: "The monetarist theory that prefers breaking inflation through recession is absurd. It never worked. You can beat inflation only by productivity." In fact, 'expansion' and 'productivity' are key words in the Socialist programme. Expansionist policies were to prove non-inflationary by goading industry along productive lines. To the extent that the private sector could not be relied upon to do this, nationalisation was a weapon. This could, to start with, ensure a cut in investment abroad, which had grown at the expense of greater investment at home. Further, since it was the larger industrial groups that were to be brought under government control, one could expect that the government's share in some of the most productive industries would increase. As per plan, the state's share was to increase from nothing to 60 per cent in electronics and information processing, from zero to 75 per cent in synthetic fibres, 1 to 79 per cent in iron and steel, from 16 to 52 per cent in ba^ic chemicals and from 58 to 74 per cent in armaments. This sharp increase in the state's share in key areas was to be accompanied by massive spending on research in fields such as bio-technology, electronics and micro-chip technology, with the aim of increasing such expenditure to a total of 15 billion dollars or 2.5 per cent of