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Dirigisme (French:[diʁiʒism]), ordirigism (from French diriger 'to direct'), refers to an economic system in which thestate takes an active and directive role in shaping and guiding the economy, rather than limiting itself to a purelyregulatory or hands-off approach within amarket economy. As an economic doctrine,dirigisme stands in contrast tolaissez-faire, highlighting the constructive role ofmarket intervention in addressing inefficiencies andmarket failures.Dirigiste policies typically includeindicative planning, state-guided investment, and the strategic use of market instruments such as taxes and subsidies to encourage economic actors to align with national development goals.[1] Dirigisme is not synonymous with astate-controlled command economy but market economy and big public sector is required for dirigisme hence public sector becomes an instrument for altering the market.
The term emerged in thepost–World War II era to describe the economic policies ofFrance which included substantial state-directed investment, the use of indicativeeconomic planning to supplement themarket mechanism and the establishment ofstate enterprises in strategic domestic sectors. It coincided with both the period of substantialeconomic anddemographic growth, known as theTrente Glorieuses which followed the war, and the slowdown beginning with the1973 oil crisis.
The term has subsequently been used to classify other economies that pursued similar policies, such asJapan, theEast Asian tiger economies ofHong Kong,Singapore,South Korea andTaiwan; theeconomy ofChina after itseconomic reforms,[2]Indonesia[3][4] andIndia after theopening of its economy in 1991.[5][6][7] Outcomes associated withdirigisme differ across these cases, with some economies achieving sustained growth and structural transformation, while others recorded more limited or uneven results.Dirigisme is not strictly tied to any single political ideology or philosophy, as variations of dirigiste policy have been implemented under both left and right leaning governments.
According to the heterodox economistMariana Mazzucato, most modern economies of the world can be characterized asdirigiste to some degree as the state may exercise directive action by performing or subsidizing research and development of new technologies through government procurement (especiallymilitary) or through state-run research institutes.[8]
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Before theSecond World War, France had a relatively fragmentedcapitalist economic system. The many small companies, often family-owned, were often not dynamic and efficient[citation needed] in comparison to the large industrial groups inGermany or theUnited States. The Second World War laid waste to France. Railroads and industries were destroyed by aerialbombardment andsabotage; industries were seized by Nazi Germany; in the immediate postwar years loomed the spectre of long years ofrationing (such as the system enforced in that period in theUnited Kingdom). Some sections of the French business and political world lost authority aftercollaborating with the German occupiers.
Post-war French governments, from whichever political side, generally sought rational, efficient economic development, with the long-term goal of matching the highly developed and technologically advanced economy of theUnited States. The development of Frenchdirigisme coincided with the development ofmeritocratictechnocracy: theÉcole Nationale d'Administration supplied the state with high-level administrators, while leadership positions in industry were staffed withCorps of Mines state engineers and other personnel trained at theÉcole Polytechnique.
During the 1945–1975 period, France experienced unprecedentedeconomic growth (5.1% on average) and ademographic boom, leading to the coinage of the termTrente Glorieuses (the "Glorious Thirty [years]").
Dirigisme flourished under the conservative governments ofCharles de Gaulle andGeorges Pompidou. In those times, the policy was viewed as a middle way between the American policy of little state involvement and the Soviet policy of total state control. In 1981,Socialist presidentFrançois Mitterrand was elected, promising greaterstate enterprise in the economy; his government soonnationalised industries and banks. However, in 1983 the initial bad economic results forced the government to renouncedirigisme and start the era ofrigueur ("rigour"). This was primarily due to the Inflation of the FrenchFranc and theKeynesian policies taken byFrançois Mitterrand.Dirigisme has remained out of favour with subsequent governments, though some of its traits remain.
