TIME EUROPE
June 12, 2000 VOL. 155 NO. 23
French Connected
Despite a legacy of state control, and an archaic political leadership, France is thriving — and modernizing — in the face of global competition
By THOMAS SANCTON Paris
Few countries would seem less likely to succeed in the modern world of globalization, free trade and high-tech, speed-of-light capitalism than France. Widely caricatured as the home of the 340 cheeses, the eight-week vacation, the 35-hour workweek and the crippling public sector strike, this over-centralized, over-taxed, state-heavy, tradition-bound, sedentary, protectionist and perversely self-satisfied nation could not possibly survive in the competitive, market-driven international arena of today.
Think again.
A new France is taking shape at the dawn of the 21st century. Like a newborn chick pecking out of its protective shell, the proud young bird is only partly visible — a beak here, a claw there — but already begins to reveal the shape of things to come. The trends are clear: privatization, decentralization, entrepreneurship, multiculturalism, a weaker state, lower taxes, a pared-down public sector, and a more collegial European identity in place of l'exception française and the universal sense of mission that have heretofore defined France's place in the world. Says former Socialist Finance Minister Dominique Strauss-Kahn: "We're becoming a country like any other."
Well, not quite. France still has one of Europe's highest tax burdens (45.3% of GDP) and one of its most bloated public sectors (accounting for one in four jobs) — not to mention an archaic, out-of-touch political élite headed by Gaullist President Jacques Chirac, 67, who has been battling in the French political arena for more than three decades, and Socialist Prime Minister Lionel Jospin, 62, an austere Protestant who claims to be a modernizer but still lapses into old-fashioned leftist rhetoric and is leagued with one of Europe's last, and least-reconstructed, Communist parties.
Yet look what this leftist government has accomplished since coming to power in June 1997. Jospin has totally or partially privatized more companies than his four predecessors combined — $24 billion worth in all, including such state-owned behemoths as Thomson Multimedia, Air France and France Telecom. Economic growth this year is projected by some estimates to pass 4%, the strongest performance of any major European country. The Paris Bourse grew by a record-shattering 50% in 1999 while the technology-driven Nouveau Marché leapt ahead by 135% (repercussions from Wall Street's April correction have recently, perhaps temporarily, cooled those red-hot markets). Though France was slow to plug into the Internet, it is quickly closing the gap and its burgeoning new economy could account for as much as 20% of all French production this year. Most important, France's unemployment has dropped from an alarming 12.6% when Jospin took office to the current 10%. As the vibrant economy continues to produce new jobs at the rate of more than 1,000 a day, the government is predicting single digits by the end of the year.
This dramatic recovery comes against the backdrop of some very real economic and industrial strengths. France is the world's No. 4 exporter, fifth-biggest economy, a world leader in transportation (the tgv high-speed train), aerospace (Airbus and the Ariane rocket, produced in France with European partners), telecommunications (mobile phones and wireless technology) and civil engineering (the dazzling new Normandy Bridge and the Franco-British Channel Tunnel). With assets like these, the country is well placed to benefit from the cyclical upturn now lifting all European economies.
The fall in unemployment and the return of growth have suddenly shifted the public mood from a decade-long depression into an exuberant optimism. "We lived through a terrible decade in the '90s, when we hit the bottom of the pit," says sociologist Robert Rochefort, head of the CREDOC, a Paris-based think tank. "We had no confidence in anything, record unemployment, a sense of national decline. Since 1997, we have seen a spectacular return of confidence, a sort of alchemy, in which everything seemed to turn from lead to gold."
The turnaround actually began just before Jospin's election, but the Prime Minister deserves credit for boosting public confidence with a series of measures he launched shortly after taking office. After dithering over joining the euro, the new Socialist government signed the June 1997 Amsterdam Treaty which ensured France's participation in the single currency and tied its destiny to the European Union. Initial hesitations over privatization soon gave way to a steady sell-off of state companies that reassured the business community and international investors (who hold more than 40% of shares in publicly-traded French companies). Most important, and most controversial, were the 35-hour workweek and the program that offered state-subsidized jobs to 350,000 young people.
