Saturday, February 13, 2010

The French Paradox

One of the distinct feature of France is that its people are the most dissatisfied with capitalism and the most willing to see government play a more active role in owning major industries. This is not only what makes France different from the U.S. but even from its closest neighbors like Germany, Great-Britain or even Spain.

Last November a survey of 29,000 people across 27 countries (almost all democracies) by GlobeScan and the BBC World Service found that

- Only 23% agreed that capitalism is “fatally flawed” and needs replacing but in France, that number was 43 %.

- There was more support for an increased government role in redistributing wealth and regulating businesses than for outright state control of big industries - except for France where 57% call for their government to do more incontrolling or owning major industries.

As to why there is so much dissatisfaction with capitalism in France than anywhere else, there may not be one single answer. The paradox is that France as a whole has largely benefited from the "capitalist" system and the country has some of the most successful firms in Europe - Carrefour, L'Oréal, etc..... and it remains the 5th largest economy in the world and the 2nd largest in Europe. So why is that?

The Economist suggests that at its core is the paternalist belief in the state’s duty to protect citizens from the turmoil of the market, and to play a strategic role in shaping the economic arena. That is certainly true. The dirigist culture is more prevalent in France than anywhere else, even in Europe.
In fact, one could argue that there is some sort of political consensus of the political elite as to giving government a strong role in the economy as in social matters. My take is that , in addition to the long history of strong government, the French have also now equated dirigism with national sovereignty.

They see big government as a means of protection from the threats both inside (the chaos of social disintegration) and outside (outsourcing and globalization). This is nothing new in the French mindset from the Jacobin centralized republic during the French Revolution to the post-world war II central planning, following the chaos and the destruction of the war. So it has been at the core of the French identity for the last 200 years.

Not only is big government perceived as protective but it has also been very successful in making France a strong economic power in Europe. Indeed, dirigism worked out pretty well for the French and modernized the country- from the development of their large industry groups backed by the government to the current infrastructure and energy nuclear "independence". Even though the state owns less than it used to, following WWII or the 1980s, it continues to own shares in corporations in a range of sectors, including banking, energy production and distribution, automobiles, transportation, and telecommunications more than any other European country.
So it is no wonder it is a favorite of the French in this day and age of soul searching and economic crisis. Whether this is a sustainable system for the future in this globalized world remains to be seen.....

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