France looks the other way

Tall and eloquent, Dominique de Villepin looked every bit the Gaullist Prime Minister a couple of days ago as he hailed the Gallic "can-do" spirit and sang the praises of France's industrial might. He was dazzled, he said, by the "determination of France to move forward". An observer might have imagined that the Prime Minister and part-time poet was celebrating some new triumph, but the news was bleak. Unemployment, France's millstone for two decades, had risen again and Paris was under fire for trying to prevent foreigners taking over French companies, which M de Villepin calls "economic patriotism".

The Prime Minister was performing an exercise that has become standard of late for the French governing class: magical thinking.  This wishing away of reality has become the norm as Gallic morale has slumped under the blows of a world in which France's exasperating historic rivals, les Anglo-Saxons, seem to have all the answers.

From the loss of  the 2012 Olympics to London to the collapse in riots of the French model of integration last autumn, barely a day goes by without some supposed lesson in American-British superiority in the globalising world. Over the past month or two, education has become the latest field for tweaking Gallic sensitivities.  American higher education and academic research is being held up as a model alongside France's underfunded and overcrowded universities. Nicolas Sarkozy, would-be president and the most reformist of President Chirac's cabinet, has just stirred the ire of the teaching world with a scheme for performance-based reform to secondary schools that could have come from Tony Blair. 

Then there is justice. After a gross mishandling of a big paedophile prosecution, a clamour has now arisen for France to ditch its Napoleonic criminal code and replace it with the Anglo-American trial system. Last week, taboos over privacy were abandoned as the government adopted an American system for alerting the public immediately when a child is believed to have been abducted. On the broader front, the American cultural bandwagon rumbles on with its Google, i-Pods, Hollywood hits and the all-conquering Da Vinci Code. The Americans are even teaching France how to make wine, imposing a New World taste that is being imitated by impoverished Gallic vineyards.

So, unable to beat the Anglo-Saxons, but unwilling to join them, Chirac's government and the Socialist opposition have defaulted to good old  nationalism, also known as le modèle français. France, according to them, can restore growth and grandeur not by adopting the "liberal" methods of the deregulated world, but reverting to aggressive intervention and protection by a paternalist state.

The approach may fly in the face of the experience of two decades of French relative decline, but politicians believe that the voters want it. Proof was the rejection last May of the European Constitution, a text widely deemed to be a plot by Britain and its allies to kill the French system and open the frontiers to Polish plumbers. French students are busy proving their attachment to the system this month with furious demonstrations against a scheme by M de Villepin to curb Europe's highest rate of youth unemployment. They do not like his two-year "First Job Contracts" because they do not guarantee permanent employment. In another glimpse of this mood, a recent poll showed civil servant to be the most desired job for French under 25s

The new nationalism was reflected when Chirac said that capitalism was as evil as communism. It can be seen in the Socialists' drift to the left ahead of next year's presidential elections. It also explains Sarkozy's retreat this year from his campaign for a "rupture" with the French statist model.

The enemy of both political camps are what M de Villepin calls "the declinologists". These are the experts who for the past three years have fuelling the sense of doom by diagnosing the malaise and talking up the Anglo-Saxons. Their books do well because France feels that it has been caught out by the ascendancy of the "liberal" world since 1973, according Marcel Gauchet, editor of Le Debat review. "We now have the impression that we are a country condemned by history," he told Le Monde.

A common declinist theme holds that because France's slide has been gradual, it has not yet generated the kind of crisis that prompted Britain to vote for Margaret Thatcher's revolution in 1979.
A harsher view has been voiced in a new book by Pierre Lellouche, a maverick Gaullist MP who once served as Chirac's diplomatic adviser. France is living in the dreamland of Amélie , the heroine of the hit film, Lellouche writes in Illusions Gauloises (Grasset). "Our 'system' is well and truly on its last legs," he says. French politicians are denying reality by all evils on "the three Bs -- Blair, Bush and (Jose Manuel) Barroso", President of the EU Commission.  "France is saying 'no' to the Anglo-Saxon model but it is jealous of its dynamism and envies its full employment," he says. 
    "But let us be fair: If the French political class can get away with lying to the French about the reality of the country... it is because the French want it that way."

Comments

[Paul Whitfield]

The French are right to want to preserve themselves from drowning in a sea of mid-Atlantic culture. Unfortunately, they do not realise that to do so, it is necessary to be economically strong: literally, to be able to afford it, like any other luxury. The things that prevent this are: a self-protective governing class (what a concept in the country of Egality!); membership of the Euro, which denies power to exporters; and cowardly politicians who are in thrall to the power of the unions and other vested interests.

