France in a funk

No Olympics, no Euro constitution and riots in the suburbs… But the French continue to produce world-class companies. So need they be so glum?

by Charles Bremner
Last Updated: 09 Oct 2013

With their wild flowers and rushing streams, the foothills of the Pyrenees seem an unlikely place for observing the French disease. Yet the green valleys were the site earlier this summer of two triumphant acts of resistance that captured the bloody-minded mood of France as it nurtures its wounded soul. Typically, the villains in both cases were foreigners: Japanese businessmen and mountain bears.

On a glorious sunny morning, I stood in the square at the village of Arbas with François Arcangeli, the young mayor, as he showed the damage that had been inflicted by protesters. Dozens of sheep farmers had turned up on tractors, locked him in his office, sprayed the town hall with animal blood and destroyed its garden and statues.

The farmers were upset about the imminent release from around Arbas of half a dozen brown bears brought from Slovenia to save the Pyrenees' dwindling bear population. The farmers feared the foreign bears would kill sheep and attack people. ‘It was frightening – a very violent, organised punitive expedition,' said Arcangeli, an architect who works in Toulouse, the high-tech entrepôt 80 miles from the village of 220 people. The mayor even received death threats.

There is little that is rational about the anti-bear campaign, which eventually forced the government to halt the releases after only four had been set free. Bears attack few sheep and when they do, their owners are well compensated. No Pyrenean bear has killed a human for at least a century. The farmers' revolt, as the bear lobby points out, springs from something darker: France's eternal mentality of civil war, the us-against-them belief that some menacing outside force is always trying to put one over on the people. In this case, ‘they' are the bear-loving ‘Parisians' who supposedly want to put the sheep-breeders out of business.

As the bear feud was raging, another, even more absurd, stand was being staged west of Arbas in the Aspe valley. Jean Lassalle, member of parliament (député) from the centrist UDF party, was on hunger strike. His aim was to force Toyal, a Japanese firm, to keep its aluminium pigment plant in the town of Accous. In reality, Toyal had no plans to move its 150 jobs out of Lassalle's birthplace. It was expanding and opening a new plant 45 miles north. But the intrepid député did not believe Toyal. So he starved in the name of resisting délocalisation. This word, one of the most feared in the French lexicon, means both ‘relocation' and ‘outsourcing' – understood as the export of French jobs east and south.

After 39 days, President Chirac, having telephoned Lassalle, ordered Dominique de Villepin, the prime minister, to intervene. With a guarantee of state subsidies, Toyal promised to stay in Accous for ever and Lassalle, 18 kilos lighter, became a star.

But the battles over the bears and the Japanese jobs were minor alongside the upheavals of the past 16 months – the rejection of the European Constitution, immigrant riots and then the student revolt this spring. But the Pyrenean episodes captured in close-up the defensive, unhappy mood that prevails in a country that seems convinced that it has lost its way. Even its footballers couldn't quite manage to lift the World Cup.

France has been manifesting its malaise since the end of ‘les trente glorieuses', the 30 years of revival after the wartime Occupation. For the three decades since then, everyone has talked of ‘la crise' (the crisis). The consensus on national decline began with the start of mass unemployment under president Valéry Giscard d'Estaing in the late 1970s and grew under his successors on the Republican throne, Mitterrand the Socialist and Chirac the Gaullist.

France feels that it has fallen out of sync with a world dominated by ‘Anglo-Saxon' economics and the big trading powers. And the best job at bashing the French has been done by themselves. An industry called ‘déclinologie' – the study of decline – has sprung up in the footsteps of Nicolas Baverez, whose book La France Qui Tombe (‘France in Free-fall') started the doom craze in 2003.

The ‘declinologists' play variations on a theme: France is a nation fraught with strife, living in the past, beyond its means, governed by a discredited élite and doomed to low growth and high unemployment.

But there is a glaring paradox. The media, politicians, workers, small businesses, thinkers and the education world are all mourning the nation's lost soul and the ‘blockages' that seem to make reform impossible. Yet in many ways France has never had it so good. This, after all, is the country with the world's most admired quality of life and with an infrastructure that is the envy of the world – think high-speed trains. French multinationals such as Saint-Gobain, Michelin, Axa, Vinci and Carrefour are global champions; France's high-tech enterprises are on the front line; and Capgemini, a computer services firm, is a leader in global outsourcing – the ‘délocalisation' that so terrifies France.

The easiest way of explaining the paradox is to see two Frances. There is the dynamic, outward-looking ‘France SA'; and then there is the glum, worried citizenry who vent their grievances through strikes and elections. Surveys this year have shown, for example, that 74% believe that the country is in decline; more than 60% believe that capitalism is bad; and 69% support De Villepin's protective policy of ‘patriotisme économique' (‘economic patriotism').

