MITTERRAND'S NEW AUSTERITY DRIVE 41 GNP. [n practice, this attempt to make a break for technological superiority dovetailed with the policy of nationalisation, since the large firms that were to be taken over dominated areas like electronics-And if successful, the strategy could make France an European Japan with a socialist face. Despite the vision that it implied, there rcrmiincd two major obstacles to the strategy. Firstly, even within the country a lot depended on the private sector that controlled a significant chunk of the economic activity in the agricultural and industrial sectors: Nationalisation was no doubt a positive step forward, but to the extent that it was partial and related to the objective of raising productivity, it left the fundamental operation of the system to be determined by the anarchy of market forces. Though efforts are being made to restore the dirigiste system of planning that had collapsed under President Giscard D'Estaing, the fact remains that indicative planning is by no means equivalent to the domination of the planning principle. The net result was that a significant section of French industry, which has been experiencing a recession since the mid-1970's, has not responded to the social democratic message. Since there has been no overall recovery that could have expanded existing markets and generated new ones, investment in the private sector which declined by 7 per cent in 1981 is not expected to fall any less this year. As a consequence, unit labour costs in manufacturing in France and West Germany (France's major trading partner) have widened over time. In 1980 and 1981 while unit costs increased by 25 per cent in the French manufacturing industry, the comparable figure for West Germany stood at 12.3 per cent. The second (though related) problem faced by the socialist programme stems from the fact that, while it opts to remain within the capitalist system, it simultaneously goes against the severely contractionary spirit that prevails in the other crisis-ridden capitalist countries. Most of these countries are, in fact, attempting to reduce the impact of the crisis that plagues them by protecting their own markets and, through contractionary policies and high interest rates, their balance of payments, while pursuing a more aggressive strategy abroad. In this atmosphere of intensified inter-imperialist rivalry, the expansionary strategy being pursued by France provides its competitors the opportunity to score without having to make any moves. And that precisely has been the experience. The massive expansion in public expenditure undertaken by the new government reflected itself in a burgeoning fiscal deficit that stood at 81 billion francs in 1981, as compared to the conservative 29.5 billion francs accepted by the previous regime. Starting with this huge deficit, public expenditure rose by 21 per cent in 1982, implying a deficit forecast of 95 billion francs, which was expected to reach 120 billion francs (about 4.5 per cent of GNP) in 1983. Together with the