But it's still a wonderful place to live, the lasty civilised country in the world perhaps. Vive la difference (abordable)!

[Robert Marchenoir]

Yes, but.

Speaking of education, it is very striking to see the same problems sprouting up at the same time in French and British newspapers. Very often, while reading the Daily Telegraph section on education -- sorry, Charles --, I could swear they are describing the French situation, but they are not.

Something historical is clearly at work there, which goes far beyond the apparent divide between the "French social model" and the "Anglo-saxon" one.

Also, as much as I admire the American "can-do" spirit -- as opposed to the Gallic can-do which is, indeed, mostly magical thinking these days, one should ponder the economists' warnings that social mobility, which used to be at the core of the American dream and the justification for hard work and inequalities, does not work any more.

This is discussed in detail in a piece of research recently published by the French think-tank En Temps Réel (in French):

http://en.temps.reel.free.fr/cahiers/cahier25.pdf

[Frank Schnittger]

The issue is not really the relatively minor differences between France and Les Anglo-Saxons - the Euro, the Unions and an effete governing class - but a much larger gulf that is emerging between the first world and the third.

Put simply, much of the third world (Africa being the glaring exception) is looking for promotion into the first division and showing itself well capable of holding its own in the competiveness stakes. The greater the degree of globalisation, the greater the degree of promotion/relegation which can take place.

Because the supply of labour is almost infinite, its price is bound to fall in free market conditions, and hence the threat to existing first world living standard differentials with the third world.

Of course, globalisation also promises increased prosperity for all - so we can all be winners in absolute terms. The irony is that those who most criticised the first world's exploitation of the third are now suffering from the effects of the increased competitiveness that many former impoverished third world states have achieved.

The issue is whether France and others can prevent such relative promotion/relegation based on this increased competitiveness by erecting national barriers to globalisation.

The smart money is on such bogus nationalism just hastening relative decline by slowing necessary reforms and inhibiting economic dynamism at home.

[John Hornsby]

Despite their constant talk of reform and their 'penchant' for protest marches, the French are a deeply conservative people, clinging to privileges of the "shorter hours and more pay" variety. The poor education system, notably the universities, and the lack of training courses and vocation-orientated teaching at all levels lie at the core of the problem. With its huge national debt, high unemployment and two decades of poor government, the sands of "the good life" are running out for France.

[Richard orléans]

So the anglo saxons are triumphant?
Well the hourly productivity in France is 19% higher than in the UK. ie the average frenchman produces in 4 days what the average Brit does. (this comes from the economist).it is also higher than in the US. How is the anglo saxon car industry doing? What about airbus the worlds biggest airplane manufactuer, or SAP the computer software of the world's largest companies or Dasault sytems which dominates in engineering design, ariane space the world's favourite satellite launcher, roche which manufactures tamiflu, the strength of the French nuclear industry, the TGV etc. etc. The relative decline of France and Europe is versus countries such as China, India,Korea, Brazil. The anglo saxons are declining also in relative terms of which the swamp in Iraq is a symptom.

[Yann Paccalin]

France presents serious desavantage today except may be for french people out there! Always complaining but with no interest or model to look at! But considering global warmings & sea level raising fast today! Their model may prooved good again... Sometimes! It's not good news!

[Frank Schnittger]

Just some small points for Richard Orleans: SAP is a German company and Airbus is a joint venture which includes several European countries including Britain through a 20% stake held by BAE. Virtually all the companies you mention are Multinationals which illustrates the impossibility of maintaining a "fortress France" approach in an increasingly global economy.

[Peter Athey]

Richard Orléans mentions productivity to show the superiority of french industry over anglo-saxon business. This is an argument that the french government spin-doctors (relayed in the French press with no supporting data to justify it) have been using for years to sell to a french public the idea that all is well in their hands and 'just give us more time in power, and we'll give you more of the same good-life'.

In fact, Industrial statisticians use what is called the Tornqvist index to calculate Multifactor Productivity growth. This complex equation calculates productivity growth by measuring changes in the relationship between the quantity of an industry's (or service's) output and the quantity of inputs consumed in producing that output, where measured inputs include capital and intermediate purchases (including raw materials, purchased services, and purchased energy) and labour input. The Tornqvist formula factors in all these different parameters to yield growth rates which are differences in logarithms. The antilogs of these rates are chained to form the index.