Adrian Dearnell, 34, a Paris entrepreneur of French-US parentage, believes his country suffers from a deep cultural divide. ‘French businesspeople are on the same page as the rest of the world, but that's a minority. The rest don't have any basic idea of the dynamics of the marketplace,' he says. Dearnell's firm, EBM, provides an online TV service for investors.

 At the American Chamber of Commerce (Amcham) in France, they have nothing but praise for the French business model. Stephen Pierce, Amcham's managing director, who has spent most of his life in France, agrees that the country is undergoing one of its bouts of anguish and that heavy regulation and high taxes are to blame. However, the malady is nowhere near as bad as the French believe, he says. French workers are more productive than Americans – despite working the world's shortest hours; the country has suffered few strikes; and inward investors continue to see France as one of the most attractive nations.

 ‘Le blocage doesn't really exist,' insists Pierce, talking in his office on the Boulevard Haussmann. ‘They have created a myth that nobody works and everyone is out on strike, but in fact the country works extremely well. Output at the mid-management level, as well as for the engineers and the worker-bees, is extremely high. And the level of culture is extraordinary.'

Like everyone who knows France, Pierce ascribes its success to the old tradition of ‘système D', the ‘D' standing for débrouillardise, or getting around the system. ‘The education system is rigid, but that's what they are used to. The 35-hour week meant people had to work harder, but they just made it happen. They threw money at it and people reacted positively.'

 Pierce puts his finger on another aspect of the Gallic system – a flexible approach that tempers all that rigour and ideology. He cites the scenes in Clermont-Ferrand after the death at sea this May of Edouard Michelin, the boss of the family tyre firm that is based there. Thousands of workers, many from the strike-happy CGT union, turned out to mourn.

‘Look at the number of Communists who were praying outside the cathedral for Michelin. That's the real France. He was the boss and they loved him,' says Pierce. ‘The French are very bad at separating personal feelings from professional ones. In 35 years of doing business here I find that personal feelings override the professional. As a result, doing business in France is extremely pleasant.'

The management style is shifting as younger executives from business schools move up, but the culture nevertheless remains paternalist and hierarchical.

French bosses emerged as autocrats from a Mori survey of European captains of industry last January. Fewer than three in 10 of them said they were happy to be challenged on decisions, whereas nine out of 10 British CEOs had no objections. Two-thirds of the French grands patrons (big bosses) said that one of the best aspects of their post was having ‘the freedom to make decisions with minimum interference'. Only 39% of the Britons rated this as a plus.

Britons working in French firms are at first taken aback by the cultural difference. ‘They are much more authoritarian,' says a British senior executive in a Paris financial services business. ‘They are not much concerned with building consensus and getting people motivated. The boss's door is shut. You won't find him wandering the corridors.'

On the plus side, however, communications are clear, says the 53-year-old expatriate. ‘It is refreshingly direct. E-mails can often be quite abrupt – they don't beat about the bush.'

For both workers and management, a good boss has a strong paternal side (rarely maternal, since so few French women make it to the top). I encountered a perfect specimen the other day: Pierre Gadonneix, 63, CEO of Electricité de France (EDF), the world's biggest electricity supplier. In his palatial office on the Avenue Wagram near the Arc de Triomphe, Gadonneix explained that pursuit of profit had to be combined with ‘the social contract'. Caring for the workforce created the team spirit that had made EDF so successful – including its UK subsidiary, which makes a quarter of the group's profits, he said. Combine this with the guiding hand of a wise state and you have a winner. ‘Chef d'entreprise (CEO) in a market economy is the most beautiful challenge that exists, but "market economy" does not mean that the state has no role. On the contrary, it has to promote growth and social justice.'

Such is the language of the high management class, many of whom, like Gadonneix, hail from the civil service. Gadonneix earned a PhD at Harvard Business School and went on to turn Gaz de France into a star, but he was first a product of the Ecole Polytechnique, training ground for the top state engineers. This mandarin class produces great administrators who move smoothly into the board- rooms of both private and public corporations. They may not be risk-takers, but they often have a rigour and strategic vision that are a match for any.

They also seem especially suited to international operations. Felix Rohatyn, the Lazard Frères banker who served as US ambassador to Paris, likes to say that France and the US are the nations that are best at globalising their business. Non-French executives in Paris say that Gallic bosses prosper in the multinational world because their companies blend in with local cultures. Michelin in the US, for example, feels and behaves like an American company.

