Plus ça Change—in the French Economy

If some things don’t change, everything will

Hollande has to do more than restore France's economy; he must recover its spirit of dynamism.

By NEIL ROGACHEVSKY

This year’s Bastille Day promises to be a very sombre affair.  In a move being billed variously as a “disaster”, “bloodbath” and “earthquake”, car marker PSA Peugeot-Citröen announced on July 12 that it would be laying off 8,000 workers throughout France and stopping auto production at one of its flagship plants at Aulnay-sous-Bois, not far from Paris in Seine-St Denis.

The subject of long speculation, the move prompted an outpouring of outrage amongst PSA employees, with many stating their intention to use the union to fight the decision. “This will be a war,” declared one employee. The socialist mayor of Aulnay-sous-Bois spoke in tones of emotional disbelief. “The government had done so much to make the area hospitable. Transportation links to Paris, including a stop just outside the factory,” he told French Radio. “This sends the wrong message.”

On the same day, Bloomberg reported that General Electric’s France division has been trying frantically to hire welders and cutters for an oil and nuclear valve factory in Western France but can’t find qualified employees. The head of the French Federation of Mechanical Industries Jerome Frantz said he expected a shortfall of about 15,000 workers for manufacturing positions over the next five years.  Pierre Berger CEO of one of France’s largest construction companies, Eiffage SA, also reported difficulty in recruitment. “Working with one’s hands in this country isn’t recognized,” he told Bloomberg, “except in luxury goods and for arty Parisian craftsmen.”

Taken together the two items perfectly encapsulate the French challenge as it attempts to negotiate a difficult economic and political situation. Unable either to penetrate the Asian market or to compete with German companies in Europe, PSA has no choice but to cut and reorganize. The Aulnay closure is a stark reminder of the “lack of competitiveness” highlighted by politicians left and right. President François Hollande pledged to make competitiveness a centerpiece of his presidency.

The Bloomberg report starkly reveals, however, why the effort will be so difficult and exasperating. There are jobs to be had—and jobs in sectors that have been traditional French strengths, like energy. Do the math: The 15,000-worker shortfall Frantz expects more than makes up for job losses as PSA Peugeot-Citröen. But it’s difficult in France even to capitalize on existing opportunities, let alone create new ones. As Marc Ferracci, a French professor who studies labor, told Bloomberg: “French employees are rarely willing to move, compared with the US and the UK, because the French housing market lacks fluidity.”

It was this state of affairs that Nicolas Sarkozy was elected to rectify in 2007. He failed to do so, but at least one can say on his behalf that resolving it requires real statesmanship rather than run-of-the-mill politics. For the problem is not simply one of regulation, taxation, or the housing market (although these are surely symptoms). Rather, it is the resistance to economic dynamism that is built into the very soul of contemporary France.

As Walter Russell Mead has amply demonstrated, the modern economy demands nothing if not flexibility.  The model of one job for life is gone, and current young people can expect shifting jobs and locations as the norm rather than the exception. While resistance to this dynamic has not been specifically French, it is especially evident here. When it comes to stating their work or profession, the French remain unable to say “Je fais,” insert task, saying instead “Je suis,” insert profession. This rigidity has left France particularly ill equipped to deal with the creative destruction inherent in a global economy.

Nostalgia for the French approach is not totally unwarranted. Attachment to one’s job as a vocation can breed depth and seriousness, and at the highest levels can produce staggering achievement. Also, as Plato said, it is just that one man has one job. But which job? Clearly not the ones that French people want to do. This way of doing things will no longer cut it.

The situation for France is hardly unprecedented. But in the 1980s and 1990s, the rise of Asian competitors in key French domains was still far off, and the country was buoyed by rapid economic growth globally and in Europe—and not least by good political turns like the fall of the Soviet Union and the opening up East European markets that initially consumed the French goods that they now manufacture.  

While this time around there seem to be fewer foreign lifelines, France does have resources to meet those challenges. It benefits from a high birthrate, still has quite a strong education system, and, in certain sectors like energy, engineering and the luxuries, it still performs at the very top globally. Further, the principles of Liberty, Equality, Fraternity do not need to be thrown out and in fact could prove indispensible as the country tries to navigate unchartered waters. But the economic bad news continues to pile up, and what seemed in the last decade like problems far over the horizon have become urgent as a result of the financial crisis.

In Giuseppe Tomasi di Lampedusa’s novel The Leopard, a young Sicilian nobleman, watching the collapse of his family and the whole aristocratic edifice of Italy, notes presciently that he and his ilk “have to change so everything remains the same.” The ever-darkening economic cloud in France should remind the country’s political class and citizens that if at least some things don’t change, everything will.