When you look closely at the different elements that make up the equation you can clearly see that the labour inputs play a major role in the overall weighting. In some french industries, labour costs can represent 80% of the final price to customers.

In France, employers do their utmost to reduce labour in their business calculations, leading to high unemployment because it is more cost-effective to invest in machines that will run 24 hrs/day, and buy in advanced raw materials (ready-to-install sub-systems assembled in some other, low-wage economy) when building their products.

Thus French industry has high productivity quite simply because it is dividing output by the relatively low number of employees doing the work. And each of these workers has to support a spiralling number of un- and under-employed citizens(retirees, public-sector workers, and Members of Parliament included) with ever increasing taxes. Indeed a virtuous circle!.

[alan morgan]

In deepest languedoc it is very difficult for rural people to find enough money to buy the basic essentials of life. Let alone rise to the heights of the political ruling classes. They survive by having three jobs - one of which is legit. If lucky a wife may have a secure job in the civil service ( perks, pension, light work)If not, dependent on say wine you face severe competition and go bust. They do not fear the future. They fear the ruling class in paris which is out touch, out of date and well past its sell by date. de Villepin,an unelected, member of this class is doomed.

[Robert Marchenoir]

Peter Athey's point is substantiated by an empiric observation that many French consumer-oriented businesses are obviously under-staffed.

Next to where I live in Paris, there is a large DIY store, part of a national chain. Not exactly a corner shop. You can walk for miles (not really miles, but you get the point) and not come across a single shop assistant.

I once asked who could advise me about buying some paint. The answer: nobody, because the paint guy is on holidays.

Another time, I asked for just a human being to answer a question about any products at all. The answer: everybody is busy marching in the streets. No kidding. I did not make this up. There was a demonstration that day to support an umpteenth national strike about whatever, and everybody whas out there, except the cashiers and the security guys.

Nice setup: we're ready to take your money and bust you if you attempt to shoplift, but certainly not to help you.

Also, there must be two carts and a half for all the customers who want to buy many items. But they are hidden behind a counter, and when you try to retrieve one by yourself, the girl at the counter barks at you while on the phone for not waiting to get permission.

How this store can support itself while repelling customers is beyond me. And that's not an isolated case, either.

About hourly productivity, it is indeed quite high in France. But it trails behind if you consider the hours worked in a year, with holidays and 35 hour-weeks.

Could Peter Athey advise some kind of link for those who would like to learn more about his view of productivity? (Without logarithms, please.)

[Victor Tan]

Anyone who knows the French well, will know that they are a haughty, obstinate and blind lot. Haughty, because they are brought up and indoctrinated by their political leaders that they are the best in the world, in terms of country, culture, language, fashion and food. Obstinate, because if you think that you are the best in the world, there is no need to learn from anyone, notwithstanding the fact that their beloved and unsustainable social system is creaking, and in danger of collapsing altogether caused by the enormous costs. Blind, because they cannot or refuse to see that the world has changed, and competition from Asia and the United States is already in their country selling them cars, television, hi-fi and mobile phones (Japan and Korea); clothes and shoes (China); films, IT, internet, McDonald and Coca Cola (United States).

Does this scenario not remind them of the discontent that brought about the revolution in 1789? It will take an intrepid soul to put a date on the next revolution, but I am brave enough to say that if they continue on this path, it will happen sooner rather than later.

[Andrew Whiting]

If, as according to Samuel Johnson (1775), "patriotism is the last refuge of a scoundrel", is economic patriotism, as espoused by Monsieur de Villepin, the last refuge of an economic scoundrel?

[Mary Chin]

I just left France after an eight-year stay. Towards the end, this magical thinking was a continuing source of bewilderment to me. France is subject to the same demographic and economic pressures as any other industrialized country: rising health costs, an increasingly large number of retirees, low birthrate and high unemployment. They are now part of the world market, whether they like it or not, and closing out foreign influences costs money. It has made me wonder to no end how the French believe they would be the exception to the rule and have ever-increasing benefits for an ever-lower cost (taxes). I enjoyed my time in France but in the end, I could not buy into their fantasy.

[pete shaw]

I'm astounded, Mr. Bremmer, how you have this uncanny knack for distorting the truth and missing the mark when it comes to reporting on what's happening in France.

The CPE strike yesterday was not about people calling for "permanent jobs" as you so erroneously suggest. Perhaps if you didn't have that great big axe to grind, you might have mentioned that the proposal is to introduce UK style hire and fire labour market flexibility.