 Again, we run into the paradox. If France has such enlightened business leadership and fine state administration, why is it in such a funk and so determined to resist the outside world? The reasons are to be found in the civil-war mentality and the attachment to a paternal, protective state. Five million citizens may have bought shares when EDF was partially floated last autumn, but they do not trust the élite who run their lives. Thanks to a state education system that indoctrinates the young with quasi-Marxist theory, the average citizen remains deeply suspicious of the free market – or le libéralisme, as it is called, usually with a sneer.

On the other side, those brilliant hauts fonctionnaires (top civil servants) – who have in- cluded most modern French prime ministers and two of the last three presidents – believe that they know best. They hate taking advice and do not trust the people with too much information. A generation of politicians carries responsibility for France's resistance to economic reform. For fear of stirring revolt and losing elections, leaders of both the left and the right have failed to come clean and explain economic life. They have reformed – privatising most state enterprises, for example – while pretending nothing has changed (Britain has its equivalent unspeakable secret: the insistence of successive governments that the EU is purely a market and not a political entity).

When you talk to ministers or opposition leaders in private, they acknowledge that France must abandon its stifling labour laws and excessive regulation – and then add: ‘But France doesn't like to be pushed too hard. We have to tread very carefully.'

Chirac has much to answer for. As president for 11 years, he has reformed by stealth while soothing the country with protective rhetoric. During the débâcle of the failed European referendum in May 2005, Chirac out-did his own propensity for populist nonsense by saying that global capitalism threatens the world as much as did Soviet Communism. He then guaranteed further alienation of people from rulers by appointing as premier an unelected, aristocratic senior civil servant with as much common touch as a member of the British royal family.

De Villepin earned popularity with his doctrine of economic patriotism – under which the government has intervened to reverse plant closures and to engineer mergers such as that between Gaz de France and Suez. De Villepin has also brought down the wrath of the Brussels competition police by declaring certain strategic sectors (including the casino industry) out of bounds for foreign takeover. The prime minister has assured business leaders that he did not really mean it. ‘Do not imagine for a minute that we think that yoghurt is part of France's national interest,' he told Americans after he had been noisily pledging in public to defend Danone, the food-maker, against a rumoured takeover attempt by Pepsico. (See this month's MT Interview.)

The political near-destruction of De Villepin (he remains prime minister) came this April after he decreed a reform to the labour law to enhance youth employment. It was supposed to help reduce the shamefully high barriers the educated young face to entering the workforce. He failed to consult on or explain the so-called First Employment Contract (CPE), so it was seized by opponents as further evidence of a plot by the governing class to feed the young of France to the capitalist barons.

De Villepin followed well-worn tradition and surrendered to the street, demolishing his remaining credibility and helping drag Chirac's approval rating down to 18%, a record low for any post-war president. The coup de grâce came with the so-called Clearstream scandal, in which the prime minister appeared to have tried to smear Nicolas Sarkozy, the conservative party leader who is out to win the presidency on Chirac's retirement next spring.

Here we find another paradox. There are signs this summer that despite De Villepin's rout, the spring revolt changed something. Over Paris dinner tables, you can hear heads of enterprise and their top civil service friends concurring that the student revolt forced France to look outside and realise that its failure to put its young into jobs was a European disgrace. It is no longer taboo to say the famous French social model has created a two-class nation, with over-protected employees on the inside and an army of unemployed and short-term contract workers on the outside.

The change is embodied by the emergence of new players. Among them is Laurence Parisot, who last year became head of Medef, the employers' federation. Aged 46 and an excellent communicator, she has made an impact preaching the need for a new mentality. ‘We have to explain to our compatriots that we are living in a new world,' she says. The most urgent reform, she thinks, is a revolution in the country's sclerotic education system and in particular its disgraceful universities. Under-funded and over-crowded, les facultés, as they are known, are the poor relation of the grandes écoles, the highly selective colleges that train the professional élites. The universities, open to all holders of the baccalauréat leaving exam, suffer a 40% failure rate in the first year.

The most striking sign of renewal is the rise of two reformist politicians in their early fifties – Sarkozy on the centre-right and Ségolène Royal, the Socialist who towers above her rivals for the presidential nomination. Sarkozy, the pugnacious leader of Chirac's UMP party and its certain presidential candidate next April, is promising une rupture – a break – with the old thinking. Royal, 53, though a former minister, veteran MP and product of the mandarin class, has cast herself as a reformer who is not afraid to smash Socialist icons such as the 35-hour week. She is being resisted by the neo-Marxist barons of the party – including François Hollande, the father of their four children. But with her charisma and fresh look, she is so adored by the public she seems unstoppable.

Both Ségo and Sarko confess to a heresy in the eyes of the French left and right: each is an admirer of Tony Blair. Royal has revealed little of her manifesto and, with her anti-liberal colleagues gunning for her, she is staying vague on the economy. But chatting with her for two hours on a train this spring, I found her to be enthusiastic about bringing about her own version of rupture. She says she is determined to lighten the burden of regulation that holds back the country and wants to convince her compatriots globalisation is not their enemy.

