The Good Life Returns

Confronted with Paris' stiff prices, many a visiting American has wondered how the French manage to live at all well on their monthly salaries, which average far below U.S. scales. The answer is that Frenchmen do not get by on their salaries alone. Thanks to an elaborate system of vacation bonuses, workers receive up to 14 months' pay a year. Fringe benefits--from subsidized lunches to company-paid housing--are far more generous than those in the U.S. or Britain. Today Frenchmen are more than ever enjoying the good life, evident in the brisk trade of big department stores and even such luxury shops in Paris as Hermes and Chez Franck. Workers' purchasing power went up by 5% last year, and private consumption rose more than in any other Western country.

The relative prosperity is testimony to an economic turnaround. Only 17 months ago, France was beset by inflation; it arose from the student-worker riots of 1968, after which a 15% wage increase was necessary to restore tranquillity. The danger of a runaway price-wage spiral and loss of confidence in the economy seemed so acute that Finance Minister Valery Giscard d'Estaing brought out every modern anti-inflationary weapon: a devaluation of the franc, tight credit controls, the highest interest rates in Europe, a temporary price freeze and a strict limit on wage increases.

Arms and the Exporter. The austerity measures were startlingly effective. Since devaluation, the franc has become one of Europe's solidest currencies. The gross national product grew by 6.2% last year, to $126 billion, while prices rose only 5.2%. Leading companies threw their energies into exports, which increased 21%. Arms exports boomed. In 1970, France sold $1.3 billion worth of military aircraft, submarines, helicopters and other equipment to 26 countries. France ranks second only to the U.S., which expects to sell $1.9 billion worth of armaments abroad in the fiscal year ending June 30.

By last month Giscard d'Estaing was able to announce that "the readjustment has ended." The measures have worked quickly because France is a prosperous country with considerable powers of recovery. Giscard d'Estaing told TIME'S Roland Flamini last week: "France goes through events, through wars, through student riots, and these events can be very dangerous and disruptive. But as soon as the clouds fade away, we go back to normalcy."

The recovery has been sped along by changes in the structure of industry. As Giscard d'Estaing put it, "We had an industry that was in the hands of an old establishment of bourgeois people, rather respectable, rather inefficient, reluctant to change. Since our entry into the Common Market, this has been entirely changed. The people are not the same; the old ones have faded away, disappeared."

French firms have been reorganizing and putting great stress on le management by skilled professionals. Business courses are spreading in universities, and some of the hallowed grandes ecoles, the elite schools that turn out the country's top politicians and scientists, are opening their doors to students of management and marketing. Many important board rooms are still dominated by omnipotent patrons like Plane Maker Marcel Dassault, 83. But Marcel Boussac, 82, recently turned over control of his $100 million textile empire to a professional management team.

Management has also been sharpened by a burst of government-encouraged mergers. Last year 170 small-and medium-sized companies were brought together in the merger of two industrial complexes: Saint-Gobain and Pont-a-Mousson. Two companies now account for two-thirds of France's crude-steel production. Moet et Chandon, the champagne producer, and Hennessy, a major cognac producer, have decided to mix it up together. This month the two leading Dijon mustard manufacturers joined with the Poulain chocolate company --after the government vetoed a takeover of the mustard companies by Heinz.

Shopping List. Giscard d'Estaing predicts that the economy will grow by 5.7% this year, despite a slowdown in production and slight rise in unemployment toward the end of 1970. Whether stable growth can continue depends in large part on French workers. Union leaders in nationalized industries have readied a long shopping list for contract negotiations, including a shorter work week and a lower retirement age. Two weeks ago, the government signed a contract with state railway workers for a 6% wage increase and additional raises if inflation should exceed 4%. The contract should set the pace for pacts in other nationalized industries.

The fact that the settlement was accomplished without one of the bitter strikes that have so often derailed the economy is an indication of the businesslike new mood of France. As

Giscard d'Estaing put it last week, "the unions in Germany are able to ask for 15% or 17% increases, and in Italy 18%. In France, they don't; they say 8.5%, and we say 7.2%. But they do not move to absurd limits. As soon as you realize that, and you try to keep the French economy on the right path, it becomes probably less difficult than in other countries."

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