07/05/2012 18:13 BST | Updated 07/07/2012 06:12 BST

The Meaning of President Hollande

"Vous verrez, Antoine; dans quelques années ils feront comme si je n'avais jamais existé..." (You'll see, Antoine; in a few years they'll act as if I never existed...") remarks the dying President Mitterrand to his idealistic young biographer in the Robert Guédiguian film Le Promeneur du Champs de Mars.

Yet 16 years after Mitterrand's death, the ghost of the first (and, before now, only) left-wing President of the Fifth Republic looms as large as ever. Over the past weeks, as once more the spectre of a Socialist in the Elysée has haunted Europe, commentators have dredged up the radical programme introduced by Mitterrand on his 1981 election - banks nationalised, wages increased, working time slashed - and the surge in inflation, capital flight and forced capitulation to the markets that followed in 1983.

The historic election of François Hollande will give some cause to ask if the same fate will befall him. Like his antecessor, he is a product of the party machine, is proud of his modest roots and rural hinterland and brings to the office of President an assertive political vision that rebuts the prevailing economic consensus. Will he, like Mitterrand before him, have to rein back his political 'grand project'?

After all, France has seen several such visionary movements over the past 30 years. The promise of revolutionary change in 1981 was one. The optimism surrounding left-right 'cohabitation' in 1997 was another. In 2003 the likes of Jacques Derrida and Jürgen Habermas touted the prospect of a Franco-German 'Old Europe' blazing its own Kantian trail in defiance of those war-mongering free-marketeers in the UK and USA. Just years later the country rediscovered its passion for all things Anglo Saxon, as manifested in the frenetic, diminutive figure of Nicolas Sarkozy, he of the NYPD t-shirts and the call to "work more to earn more."

Yet all of these proved false dawns. For a country that loves big ideas, big projects, big strategies, the ideological shake-up precipitated by several decades of globalisation has been disorienting.

Hollande did not let that temper the optimism of his election campaign. His rhetoric has been fiery, full of promises to tackle the financial markets and grand visions of French exceptionalism; "each country has a soul", he proclaimed at a vast, superbly choreographed rally in the deprived Parisian suburb of Le Bourget, "and the soul of France is equality!"

Pledges to take on Angela Merkel, overturn Europe's deflationary austerity policies and institute a 75% wealth tax on earnings above €1 million have seen him tarred as an unreconstructed dirigiste by many, particularly in the UK. The Economist called him "rather dangerous" and "anti-business", the FT detected "an odour of interventionism", and in a letter to the Wall Street Journal, right-wing academics attributed to him the belief that "the state can manipulate an economy as a locomotive driver can move a train, by pulling a few levers."

The outgoing President Sarkozy, in a far cry from his fulsome praise for the British and American economic models in 2007 (quickly swept under the carpet once the financial crisis hit), responded to his opponent's challenge by presenting the election as a choice between his own brand of Teutonic dynamism and the alternative: Mediterranean-style crisis under Hollande. The latter hit back in a mid-campaign speech advocating a distinctly French economic strategy over craven imitation of the German model. The reporters had their narrative.

So far, so blinkered. As ever, though, a cursory flirtation with the details reveals a more complex picture. The Economist, for example, slams Hollande's planned €20 billion investment "splurge" as evidence that he will grow the state, apparently unaware that this, like all new government spending, will be 100% offset by budget cuts elsewhere (see the detailed charts under 'Les Chiffres' here for the full breakdown). But significant as it is, his commitment to stimulate the French economy and pay down the country's debts is not, nor shall it become, the 'grand projet' of Hollande's presidency. And in their feverish coverage of his immediate fiscal and diplomatic plans, international commentators have largely overlooked his longer-term vision for the French economy.

Thus it may surprise many to learn that the Socialist programme pledges to both decentralise and shrink state spending year-on-year, cut corporate taxation for companies that reinvest profits, establish both a national investment bank and an industrial savings bank devoted to SMEs, establish a 'pact of trust' binding employers, unions, banks and local authorities in a consensus-based system of co-production, lower VAT and introduce full proportional representation in time for the 2017 election.

