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AB 2000 studies

Alain Boublil Blog

 

To rethink industrial policy

The huge damages caused by the corona virus outbreak on the French production plants as becoming aware of the risks generated by the foreign dependence on essential supplies have driven to the resurgence of a concept some believed it was forgotten or inefficient, the industrial policy. It had its glorious time during the Sixties, when trade borders were starting to be opened and during the Eighties when were revealed the weaknesses of the national production plant.

The neo-liberal turnaround in the Nineties in Europe as in the U.S. had made the concept put among the ideas and the practices of a bygone past. In 2009, when the American government nationalized General Motors to save what was then the first car maker company in the world at the height of the recession caused by the sub-prime crisis, it wouldn’t have been in the mind of anybody to rehabilitate practices related as coming from the previous world. In France, after the privatization wave occurred during the 1986-88 period and since 1993, enterprises launched themselves into a strategy based on de-localizations and huge foreign acquisitions, financed by indebtedness, without any reaction from the State. During that whole period, successive governments did not think it was well-timed to intervene, even when the State was a shareholder of the related enterprises. Foreign exchanges of goods, excluding energy, were deteriorated to the extent to become heavily in deficit from 2004 and industrial employment fell in a general indifference. That evolution was even at the origin of massive transfers in favor of enterprises to recover, as it was said, a lost competitiveness explained by excessive wages costs. Nobody then, or almost, noticed that Germany or Switzerland, which had labor costs much higher than French ones enjoyed large trade surplus.

The industrial policy concept was abandoned and along with that, its tools. Not only the State renounced to exercise as a shareholder an influence on these enterprises strategies but it continued its disengagement through the sale, every year, of stakes, even in enterprises which provided essential public services as energy. Another major tool, public orders, disappeared under the pressure of European regulations. The only thing which was important was competition which had to freely exist inside the European common market. The States didn’t have the right to favor enterprises, production units or jobs located inside their borders. The localization of an activity became irrelevant and the concepts of sovereignty or supply chains security disappeared.       

Some countries including Germany were very poorly affected by the consequences of these changes because the German production model, conceived just after the war didn’t need public intervention to have basic rules regarding wealth creation sharing and the safety of supply chains respected because that was done in a natural way. The major groups were protecting their suppliers. A consensus between the management and employees representatives who were present in the management boards was established from the beginning to lead to a fair sharing out of the created wealth and to protect employment. At last, consumers had, for a long time, understood that the level of employment and their life standards in their countries were depending from their behaviors. They were favoring each time it was possible products having a large share of their value added produced locally. At last, enterprises had always preferred internal growth and had rarely launched costly foreign acquisitions.

The violence of the crisis which hurts the French economy makes public intervention indispensable to save production plants and to redirect, in many sectors, with atop of them the car industry, investment policies and international development strategies. But that intervention must first occurr after a huge pedagogic effort to make economic agents behaviors changing, consumers as managers ones and to make social partners accepting that they can and they must find compromise between themselves whose result will be immediately rewarding  to everybody. The second prerequisite is to admit that industrial policy cannot give the expected results if different objectives are adopted in the same time because, in that case, we are sure that none of them will be fulfilled.

So, about the car industry, a support of demand is indispensable but it must not be limited to electric vehicles because, despite heavy subventions and due to their low autonomy, they only arouse a marginal appetite from clients. On the same, if it is chosen to support thermal insulation works to help the construction sector, it is counter-productive to limit these subventions according to the revenue level because these who have low ones are not in situation, despite these subventions, to finance works whose cost-effectiveness is only a long term one.

The support, which is indispensable to the survival of many groups must be conditioned to a major change of their strategy when it had, in the past in Renault for instance, consisted in massive de-localizations or, as in the pharmaceutical industry, to sub-contract the production of essential components. It must also have, as a counterpart, a radical attitude change with suppliers, through favoring proximity, guaranteeing them a reasonable profitability and especially in reducing payment delays which are imposed to them. In that domain, the State and the public companies must also make their practices moving. The government has enough pressure tools and if the top managers of some companies refuse these changes, the asked supports can be conditioned to their departure.

The rise of the State in the capital of some groups must not be a taboo. In many occasions, and it is not necessary to come back to 1982, that action has been successful, as in the Alstom case fifteen years ago or, more recently, with Peugeot. Taxpayers must be satisfied because in most of the cases, when the State sold its whole or a share of its participation, it realized a capital gain.

In the past, the supporting policy in favor of enterprises has been offered without any counterpart and was not focused. The sectors which were exposed to international competition did not receive more than these which were protected from it as retailers, banks or insurance companies. The analysis of French foreign trade evolution shows that the expected result, the rebound of a supposed lost competitiveness, has not been reached. These social and fiscal charges transfers have been financed by an increased taxation of household and an augmentation of the public indebtedness. That had an unfavorable impact on activity and French economy during these last ten years endured its lowest growth since 1945. The crisis it is going through will cause the deepest recession since the war. The only possible answer is a deep change of the economic policy.

The industrial policy is not a matter of ideology but of practices. To rethink it to adapt it to our international environment and to make it understood by economic agents would be a central element of this new economic policy. The seriousness of the situation demands the support of everyone and a change in behaviors because it is an illusion to think that the simple announcement of supporting plans along with hundreds of billions will be enough to ensure the rebound of the French industry.

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