Public Investment and Industrial Policy in France

This chapter first traces the long-term evolution of public investment in France, noting how this is mostly channelled through local governments and how, while comparatively high with respect to other advanced economies, the public capital stock and the general government net wealth have been steadily decreasing since the Global Financial Crisis of 2008. After the COVID-19 shock, despite the 2021 "Plan de Relance" and the 2022 "Build the France of 2030" program, public investment has remained surprisingly flat. The chapter then discusses the recent evolutions in French industrial policy objectives. The Lisbon Strategy was centred on boosting productivity through innovation and climbing the value added ladder. The response to the crisis of 2008 marks a first change, with a strong emphasis on price competitiveness and cost reduction (including through corporate tax reduction). Since the early days of the pandemics, then, the notion of "industrial sovereignty" has very quickly eclipsed that of competitiveness, with policies aimed at reindustrialization especially in strategic sectors. The chapter concludes that these frequent changes indicate an excessive short-term focus among French policy makers, incompatible with managing long-term structural transformation.