Despite often absurd economic policies, France has produced corporate powerhouses, says Maurice Lévy. Imagine what it could do with sensible ones
Paradox – a statement or tenet contrary to received opinion or expectation; sometimes with favourable, sometimes with unfavourable connotation; from L. paradoxum, Oxford English Dictionary
France is a paradox. This was well illustrated in mid-November in the Financial Times. On two facing pages were the two aspects of the French reality. On the left, a long article about the terrifying wave of violence that was so dramatically sweeping through the poor suburbs of many French cities – a photo of a hooded youth brandishing a Molotov cocktail needed no words to convey the sense of malaise. On the right, a long story about France’s ultra-sophisticated nuclear power industry. From Valinox Nucléaire, a small manufacturer of high-grade nickel alloy tubes, to Areva, a global nuclear power services group, the FT noted how French companies are winning contracts around the world: indeed, the nuclear industry generates around j4 billion in annual exports.
Too often it is the first image of France that attracts attention. Yes, France has many deep and ingrained problems. We are now paying the price of a head-in-the-sand attitude to the challenges of globalization.
This attitude was already evident in the mid-1970s, when the quadrupling of the oil price transformed the world economy. While our Dutch neighbours resorted to their bikes, the French government told its citizens that they should continue to use their cars for weekend outings. They “deserved” it, after all.
That was just one in an unending series of economic choices that flew in the face of economic reality. The greatest and perhaps most absurd example came with the adoption of the 35-hour work week as an answer to endemic unemployment. The French could all work less and earn more. Wonderful!
So it is no wonder that French economic performance is so unsatisfactory today. The facts are inescapable. Some 10% of the active population is unemployed, including one out of four young people and four out of 10 immigrés. If there is a single reason why our cities exploded last November, it is this. At the same time, the stock of public debt has soared, from 20% of national income in 1980 to an astonishing 66% in 2005. If you throw in the liabilities associated with public-sector pension schemes, the true size of the public debt, according to one top economist, is j2.5 trillion ($2.9 trillion) – j42,000 for every man, woman and child in France.
The case for optimism
And yet, I am optimistic about France. This extraordinary country has some real competitive advantages and strengths. Consider:
»The French work hard – despite the 35-hour week. French white-collar workers are among the hardest-working in Europe, especially in the industrial heartlands of northern and eastern France. At Publicis, we joke that the 35-hour regime is so good that we do it twice a week.
»The French are productive. By many measures, French workers are among the most productive in the industrialized world.
»Education levels are extremely high. True, France may lack US-style super-universities – the MITs, the Caltechs and the Harvards. But overall educational levels are among the highest in the world. Education is universal, free, and standards are high.
»Meritocracy à la française is able to pick winners. The French system of Concours – merit examinations – is unique, though there are parallels in India and other countries. This allows a natural selection of human talent and also encourages a strong sense of discipline.
»“Le système D”. “D” as in the expression, “démerdez-vous” – in other words, “get on with it!” (or, more literally, get yourself out of the shit). Simply put, the French are world masters at getting around the rigidities of life, at finding solutions in highly pragmatic ways. The absurd complexities of the 2,501-page Code du Travail, the law covering workers’ rights, for example, have forced companies to be amazingly creative about how they use people.
This helps explain some of the stunning successes of France’s corporate sector. France, a medium-sized nation of fewer than 60 million people, is home to two leading car-makers – Renault and Peugeot. Both are world-class companies. The strength of BNP-Paribas, Crédit Agricole and Société Générale – to name only the largest – underscores how competitive and profitable our banking and financial services industry has become.
While other European countries have undergone a hollowing-out of their industrial sector, ours remains singularly strong and efficient. Look at our international success stories such as Air Liquide, Schneider Electric, Saint Gobain and Lafarge.
Total is now considered one of the world’s oil and gas majors while Suez, an energy and environment giant, is winning contracts from Laredo, Texas to Qingdao in China. In life sciences, Sanofi-Aventis is Europe’s number one pharmaceutical group and number three globally, while our bio-tech sector is thriving.
Even companies that were once virtual appendages of the French state are proving to be aggressive and globally competitive. Electricité de France, now being privatized, is one of the most efficient utilities in the world; Franco-German EADS, a leading aerospace group, is the main mover and shaker behind Airbus and the world’s largest helicopter manufacturer. Areva’s next-generation pressurized water reactors could be one of the answers to global warming. All these groups are exceptionally profitable and well-run.
And how can we ignore France’s unassailable position in beauty and luxury goods? L’Oréal, the world’s largest cosmetics group, is in 130 countries and has been rightly recognized as one of the best-managed companies in the world. LVMH is by far the most important actor in the luxury goods market. Through these two giants – along with a host of smaller French players – we dominate world luxury.
Most of these French success stories have one thing in common: extremely capable management teams that are perfectly adapted to the complexities and challenges of today’s world. They are well aware that France is but a medium-sized power and the resulting humility – often not reflected in our national politicians, it is true – helps them train our managers about different approaches, different cultures, different ideas. Being the challenger sharpens the competitive spirit like nothing else.
What is missing from this picture? A new generation of French political leaders in tune with the outside world. We need policies that are the exact opposite of those failed, head-in-the sand actions that have been the standard political fare in France for the past generation.
I firmly believe that we, as a nation, are more than ready to accept some basic economic principles that have been ignored for far too long in this country. Without easing the tax burden and simplifying labour law there can be no return of economic growth; without economic growth there can be no jobs; and without jobs there can be no hope.
I believe a changement de cap – a change in direction – is more than possible; it is inevitable. Inevitable, that is, if we French as a people are determined to ride the train of globalization, rather than be run over by it. If that happens, France will truly surprise the world.
CV Maurice Lévy
Maurice Lévy is chairman and CEO of Paris-based Publicis Groupe, one of the world’s leading advertising and marketing services groups.