What is more, Hollande was as good as endorsed by the national association of SMEs (CGPME), which praised his commitment to enterprise, explicitly noting the contrast to 1981. Unlike the 2007 Socialist candidate, Ségolène Royal, he met repeatedly with the national employers association (AFEP). He promises to put employees (or their representatives) on the boards of directors and supervisory boards of all companies with over 1,000 workers, and to write into the Constitution an obligation to consult all relevant social partners before a given government or private bill goes through the legislature. His manifesto also included a commitment to increase R&D spending from 2.2% of GDP to 2.5%, level with Germany (the equivalent figure for the UK is 1.7%...), and to create 150,000 jobs for young people to curb the scarring effects of economic downturn. Perhaps most powerfully, in the television debate last week he issued a series of statements beginning "Moi, président de la République" that committed to decentralising and rehabilitating the much-abused power of the French executive.

What to make of this promising programme? Presented with radical brio by a calm, affable man with a reputation for pragmatism, attacked as dangerous and old-fashioned by some, auguring Greco-Italian sclerosis or Nordic prosperity depending on whom you ask; Germanic in many ways but belligerent towards Europe's economic hegemon in others; it is a strange beast. It carries the endorsement of everyone from firebrand Jean-Luc Mélenchon on the left to François Bayrou, leader of the Democratic Movement, on the political centre. It attracts strong support from the centrist Gracques grouping, which, associated with the likes of Bayrou and Peter Mandelson, praises the commitment to Nordic-style social dialogue, but also from the left-wing panjandrums of the Terra Nova foundation.

Questions abound. Is this, then, a President who means all things to all people? Or does he have a fixed plan? 'Change' was the watchword of his campaign, but to what precisely? How to understand the broader project? On what does its success depend?

One rainy winter's afternoon a few years ago, I found myself in a large 19th century townhouse in the chic 17th arrondissement of Paris, interviewing a Gaullist city councilor about the upcoming European elections. At one point he rolled his eyes at the Socialists' idealistic, crowd-sourced manifesto, attributing the document to the left's "desire to put everything in writing." There was, and is, something in his observation.

So for a political movement so fond of tracts and programmes (especially when elaborated behind the austere, ivory cover of an édition Gallimard), it is perhaps surprising that the Parti Socialiste has never taken the long hard look in the mirror that it needed after the humiliation of 1983. Mitterrand abandoned the traditional commitment to state ownership not voluntarily, but with the markets breathing down his neck. Therefore the PS, unlike the German SPD, never had a Godesberg Programme. Unlike Labour, it never had a Clause IV moment. Its ideological aggiornamento was never formalised. Ségolène Royal's 2007 defeat to Sarkozy was a bitter but predictable blow; trapped, unreconciled, between a Marxist past and a necessarily pragmatic present, the party lacked a credible, concrete vision.

Hollande, it seems, plans to put an end to this peregrination. For my money, the set text of his presidency will prove to be Michel Albert's 1991 book Capitalisme contre Capitalisme. Written as European communism crumbled, the work accurately outlined the next struggle: one between alternative varieties of capitalism. Albert contrasted a short-termist Anglo Saxon model (correctly predicting its ultimate failings: excessive debt, banks 'too big to fail' and monopolistic vested interests) with Rhine capitalism. The latter, prevalent in Germany, the Netherlands and Scandinavia, departs from the former in favouring long-term investments, firms run as a 'community of interests' and consensus-based politics and industrial democracy. The Rhine model, Albert argued (pre-empting Will Hutton's 1995 work, The State We're In) represents a 'stakeholder' capitalism that supports strategic investments in skills, machine capital and supply chains; all highly valuable in a globalised economy.

Hollande's big project, simply put, fixes his party's doctrine by resolving France's choice. The country has long vacillated between the Anglo Saxon model (an urge best represented by Sarkozy's 2007 campaign) and the Rhine model. This election appears to settle the matter: Rhine capitalism it is.

