A French cure

Financial Mirror (Cyprus) - - FRONT PAGE -

France is widely re­garded around the world as a coun­try that has failed to em­brace glob­al­i­sa­tion or to mod­ernise its eco­nomic and so­cial model. Its own cit­i­zens have been more pes­simistic about its fu­ture than ever in re­cent decades. The ques­tion is, can the French map out a way for­ward, dis­pel the pre­vail­ing gloom, and rebuild pros­per­ity?

The start­ing point must be a lu­cid di­ag­no­sis. In com­par­i­son to coun­tries that en­joyed a sim­i­lar level of de­vel­op­ment 25 years ago, France has un­der­per­formed eco­nom­i­cally. The gap is not wide – six per­cent­age points of per capita GDP – but the trend is wor­ry­ing enough to call for a cor­rec­tion. Un­em­ploy­ment, more­over, has re­mained at shame­fully high lev­els. And, whereas France ranks higher for some so­cial in­di­ca­tors re­lated to health care, in­come in­equal­ity, and poverty preven­tion, the price for this per­for­mance has been a steady rise in pub­lic spend­ing and debt.

The rea­son for this state of af­fairs is not that France’s econ­omy lacks po­ten­tial. It has weak­nesses for sure – a rel­a­tively thin layer of medium-size com­pa­nies, ad­ver­sar­ial labour re­la­tions, and pub­lic-sec­tor in­ef­fi­cien­cies, to name some key short­com­ings. But France can also build on re­mark­able as­sets: on aver­age, its workingage pop­u­la­tion is much bet­ter ed­u­cated than it was a quar­ter-century ago; it is younger than most neigh­bor­ing coun­tries; it is home to more global cor­po­rate cham­pi­ons than Ger­many or the United King­dom; and its in­fra­struc­ture is out­stand­ing. The bal­ance of as­sets and li­a­bil­i­ties does not jus­tify the gloom.

The causes of France’s malaise lie else­where. For starters, it is much too un­cer­tain about fun­da­men­tal choices. French so­ci­ety is am­biva­lent about its own iden­tity, the way ahead for its so­cial model, its at­ti­tude to­ward glob­al­i­sa­tion, its stance on Europe – and, in­creas­ingly, even about eco­nomic growth it­self.

Of course, all demo­cratic so­ci­eties fea­ture spir­ited de­bate about col­lec­tive pref­er­ences. But a key fea­ture of the French is that they do not trust their own po­lit­i­cal in­sti­tu­tions and lead­ers. Le­git­i­mate and ac­count­able in­sti­tu­tions and pol­i­cy­mak­ers are what hold di­vided so­ci­eties to­gether and help them over­come dilem­mas. France now lacks this glue.

A sec­ond rea­son for France’s un­der­per­for­mance is the way that it re­forms it­self. Eco­nomic and so­cial re­forms tend to be very grad­ual. Each govern­ment does its bit of tin­ker­ing with reg­u­la­tions but gen­er­ally falls short of a more am­bi­tious over­haul of the aims and in­stru­ments of a given pol­icy, merely pav­ing the way for an­other re­form five or ten years later.

As a re­sult, French cit­i­zens view each re­form as par­tial, tem­po­rary, and pos­si­bly re­versible. Half a re­form, how­ever, does not deliver half of the re­sults. It of­ten de­liv­ers much less, be­cause it fails to pro­vide clear and sta­ble in­cen­tives for new be­hav­ior. The rules of the game that are sup­posed to pro­vide guid­ance to in­di­vid­u­als and firms lack clar­ity and sta­bil­ity.

France needs to be­come much clearer about some key choices, and to act con­sis­tently. To be­gin with, the coun­try needs to build a more ag­ile, more open econ­omy. It can­not rely on the same growth model that served it well in the past, but that has since lost ef­fec­tive­ness. French cor­po­rate cham­pi­ons like Safran and L’Oréal are an as­set, but they can­not serve as a growth and ex­port plat­form any­more.

Rather, France must tap the in­no­va­tion and growth po­ten­tial of young firms. In or­der to un­lock this po­ten­tial, these firms should reach out to cus­tomers and sup­pli­ers world­wide. France should thus dis­card mer­can­til­ism and set it­self the goal of both ex­port­ing more and im­port­ing more, so that its econ­omy re­sponds bet­ter to global trends. It also needs to broaden the scope for in­ter­na­tional trade – for ex­am­ple, by open­ing up higher ed­u­ca­tion to in­ter­na­tion­al­i­sa­tion.

More­over, French so­ci­ety re­mains too hi­er­ar­chi­cal and too seg­mented. The eco­nomic, po­lit­i­cal, and cul­tural elite is too thin, too uni­form, and too closed. This is a recipe for frus­tra­tion among an ed­u­cated labour force that is too of­ten de­nied the op­por­tu­nity to ful­fill its po­ten­tial. This must change. Firms must adapt their man­age­ment and gov­er­nance with the aim of em­pow­er­ing their em­ploy­ees. The state also should open up and re­cruit se­nior man­agers from out­side the civil ser­vice.

To pre­pare for these changes, France should not only send more stu­dents abroad and wel­come more for­eign stu­dents; in a coun­try where a non-neg­li­gi­ble share of each gen­er­a­tion still strug­gles to mas­ter ba­sic lit­er­acy and nu­mer­acy, pub­lic ed­u­ca­tion must re­main a key pri­or­ity. In­deed, it is the one field in which pub­lic spend­ing should be in­creased. Over­all, cuts in pub­lic spend­ing should con­tinue be­yond cur­rent plans; but funds should also be re­al­lo­cated to fi­nance in­vest­ment in pri­mary ed­u­ca­tion.

Money alone, how­ever, will not buy suc­cess. French civil ser­vants must recog­nise that equal­ity – that car­di­nal French value – does not mean uni­for­mity, but rather more adapt­abil­ity and de­cen­tral­i­sa­tion. Schools and other pub­lic ser­vices in un­der­priv­i­leged neigh­bour­hoods should be en­dowed with the means and the au­ton­omy that they need to serve com­mon ends in the most suit­able way.

Fi­nally, France’s so­cial model needs to be rethought. It was built for a van­ished world in which work­ers of­ten had the same em­ployer for most of their ca­reer. Em­ploy­ment pro­tec­tion, life­long learn­ing, and so­cial ben­e­fits should be re­built around the in­di­vid­ual, not the job. The ben­e­fits sys­tem should be stream­lined so that it be­comes cen­tered on the per­son, rather than be­ing man­aged ac­cord­ing to spe­cific pro­grams and cat­e­gor­i­cal fund­ing streams.

This is an am­bi­tious agenda. But the cred­i­bil­ity gap in France nowa­days is such that any­thing short of com­pre­hen­sive re­form is likely to be re­garded with sus­pi­cion. This is a mo­ment when broad ob­jec­tives should be set out clearly and openly de­bated, so that French so­ci­ety can em­brace com­mon aims.

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