France Hopes to Emulate American Business Development
In the Washington Post Sunday Outlook, Anne Dumas supplies the answer to an intriguing question:
[T]here’s one area in which France would love to emulate that place across the Atlantic — the ability to foster small businesses and turn them into big ones.
It’s not exactly haute culture, but these days this is a vital topic here in France, where the unemployment rate has been stuck between 9 and 10 percent for a quarter of a century and where not a single enterprise founded here in the past 40 years has managed to break into the ranks of the 25 biggest French companies. By comparison, 19 of today’s 25 largest U.S. companies didn’t exist four decades ago. That’s why France is looking to the United States for lessons. And it’s why it was meant as a compliment when the French media dubbed the former finance minister, newly appointed interior minister and potential president Nicolas Sarkozy “the American.”
Predictably, policy proposals revolve around government activities:
The first initiative has been to promote the idea of clusters, or what are called “competitive poles” here. The state plans to allocate nearly $1 billion over the next three years to about 20 regional projects, ranging from biotechnology to communication, from energy-related projects to nanotechnology ventures.[…]
The French government is also creating a National Research Agency, which will be granted $2.4 billion over the next three years. The goal is to finance projects, private or public, based on evaluation by international peers. It seeks to replicate the “bottom up” approach of the National Science Foundation in the United States.[…]
Chirac’s government has opened yet another front. The purpose: to enhance French competitiveness through large-scale industrial programs, like those used to promote Airbus, the French space program and the French nuclear industry.[…]
The last initiative designed to break France’s economic stagnation is to set up a Small Business Administration Ãƒ la franÃƒ§aise.[…]
But there’s hope for our friends:
French firms are also hobbled by rigid labor rules and a lack of flexibility that discourages innovation. And businesses are loath to add employees because it’s expensive. According to the Organization of Economic Cooperation and Development (OECD), taxes here make up 48 percent of the cost to businesses of paying the average production worker. Among OECD nations, only Germany and Belgium impose higher payroll-related taxes. In the United States, taxes on the average production worker account for only 29 percent of labor costs. For a fraction of the amount paid to unemployed workers, who receive 54 percent of their previous pay for up to two years, the French government could provide incentives for employers by easing taxes on new hires.
If it reprioritizes and places these issues atop the agenda, I’d say that it would have better chances for success.