Montrose Journal Winter 05

AT THE FOREFRONT OF CHANGE: FRANCE THE GLOBAL BUSINESS PLAYER? -

In this era of Euro-pessimism, we are always being fed the formula for what a European paradise might look like : a region of German organisation, Italian leisure, English business and French cuisine.   Naturally the same consensus exists for the definition European hell : an inferno of German leisure, Italian organisation, English cuisine and French business. But what if they are all wrong ? Never trust cliches. In the same way as we can eat very well in London, it’s time to end the simplistic notion so often associated with France – indeed with which we French sometimes associate ourselves – namely our so-called inability to be organised, efficient, or good business professionals.  

The images of disorder in the French suburbs have been broadcast around the world. And the question on the lips of many Anglo-Saxons has been whether France, a model country where one buys a second home and goes almost free to the dentist, is in fact in crisis ?  Has Paris become a dangerous city ?  And coming after the rejection of a referendum on the European Constitution, is this merely another sign of the decline of France in Europe ?  

The reality, of course, is more subtle.  France presents a combination of great successes but also of great weaknesses. What happened in the suburbs demonstrates that we cannot ignore the weaknesses for too long without them provoking despair and, fatally, violence.  Paris is not burning, we shouldn’t be worried about that.  Rather, it is political immobility that is being burnt to a crisp and which, in the end, could be good news for France.   French public debate, to an extent, was already informed by an awareness that things could not go on as they were.  Nicholas Baverez, in an essay on success last year developed the idea of a France in free fall.  In the same tone of self-criticism, a quarter of a century ago Alain Peyrefitte was already talking about the ‘French illness’. Roger Fauroux has offered two equally critical polemics about the inability of France to reform itself : ‘Our State’ and ‘State of Urgency’.  

And yet as recently as June 2000, Time Magazine headlined ‘the French Renaissance’ and was expansive in its praise of our modernisation.  In some ways we are ready to recognise our handicaps and force ourselves to combat them much more than we are prepared to accept criticism from abroad. Particularly when the abroad in question is close to the Bush Administration…but that doesn’t mean France is set in aspic.  

Often when we talk of assets and handicaps, the temptation is to draw on the past to create an impression of the present.  This is an exercise that tends to remind us that France has moved in just a quarter of a century from being a  predominately farming economy to becoming the second or third biggest exporter of services in the world; from constant inflation to monetary stability.  These areas of excellence are clear drivers for the future and offer real value to a host of industries, including for example telecommunications, aerospace, transport, the Arts, fashion and luxury goods, distribution, foods, cars, the BTP, energy or water distribution.  

These examples help to remind people of an incontrovertible truth : namely that France has accomplished a vast transformation and should never underestimate its capacity for change. What emerges as the most important lesson for our future is to envisage our assets and handicaps not as mutually exclusive but as part of a single, dynamic concept.   Our first asset is the flexibility of our population to adapt. This has been exemplified most obviously in the past decade by the trouble-free adoption of the Euro and the widespread adoption of digital technology.  

Next comes the quality of our education and by proxy the productivity of our employees who, according to businessmen based in France, are among the very best in the world.  

Our industrial specialisation has seen us create, in a number of sectors, leaders which are not merely European but also global, with real access to international markets.   While the attraction of our country is often demonstrated in terms of tourism, we should not forget the large number of investors ready to base themselves in France and invest in French businesses. This makes France among the most privileged countries in terms of foreign investment.  

Then there is the quality of infrastructure networks and public services. The widespread power cuts in the United States and elsewhere, decaying state transport networks and the difficulty of access to quality care in many countries serve to remind us of the importance of these assets, as much elements of individual security as factors in a competitive economy.  The same can be said of an administration that is honest, competent, modernised, open to new technologies and willing to play the European Union game.  

In the end it is about putting into action the new French form of liberal-colbertism, a modern but largely practical effort at state level to ‘do what I say, not what I do’  In contrast to the two-faced American attitude which advocates liberalism in big international negotiations but does not hesitate to encourage the discreet support of the federal state for big companies, France is actually in the process of inventing a symmetrical model: one which profits when it offers the advantages of liberalism to favour the international development of its champions, as in the acquisition of marquee foreign brands by Pernod-Ricard or the re-purchasing of Nissan – or the opposite by devising poisoned pills to discourage foreign investors not welcome in France such as in the case of Danone, Alstom or Renault. 

Yet very real handicaps can undermine our position, curbing the intrinsic dynamism of the French economy and preventing us from putting our assets to good use. Our first handicap is a lack of self confidence which translates into a growing number of fears that hold back our economic growth and divide our social plan.  The fears are many : globalisation, inequality, unemployment, legal complexity, new technology and an erosion of the safety net that represents state providence.  

Our second handicap is the weakness of our intermediary bodies, notably our unions as well as the structure of working rights which encourages a culture of conflict over negotiation. The third handicap is the delay in modernising public structures and adapting methods of social security to meet our demographic demands.  The result of this is not merely an extraordinarily constrained management of the budget, but also an inability by the state to dedicate the means necessary for the future, as much for long-term investment or human capital as for research and higher education.  In short, the state lives below its means but does not dare admit it, particularly in advance of elections. Our final handicap became only too clear during the referendum on the Constitution. It resulted in a real loss of influence within European institutions.  

So we have two Frances drawn along grand lines : the one is based on access to the outside, on movement in the workplace among the younger members of the population and those who have received the best levels of training.  This France welcomes globalisation with open arms. Many leave here to go elsewhere, in particular to London, the latest destination of choice for many young French people.  

At the other end of the spectrum is the brittle France, more individualistic, largely sceptical and conservative, elderly and anxious about the most vulnerable elements of society.  For this France, globalisation is seen as an assault on our way of life and as a brutal rejection of social protection.   Of course it is in this duality that we discover the most oppressive menace for the future social cohesion of our country.  Such separation could have happened in any number of European countries. Great Britain has had the good fortune, like many other countries in the Union, to have invented a political leadership capable of reconciling these two apparently contradictory interests.  

In France the problem remains unresolved and is at the heart of the next election in 2007.  In order to win power in France is it necessary to use a political discourse which is rooted in the past to reassure the France that is anxious – the France that appears to have been in the majority in our consititutional referendum.   Many on the left and right believe that it is possible to defend our social model without profound change.  A political victory based on such a premise could end very badly, not merely for our economic future since public deficits would rapidly become untenable, but also for our social plan.  

Nothing is certain. Some of us hope that in 2007 there will be a rather different outcome, one in which France will change its political leadership and wholeheartedly turn its assets to good use. A country free of the shackles of pointless responsibilities, which can return confidence to her own entrepreneurs and make them want to open businesses in France.  A country which rediscovers social dialogue and fluidity in the workplace, which balances her public finances for the assistance of research and attracts the best foreign students, and which assures modernisation of her public services and financing of social systems. In short, a France that generates confidence and hope in society as a whole, this country would be unbeatable, except perhaps on the football pitch.  France certainly has the capacity for change as witnessed by the relentless march of enterprise in the course of past decades.  She has the imagination, as proven by her new liberal-colbertism. All that remains is for a new political leadership to give her the desire, courage and the will.   

Bernard Spitz is CEO of BS Conseil, a strategic consulting company, and teaches at the Sorbonne.  A member of the Council of State and former adviser to French Premier Michel Rocard, he is a former head of strategy for Vivendi. He was co-author, with Roger Fauroux, of the best-sellers ‘Notre Etat’ and ‘Etat d’urgence’.