2 - From the Dirigiste State to the Social Anesthesia State

Summary

Chapter 2 analyzes the policy legacies fueling the contestation of economic liberalization. When French authorities broke with the dirigiste system in the 1980s, they deployed generous social and labor market policies to pacify and demobilize victims of the move. While this “social anesthesia” strategy, as I call it, humanized and facilitated de-dirigisation, it contributed to contestation in three ways. First, it transformed France’s liberalizing trajectory into a two-stage process – a shift from the dirigiste state to the social anesthesia state, then an overhaul of the social anesthesia state itself – fueling liberalization fatigue. Second, the high costs and labor market disruptions of the social anesthesia state partially offset the economic benefits of de-dirigisation, resulting in disappointing economic results that bolstered the sentiment that liberalization does not work. Third, the fiscal burden of the social anesthesia state limited governments’ ability to offer side-payments in return for acceptance of liberalizing reform. Chapter 2 shows how these factors combined to generate mass opposition to two labor reforms aiming to boost employment among French youths by reducing their wages and job protections. In both instances, French youths, skeptical of the benefits of uncompensated labor market liberalization, protested and forced the government to retract its reforms.