The Persistent Failure of French Democratic Socialism
Abstract
The attempt to implement democratic socialism in France following Francois Mitterrand’s election in 1981 is directly responsible for France’s economic underperformance since. This paper uses the synthetic control method to assess the causal effects of Mitterrand’s election. By 1996 France would have been around 26% richer than if Mitterrand had not been elected. Investment and the labor supply fell substantially while government consumption increased relative to our synthetic counterfactual. These effects are persistent. On the other hand, there is little evidence that Mitterrand’s election caused an increase in the average tax rate or inflation. We speculate that the persistence of the negative effects of democratic socialist policies is due to the industrial organization of rent-seeking in France. Rent-seeking in France is centralized and relatively anti-competitive. This implies that the interests of the administrative State take precedence over that of private actors, that incumbents rent-seekers face less competition, and that bad policies tend to persist for longer.