But the transformation does not come as easily as all that. Vivien Schmidt's 2002 work The Futures of European Capitalism (for a good overview see here) refines Albert's scheme, proposing not two but three core models: British (/American) market capitalism, German managed capitalism and French state capitalism. Hollande intends to shift France from the vestiges of its traditional (already part-dismantled) state capitalism to managed capitalism. The former entails - or entailed - a monarchical, adversarial, interventionist approach. The latter entails social dialogue, proportional representation, workplace democracy, cooperative skill formation and long-term finance; with the state providing strategic direction and partnership, facilitating rather than directing enterprise. Look at Hollande's policies (see Part 1 of this argument) and you get the general idea.

So whilst the new President may reject German policies at a European level, his project centers on importing and adapting a thoroughly Teutonic, facilitating model of the state. His initiatives to nurture R&D, co-determination, patient finance and, most of all, a consensus-based partnership between business, unions, state and local government is, as the Gracques rightly note, fundamentally Nordic. The man embodies the policies: Hollande's consultative personal style evokes less the demeanour of a Mitterrand-esque God-President than that of an eminently 'normal' Scandinavian Prime Minister. It is a far cry from the dramatic, provocative behaviour of Sarkozy, not to mention the 'bling bling' trappings of what L'Express writer Frédéric Martel famously terms 'sarkozysme culturel'. As such, Hollande's challenge is as much about distributing power as it is distributing wealth. If he is to succeed in doing so, he must first change the political culture. Much is riding on his ability to build a culture of consensus. His comportment during the election campaign has given him a strong start; the next step is to project this culture as President, and to initiate the long, arduous process of decentralisation as soon as possible. Specifically, he will need to do the following:

Exemplify the case for his politics. The need to communicate the programme to the public does not stop at election day; it must go hand in hand with implementation (not least as some will have voted more against Sarkozy than for Hollande). The new President would do well to highlight the contrast in management styles. A rolling listening tour and government gatherings held outside Paris (although not, as under Sarkozy, in the Palace of Versailles) would be a good start.

• Use these personal characteristics to build a mutually supportive relationship with Angela Merkel. Success in spurring French competitiveness is dependent on increased demand, which in turn is dependent on a resurgent Eurozone. As it happens, even elements of Merkel's CDU are favourable towards expanding the European Central Bank's mandate accordingly. But as the Chancellor gears up for next year's general election, her ability to save face and placate German public opinion will be her first priority.

• Use the G8 summit in a fortnight to make common cause with President Obama, whose reelection in November would be threatened by any further European slump.

• Make a strong gesture of fiscal discipline early on to reassure the bond markets. Reassert the deficit cutting strategy by fixing the proposed year-by-year milestones for debt reduction.

• Use the 'great economic conference' pledged in the Socialist electoral programme to bring together business leaders, unions and other social partners to set a national economic strategy and establish the promised 'pact of trust' essential to consensus-based co-production.

• Capitalise on the strength and momentum of the electoral mandate to rapidly implement key supply-side policies: most notably the national investment bank, tax incentives and industrial savings bank. These are crucial to economic recovery but will require political capital to establish - and time to bed in.

All this has implications for Ed Miliband. After all, he and Hollande have much in common. Both are mild-mannered social democrats who recognise, as Schmidt argued a decade ago, that different economic models reinforce the competitive advantages of different industries; the UK's traditional market capitalism benefits a large services sector, France's traditional state capitalism befits defence and railways, Germany's managed capitalism is best at high-precision engineering and manufacturing. Both leaders recognise that the last of these specialisms is a particularly powerful, stable engine of growth and social cohesion in the new global economy.

There are, of course, differences. While both leaders seek to recreate the strengths of Germany's 'managed capitalism', Hollande's key challenges are to reform highly top-down political institutions and nurture co-operative economic networks in a country with little tradition of this, all whilst managing high levels of exposure to events in Southern Europe. Miliband's, meanwhile, are to revive the Labour Party's co-operative tradition, tackle a chronic lack of long-term investment and nurture new industries to rebalance the economy.

These differences notwithstanding, Hollande's premiership will offer Labour a glimpse of the challenges it faces; a fascinating study in how (and - who knows? - maybe how not) to shift an economy towards an alternative model of capitalism. In short: watch this space.

This article is a revised version of two posts first published on Shifting Grounds (