[John Gregory Flinn]

When comparing 'Les Anglo-Saxons' with France, it's not comparing like with like.
For example; socially, France is often like the obverse of the same coin as Britain. Neither side ever dreams of trying to do things the way the other does them, but commentators and journalists love speculating about this especially when one side seems to be more successful than the other. The current CPE demonstrations here are an example of what I mean. Young people in the UK would never demonstrate about an 'employment contract'!

Economically, 'Les Anglo-Saxons' have largely given up on manufacturing, especially in the UK where nowadays it forms less than 10% of the GNP. And the US is trending the same way. They find it rather dull, and the competition from the far east too difficult, especially when the best brains in Japan and Korea go into science and engineering.
Whereas 'Les Anglo-Saxons' see the Services Sectors as the best place to be. A rising stock market, cheap finance and a booming housing market are fuelling demand. Also, the world 'lingua franca' - English - provides the opportunity to internationalise many of these services.

France and the other continentals still retain significant manufacturing sectors. Where 'adding value' to raw materials is still considered a good way to increase wealth, and exporting the resulting technology is an investment for the future. Services are not so well done here nor well developed yet, as other posts note.
However a 'stand-alone' Services Sector is very dependent on the favourable financial circumstances mentioned above. It is also prone to “bubbles” as the Japanese know to their cost from the 90s, and debt, which 'Les Anglo-Saxons' are now experiencing. The present boom in property is driving a large part of the services sector in the UK, and the healthy employment prospects that arise from it.
So, when, or maybe if, a similar Services Sector develops in France then employment prospects here will similarly improve. In the meantime I think it should be more of the same.

[Frank Schnittger]

Question for Pete Shaw: Is a permanent job not one from which you cannot be fired?

I would be more willing to admire the French model if the French actually paid for it. They do not. Despite having Europe's 3rd largest economy, France is still a net recipient of EU funds. It is countries such as the UK and the Netherlands who are actually paying for the French health system and shorter working hours etc. Also, the French are extremely hypocritical in their desire to protect their own industries. They put pressure on the EU to open up industries to competition, which led to French companies grabbing large shares of key UK markets. However, the French have refused to open up their own industries, thus breaking the very laws that they themselves forced through. There is, therefore, nothing to admire in the French model, because it is based on hypocrisy, greed and contempt.

[Peter Athey]

Anonymous of March 15th appears to have a bone to pick but has almost none of the figures that I have to support his arguments.

France is not a net recipient, but contributes significantly more than the UK when one factors in the rebate (now reduced).

Although my figures are from 2003 and therefore do not cover the recent arrivals to the EU, France contributed almost 14 billion euros - second only to Germany - while the UK contributed 7.5 billion after taking into account the rebate (standard bookkeeping: what you take from Peter must go to Paul so that the two columns balance out).

Admittedly France gets a lion's share of the agricultural aid, but this is because it has a very large agricultural sector, whereas the UK does not (the very reason for the UK rebate in the first place).

The main net contributors per capita have been Holland and Sweden and the lucky beneficiaries, Spain, Ireland and Portugal. All these figures will change as the eastern block states receive massive injections of aid to help them catch up.

Now, about ownership of industry and services. As John Gregory Flinn pointed out, the UK has less than 10% of its GDP generated by industry which leaves over 90% wealth-creation done by services. What does it matter who owns the services (or even the industries for that matter)? What is important is the jobs these industries or services create. It's having access to them that is vital. It's not a question of virility - 'mine's bigger than yours' - but, "is mine more effective than yours". The French press pundits have been trying to fathom the Anglo-saxon's seeming carefree attitude to who owns their industries. I say, let France own them: they now become French capitals resposibility and expense. The only benefits to the French owners are the dividends they generate. A British owned industrialist would have no more compunction than a French one to keep manufacturing on UK soil if he can manufacture more cheaply overseas. And services - restaurants, hairdressers and other, bigger ones - can't be 'offshored'. And London is the most productive banking sector in the world - with the biggest per-capita productivity & profitability.

So, it's right for a sports team to wave the nationalist flag - but rather ridiculous to be nationalist where wealth creation is concerned. Open markets lead to vastly increased wealth creation - as Adam Smith proved over 200 years ago and which has been proved time and again every year since.

The French model is not perfect, not even ideal for a libertarian capitalist like myself, but where it does work, French industry (as mentioned by others: TGV, Ariane ect) excells.

[John Hornsby]

Mr Athey does not mention that there are still very many of the old-style peasant farmers of the sort which no longer exists in the UK.They tend to be inefficient and a burden on the EU budget.