From 1947 onward, fundamental economic decisions were guided by planning, making it unlikely that the success of French trade after 1958 can be attributed solely to a continuous short-term policy “miracle.” The Third Plan emphasized that the allocation of investment credits, subsidies, fiscal systems, technical regulations, and the acquisition of foreign equipment should all converge toward investments capable of saving or generating foreign currency. Pre-1958 governments had already implemented export-support measures such as insurance schemes, export cards, fiscal and financial incentives, and information services from the National Foreign Trade Center. This momentum translated into organizational reforms and a mindset favorable to exports, helping explain the effectiveness of exchange liberalization policies.
At the time when the objectives of the Fifth Plan were being discussed and new short-term difficulties emerged, it was not possible to conclude that France’s external payments problem had been definitively resolved. In 1964, for the first time since 1959, the trade balance of metropolitan France turned negative, and the surplus in the balance of payments declined. The surplus of 2.7 billion francs in goods and services in 1963 dropped to 500 million in 1964. Imports increased by 15.9%, while exports grew by 10.6%. During 1965, the external balance improved not because of export growth but due to stagnating imports, itself a result of a general economic slowdown. This recession was partly linked to the stabilization plan implemented in 1963 to counter inflationary pressures. Following the inflationary growth of 1954–1958, France faced the risk of stagnation equilibrium, highlighting the difficulty of sustaining balanced growth over time.
Growth and stabilization policy
A) Inflation and the stabilization plan
In 1962, new inflationary signals appeared, with prices accelerating. The increase in the price index of gross national product reached 4% in 1962 compared to 2.8% in 1961. This trend was largely driven by rising agricultural prices following a long and harsh winter. France’s relative position did not deteriorate as sharply due to similar price increases across other European countries. Notably, this inflation did not result from excess demand relative to production capacity. Surveys conducted by INSEE indicated that, by November 1962, 70% of firms could have increased production if demand had been stronger. This was not demand-driven inflation, as seen in 1956–1957, but rather a creeping inflation transmitted through costs.
Manufacturers and retailers were able to pass rising production costs onto prices without significant resistance, aside from government controls.
1° First, consumer behavior played a role. French consumers, accustomed to inflation, tended to accept price increases as a normal process. They showed limited price sensitivity and did not systematically seek lower-cost alternatives. In 1962, the Minister of Finance cited a letter from a textile manufacturer encouraging retailers to raise prices in order to increase sales, reflecting a reversal of traditional supply and demand logic shaped by prolonged inflationary conditions. Rising living standards also contributed to reduced sensitivity to price changes.
2° The highly concentrated distribution system increased costs for the national economy, contributing to price increases.
3° Agreements, cartels, and restrictive practices reduced price competition in certain markets.
4° The interaction between wages and prices created a dynamic difficult to regulate. Mechanisms such as the minimum wage (SMIG) and collective agreements influenced wage adjustments. Salaries in more dynamic and nationalized sectors acted as benchmarks, with other sectors following their trajectory. It was generally accepted that wage increases should not outpace productivity growth in order to avoid inflationary pressures. However, disparities in development across sectors and regions complicated the application of this principle, as economic progress required a more equitable distribution of national income. These challenges led to the formulation of income policy perspectives, as outlined in the Massé report published in February 1964.