The main French tool underdirigisme wasindicative planning through plans designed by theCommissariat général du plan ("Commission for the Plan"). Indicative planning used various incentives to induce public and private actors to behave in an optimal fashion, with the plan serving as a general guideline for optimal investment. During this period France never ceased to be a capitalist economy directed by theaccumulation of capital, profit-maximizing enterprise andmarket-based allocation of producer goods.
In contrast toSoviet-type central planning practiced in the formerSoviet bloc, where economic planning substituted privateprofit incentivized investment and operated the factors of production according to a binding plan, the French state never owned more than a minority of industry and did not seek to replace private profit with central planning. The idea ofdirigisme is to complement and improve the efficiency of the market through indirect planning intended to provide better information to market participants. This concept is held in contrast to a planned economy, which aims to replace market-based allocation of production and investment with a binding plan of production expressed in units of physical quantities.
Because French industry prior to the Second World War was weak due to fragmentation, the French government encouraged mergers and the formation of "national champions": large industry groups backed by the state.
Two areas where the French government sought greater control were ininfrastructure and the transportation system. The French government owned the national railway companySNCF, the national electricity utilityEDF, the national natural gas utilityGDF, the national airlineAir France;phone andpostal services were operated as thePTT administration. The government chose to devolve the construction of mostautoroutes (freeways) to semi-private companies rather than to administer them itself. Other areas where the French government directly intervened were defence, nuclear and aerospace industries (Aérospatiale).
This development was marked byvolontarisme, the belief that difficulties (e.g. postwar devastation, lack of natural resources) could be overcome through willpower and ingenuity. For instance, following the1973 energy crisis, the saying "In France we don't have oil, but we have ideas" was coined. Volontarisme emphasizedmodernization, resulting in a variety of ambitious state plans. Examples of this trend include the extensive use ofnuclear energy (close to 80% of French electrical consumption), theMinitel, an early online system for the masses, and theTGV, ahigh-speed rail network.
Soviet-type economic planning is seen inIndia after the end ofBritish rule from 1947 with domestic policy tending towards protectionism, a strong emphasis onimport substitution industrialisation,economic interventionism,business regulation andcentral planning,[9] trade, and a large government-runpublic sector. Foreign investment policies were highly restricted via theLicence Raj.[10] However, in regard to trade and foreign investment, other authors disagree stating that high tariff barriers were maintained, with import duties of 350% not being uncommon,[11] and there was also severe restrictions on the entry of foreign goods, capital, and technology.[11] Although a mixed economy, the share of investment in public sector enterprises was 60%.[12] India's economic policies during this period were more akin toSoviet economic planning rather than the Frenchdirigisme model.[12] Socialist economic planning was especially prevalent in form of thePlanning Commission andFive-Year plans.[13][14]
Afterliberalisation in 1991, India shifted from a plannedsocialist to marketdirigisme economy.[15][16] The Indian state has complete control and ownership ofrailways,highways; majority control and stake inbanking,[17]insurance,[18]farming,[19]dairy, fertilizers & chemicals,[20]airports,[21]nuclear, mining,digitization,defense,steel, rare earths, water, electricity, oil and gas industries and power plants,[22] and has substantial control overdigitalization,Broadband as national infrastructure,telecommunication,supercomputing,space,port and shipping industries,[23] among other industries, were effectively nationalised in the mid-1950s.[24][13][14] In essence, the Indian Government has indirect control on all sectors except technology and consumer goods.
Economicdirigisme has been described as an inherent aspect offascist economies by Hungarian authorIván T. Berend in his bookAn Economic History of Twentieth-Century Europe.[25] However, the fascist systems created inItaly,Portugal,Spain,Japan, orGermany were a varied mix of elements from numerous philosophies, includingnationalism,authoritarianism,militarism,corporatism,collectivism,totalitarianism, andanti-communism.[26]
Dirigisme has been brought up as a politico-economic scheme at odds withlaissez-faire capitalism in the context of French overseas holdings. To varying degrees throughout the post-colonial period, countries such as Lebanon and Syria have been influenced by this motif.[27]