The prevailing gloom hardly encourages predictions that France is about to turn the corner. It was therefore encouraging to hear the new optimism of one of the most distinguished of the doom-mongers. Jacques Marseille, a professor of economic history at the Sorbonne, has made his name with books diagnosing the Gallic malaise. In Du Bon Usage de la Guerre Civile en France (‘The Correct Use of the Civil War in France'), published in February before the student revolt, he argued that France is on the brink of rupture, but one that risked taking it back to the past. His conclusion was fairly bleak. Yet chatting one summer evening in his local café, he brimmed with optimism. The nihilistic revolts of the past year – from the European Constitution to Pyrenean bears – might be the darkness before dawn, he says. ‘I am less and less pessimistic. The battle is under way and perhaps a victory is close.'

Marseille is convinced the mood has turned and that the ingredients are there for a renaissance. This could be led by either Sarkozy or Royal, because they both represent la rupture, he says. He sees little chance of another electoral lurch towards Jean-Marie Le Pen of the racist Front National: ‘People are ready for change. They are sick of the moaning about everything being wrong. I am very optimistic. There is so much slack to draw on in terms of useless spending and waste that we can pull off a lot without much blood, sweat and tears.'

Like others among the new optimists, Marseille sees France adapting the Anglo-Saxon system to fit its own tradition, retaining a measure of its cherished social protection. The can-do spirit of the French multinationals will trickle down to the smaller business world, he thinks: ‘The "French touch" seems to be appreciated abroad, so it can work at home.'

France is far from reaching this happy state. Many ambushes lurk on the road to next April's elections and the departure of Chirac and his generation. France has a habit of confounding expectations. I would not rule out an electoral bolt back into the arms of the unreconstructed left next spring. Yet seeds of reform have been planted. There is a spreading sense that change is inevitable for le modèle social français.

 

Lakshmi Mittal Breaches fortress france

 It was one of the most bitterly contested takeover battles of recent years, a white-knuckle ride that ended in a resounding defeat for the ancien régime of French business, thanks to a potent mix of globalisation and shareholder activism. When British-based metal magnate Lakshmi Mittal finally won control of France's largest steel producer Arcelor last month, he inflicted a body blow on the protectionist French policy known as patriotisme économique.

It cost Mittal five months of intensive lobbying and a whopping £18 billion to acquire Arcelor and become the world's largest steel producer. His bid was vigorously opposed, with everyone from the board of Arcelor right up to president Jacques Chirac readily voicing their displeasure. CEO Guy Dollé was particularly pugnacious, protesting that Arcelor is ‘expensive cologne' compared to Mittal's ‘cheap perfume'.

Initially, the strength of their defence suggested that victory would go to les Bleus. But the Arcelor board, hastening to put the firm safely beyond Mittal's reach, cooked up an extraordinary deal that involved selling the company to a 37-year-old Russian oligarch named Alexey Mordashov. Presented as a fait accompli by Dollé, the sale was seen by many shareholders as riding roughshod over their interests – a sentiment that Mittal cleverly exploited to provoke an investor revolt and frustrate Dollé's plan.

The question now must be: will more French ‘strategic national assets' fall to foreign suitors, and if so which, and when?

 

Terms of conflict: a glossary of la crise

La crise The crisis of self-belief currently gripping the French nation.

CDI Contrat à Durée Indéterminée – a permanent job contract. Rare as a French hen's teeth.

CDD Contrat à Durée Déterminée – short-term contract. Scourge of under-25s, French McJob.

CPE Contrat Première Embauche – first employment contract. De Villepin's wheeze to make the young easy to sack. Riots in les banlieues got the CPE rescinded.

Déclinologie The science of studying a nation in decline, living in the past beyond its means.

Un fonctionnaire A pen-pushing bureaucrat. Thinks the world owes him a living.

Haut fonctionnaire As above but more senior. Examples include De Villepin, Chirac et al.

La France Qui Tombe (‘France in Free-fall'), a bestseller by Nicolas Baverez in which the author insists that ‘you cannot have a Blair without first having a Thatcher'.

Le libéralisme A belief in the free market. Patriotisme économique Economic patriotism: protectionist malady unknown in the UK, where we happily sell anything (our airports included) to the highest foreign bidder.

Société bloquée A constipated society: little entrepreneurial movement. Une rupture A break with traditional thinking and behaviour. A process not without pain.

RTT (Réduction du Temps de Travail) The famed 35-hour week. Comes with up to 10 weeks' paid holiday per annum.

Les trente glorieuses The 30 post-war years of the French economic miracle. Immediately followed by la crise (see above).

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