The government promised that the twin schemes would boost employment. But even Socialist Party insiders now admit that the real aim was to restore confidence to a shaken public opinion. "If you judge the youth job program economically, you can criticize it," says Henri Weber, a Socialist senator and respected party theorist. "But in fact it is a matter of collective psychology. Same with the 35 hours. These measures had a psychological function: to treat collective depression. It worked. The country started to consume, to invest, to be exuberant and happy." Employers, meanwhile, used the 35-hour negotiations to inject a much-needed measure of labor flexibility into the workplace.
Sociologist Alain Touraine argues that the 35-hour and youth-jobs programs were "economically unreasonable, but psychologically fantastic. It means we can be competitive and still develop social policy." The twin goals of competitiveness and social policy go to the heart of the challenge facing France. For social policy, as characterized by the providential welfare state, means continued government control and high taxes. But being competitive in an open global economy ultimately means trimming back the role of government, the overall tax burden and the size of the public sector. In short, it means that France must become more Anglo-Saxon, or more libérale, as they put it.
Trouble is, libéralisme is almost a dirty word in France. It's the antithesis of everything the French Revolution and five ensuing republics have stood for: centralism, dirigisme, strong government, equality, solidarity. French citizens are accustomed to look to the state for everything from welfare, pensions and education to public transportation and compensation for natural disasters. Liberalism, in the French sense, is the laissez-faire, deregulated, individualistic, profit-driven, devil-take-the-hindmost ethic embodied by the U.S. and post-Thatcherite Britain. Almost no French politician on the left or right will openly endorse such unbridled free-market policies. But in fact the logic of liberalism is built into the euro, the European single market, and the free-trade global economy that France has embraced. And liberal policies are being pursued by the Jospin government even more vigorously than by his conservative predecessors. "France is indeed moving in a liberal direction, but you mustn't say it," observes Antoine Garapon, an expert on the French justice system. "What distinguishes France today is a republican hypocrisy."
"Of all comparable countries," says Rochefort, "France is the most resistant to liberal ideology. For historical reasons, we remain a profoundly anti-liberal culture. But what happened in the last 20 years is that the world passed over to the liberal ideology and we have ended up adopting a liberal pragmatism without adopting the ideology. Our leftist liberals are pragmatic liberals."
One such pragmatist is former Finance Minister Strauss-Kahn, who argued for lower taxes, more venture capital and freer use of stock options during his two-year tenure. "No one now contests the free market," he explains, "but we still need rules and institutions. We say the free market is okay, but it's not okay for society to be organized only by the market." In short, the leftist government is not willing to dismantle the social safety net or take on the entrenched civil service in the name of competitiveness. As Weber puts it: "We are the ones who refused to take the boat and go to America. We will never accept American solutions. Our people don't tolerate the same degree of risk and violence. Our solution must be of a social democratic type."
That would seem to put limits on how far change can go in France. But in fact, the politicians are no longer in control of the process. "The changes are now coming from outside the political debate and independently of the political class," says Gaullist deputy Pierre Lellouche. "What the political class is doing is foreign to the real world and basically irrelevant." MORE>>
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June 12, 2000
SPECIAL REPORT
French Connected
Despite a legacy of state control, and an archaic political leadership, France is thriving — and modernizing — in the face of global competition
Venture Playground
A new spirit of entrepreneurship has created a thriving culture for Internet start-ups and fueled the country's robust growth. How the new economy is changing the way the French do business — and reshaping the nation itself
French Exodus
Driven out by excessive taxes and red tape, and also by a spirit of adventure, more and more French men and women are taking their talents abroad
Mixing Bowl
The French don't like to admit it, but decades of immigration have produced a multicultural society that is reinvigorating the nation
Vive Les Regions
Key provincial cities are emerging as the new vectors of economic development and cultural expression
From Decline to Renewal
Stanley Hoffman on France's success as a modern, middle-size power
EUROPE
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Expensive Exposure
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Lights, Camera, Shoot!
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Recreating a Jewel
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Essay
To Our Readers
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