How Socialists hope to stay put in France by bolstering business

French voters are being entertained by something of an oddity: a Socialist government competing with the opposition conservative parties to please business. When the Socialist-Communist coalition came to power in 1981, it nationalized the rest of the private banking industry and some 11 major industrial corporations, raised taxes, strengthened the legal position of trade unions, enforced consultation between employees and management, added to regulation, cut an hour off the workweek, and otherwise offended private enterprise.

Now, with the Communists parted from the government, the Socialists are sounding more and more like capitalists.

``In France,'' said Emanuel Davril, a Socialist Party spokesman, ``the state has played the entrepreneurial role. The individual has been too timid. We must change that. We have to encourage risk taking. We want to see new enterprises created.''

In the meantime, the opposition parties have also moved somewhat further right in economic terms. Speaking of the latest platform of the neo-Gaullist Rassemblement Pour la R'epublique (Republican Party), University of Paris economist Pascal Salin commented: ``It would have been incredible five years ago to have a program as liberal [conservative or free enterprise-oriented, in European terminology] as this. There is a different intellectual climate.''

France's conservative and middle-ground parties, such as the Republican Party and former President Giscard d'Estaing's Union Pour la D'emocratie Franaise, have always been more dirigiste than, say, the Christian Democrats in West Germany. That is, French conservative governments have steered and regulated business far more than their party labels would indicate, following a tradition that goes back centuries through the times of French royalty and of Napoleon.

Prime Minister Raymond Barre, under President Giscard d'Estaing, managed to move France in the direction of a less controlled economy, abolishing price controls and removing most foreign-exchange controls. But the Socialist government reintroduced both when their original economic program went awry; more recently it has been moving toward liberalization.

``We are trying to do it not so brutally,'' said an 'Elys'ee Palace economist, noting that 70 percent of all prices are free of government controls.

Jacques Chirac's Republican Party is now advocating denationalization of not only the banks and enterprises nationalized by the Socialists in 1981, but of all state-owned banks. That would include the largest three banks nationalized after World War II.

``Nationalizations are no more popular in France,'' noted Alain Jupp'e, an economic adviser to Mr. Chirac.

The Republicans might also denationalize Renault, the state-owned auto company, a major advertising agency, and a few large insurance companies. ``We think it is possible,'' said Mr. Jupp'e, although noting that the denationalization process might take five or six years.

``We have a lot of entrepreneurs in France,'' he continued. ``But they are under too much state control. We want to give them more freedom.''

Whether Chirac would actually prove so free enterprise-oriented if he won the presidency in 1988 remains a question. ``I would be surprised,'' said J. Paul Horne, the Paris-based economist of Smith Barney, Harris Upham & Co., an American brokerage. ``He was always the most dirigiste of all.''

Mr. Barre has been more cautious than the Republican Party, talking only of undoing the recent nationalizations of the Socialists. Professor Salin finds the conservative parties are putting ``some brakes on liberalism.''

The Socialist government itself can hardly advocate undoing its own work so soon. In the past 18 months, however, it has sold about $1.1 billion of nonvoting shares in its nationalized industries. The paper, called titres participatifs, is a type of quasi-debt with a guaranteed return linked to long-term French government bond rates, plus a kicker based on the company's net income growth, sales gains, or cash flow.

Last month, President Franois Mitterrand took this initiative somewhat further by letting Soci'et'e G'en'erale, a long-nationalized bank, issue investment certificates which, instead of a guaranteed return, gave the investors a 9 percent ownership stake in return for about $65 million. The bank needed fresh capital, and the government had no money of its own to provide. But these certificates, too, have no voting rights, appeasing left-wingers in the Socialist Party.

More important, the government has moved to modernize and consolidate the nationalized industrial companies, trying to reduce losses. It promises to cut corporate taxes this year. ``We realized French industry wasn't ready to compete,'' said the Socialist Party's Mr. Davril.

Last September, Mr. Mitterrand appointed his pragmatic, market-oriented industry minister, Laurent Fabius, as prime minister, replacing Pierre Mauroy, considered more of a Socialist ideologue.

The Socialists emphasize that they are trying to slim down the nationalized companies' work forces in a humane way. ``We recognize there is featherbedding in heavy industries,'' said Davril. ``But we need humane solutions. We must help workers to be retrained. I'm afraid the opposition would do the restructuring more brutally.''

Nonetheless, the government has given nationalized companies permission to lay off thousands of workers. ``They have bitten the bullet,'' said Mr. Horne. ``But they have not done as much as they should.'' The Socialists fear the political consequences of rising unemployment among many party faithful.

Horne noted that some of the state-owned companies have been restructured to eliminate ``needless overlapping and fighting.'' The companies ``are better organized than they were.''

The Socialist government also permitted a major private industrial engineering company, Creusot-Loire, to go bankrupt and be liquidated, even though this meant a sizable loss of jobs. Only recently, the government statistical institute predicted French industry will lose 4,000 jobs a week in the first half of this year as companies cut back on labor to increase efficiency.

Mitterrand's government has also attempted to stimulate small business and venture capital. The nationalized banks have set up venture-capital funds. Indeed, the Socialist move to the middle, combined with rising business profits and modest economic recovery, has prompted handsome price gains in the stock market.

The Republican Party's Mr. Jupp'e says: ``I don't think the Socialist Party can improve the situation before 1986 [parliamentary elections]. They lack the trust and confidence of business. Capital investment is flat. Unemployment will keep on increasing for two years. I don't see how Mitterrand can win.''

At the 'Elys'ee Palace, an economist talked of continuing the policy of economic restraint to keep inflation down and the balance of payments in order. But, he said, the government would not let unemployment ``go out of sight.'' He talked of giving tax breaks to construction, increasing job training, and expanding public works programs to help provide work. ``France has the worst demographic position in Europe,'' he lamented.

Moreover, he sees ``the beginning'' of a better economic trend. At the moment, that offers the Socialists only faint hope of victory in next year's parliamentary elections.