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« France must draw the conclusions from the geopolitical situation and enter a war economy “Warned, Monday, June 13, President Macron, during his trip to Eurosatory, the land armament fair, north of Paris. In economic terms, how should this solemn warning be interpreted?
This very martial declaration of the president is intended to strike the spirits and to explain, communicate on a change which, in fact, has already taken place. Like the other countries concerned by the invasion of the Russian army in Ukraine, France is adapting its economy. To deal with the real or feared shortcomings that the conflict will generate. Lack of access to cheap energy, Russian gas, for Europeans, lack of supply of Russian or Ukrainian wheat for importing countries.
The economist Keynes summed up the situation in a few words: the war economy is the transition from abundance to scarcity “. And in this perspective, the State quickly mobilizes all the economic forces of the country so that they make up for the shortcomings. The country is trying to meet its needs on its own.
The president insisted on the military needs
By delivering equipment to Ukraine, France has emptied its stocks, which were already considered too low before the start of the conflict. Given the situation in Eastern Europe, there is an urgent need to reconstitute them. We must produce shells, missiles or artillery equipment as quickly as possible. The industry is already geared up to meet this demand. But this will not be enough to cover all the needs. This is why a law should quickly be submitted to Parliament to requisition civilian materials or companies for military purposes.
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Such a law already exists in the United States to deal with these exceptional situations. According to Jacques Attali, the transition to a war economy is a question of survival. As opposed to the peacetime economy, the wartime economy is no longer focused exclusively on satisfying the desires of customers or corporate shareholders, it must be quick to respond to priorities set by the government.
Will the state spend more to finance this war economy, as it did during the pandemic?
President Macron pointed out, we can no longer live in the grammar of a year ago “. The situation is therefore not comparable to the efforts undertaken to combat the spread of Covid-19. We go from “whatever it costs” applied to the income of the French to whatever it costs applied to production, points out Jacques Attali. The war economy is often associated with printing money: central banks would be asked to turn a blind eye to inflation and over-indebtedness to deal with the urgency of the situation.
But this time it’s different. Faced with inflation, central banks intervene to try to curb it by raising interest rates. The Federal Reserve will announce by tomorrow a rise in its interest rates stronger than initially expected, the European Central Bank is on the same line. In addition, France will have to make budgetary choices, because for the moment the president has not specified whether he was going to increase the envelope dedicated to defence.
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