The Return of the State? French Economic Policy under Nicolas Sarkozy

France would seem to be a prime candidate for a vigorous state response to the economic crisis. The country has a long tradition of dirigiste or state-led economic development and its President, Nicolas Sarkozy has been an outspoken critic of laissez-faire capitalism and proponent of more robust regulation. Following the 2008 financial meltdown, the Sarkozy administration announced a series of statist initiatives, ranging from fiscal stimulus, to industrial policy, to financial and economic regulation. Yet this paper will show that the reality of France's response to the crisis has fallen well short of the statist rhetoric. The government has committed few additional resources, displayed little inclination to steer business strategies, and balked at issuing regulations in the absence of pan-European coordination. This paper argues that Sarkozy's neo-statist initiatives have been largely checked by the legacies of shifts in French economic policy a quarter-century ago. In particular, the break with the dirigiste model in 1983 has deprived French authorities of many of the institutions and instruments associated with state-led development, while the massive expansion of social and labor market programs that eased the movement away from dirigisme has left the government without the fiscal capacity to launch expensive new promotional policies. The broader lesson is that a country's response to crisis is shaped by long-term structural factors, not just short-term political calculations, and that even when neo-liberalism is widely believed to have failed, a statist response must be forged, not simply presumed