When Francois Mitterrand, Europe's foremost socialist, welcomes Ronald Reagan and other guests to the splendor of the Hall of Mirrors at Versailles, the irony will be compounded. French socialists sometimes defend their collectivism by noting that the French government has performed entrepreneurial functions since Louis XIV.

Germany's socialist party is socialist more in pedigree than in program. Leaders of Italy's and Spain's socialist parties say their nations' public sectors already are too large. But when asked to cite one model of successful socialism Mitterrand bobs and weaves, and other socialists stress their continuity with the Sun King.

Mitterrand has nationalized the banks and the nine largest industrial groups, encompassing even more than what British socialists call the "commanding heights" of the economy. Granted, France already had considerable nationalization: Renault, Air France and the domestic airline, aircraft and engine manufacturing groups, a huge oil firm, the railways, coal mining, electricity and gas. Seventy percent of the banking system has been nationalized since the 1940s. But now the state's share of the competitive industrial sector has doubled, to more than 30 percent.

State-owned companies will soon employ 23 percent of the work force. By some measures, there is more nationalization in Austria and parts of Scandinavia. But capital allocation is the key to capitalism, so the crucial statistic is that the French government controls 85 percent of all credit-granting institutions. French industry is extraordinarily dependent on the banking system, which provides more than 70 percent of all borrowing.

Having paid lip service to the "fundamental liberty" of bankers (in which case, why nationalize them?), the government has now ordered the banks to lend more than $1 billion to nationalized industries. That is, you may say, France's problem. But politically determined credit is a subsidy, a form of protection that subverts free trade. That makes it other people's problem, too.

Socialists argue that directed investment is necessary because the United States is currently unable or unwilling to play its assigned role as "locomotive" of the world economy. Because the U.S. economy will not pull French socialism to success, French industry will be used to pull up the level of French demand. What is apt to go down is the value of the franc, as inflation--already at 14 percent--rises.

The French are Europe's most temperamentally traditional and viscerally conservative people. They are especially bourgeois in their regard for property ownership. Yet they seem remarkably unbothered by the socialist program. Perhaps this is because the French people do not "own" French industry.

One of every seven Americans is a shareholder; one of every 12 Germans and Japanese is. But in France, as in Britain (where socialists still believe in nationalization), only one in 23 citizens is a shareholder. Paul Fabra, economic columnist for Le Monde, says: "To the extent that economic growth does not any longer mainly depend on savers investing in equity capital, the whole system is bound to lose its legitimacy."

The French frequently regard themselves as the principal source of bright idealism in a dimly lit world. But as a former minister, Alain Peyrefitte, says in his book "The Trouble with France," the French may be "more ungovernable than any other people, holding the world's record for insurrections, failed regimes, for civil strife." They are in love with authority, yet invariably disappointed by it. The history of the French left is of extravagant dreams emphatically dashed. Twice in 22 years--in 1848 and 1870-- there was class violence more vicious than anything Britain experienced during industrialization and urbanization.

The sophomoric turmoil of May 1968 kindled in the left an unsatisified longing for "change." Today, as always, French socialism, unlike German social democracy, seeks cultural transformation as well as material amelioration. The hegemony of the left over French culture is notorious. A majority of the socialist deputies are secondary school teachers, a traditional source of radicalism fueled (as intellectuals' radicalism often is) by status anxieties.

As a sign that France is, in Mitterrand's words, "breaking with capitalism," French television has gone through a phase of showing fewer American films, and there has been impenetrable talk about cleansing radio of "imperialist music." There now is a Ministry of Free Time, presumably to help the French use leisure virtuously, and advisers have been appointed to museums to ensure that exhibits do justice to "working class culture." But socialism has--so far--deferred to a defining French institution: first-class compartments on the Paris metro.