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AB 2000 studies

Alain Boublil Blog


The French industrial crisis

As if the major economic crisis generated by the corona virus pandemic was not enough, France is also confronted with the major disruptions of its industrial equipment. To cope with what is appearing as a decline, it is risen the necessity of a re-industrialization and of re-localizations. The State is called to help to reverse the trend but it has not, it is the least which can be said, skimped on the means for ten years to try to remedy to it through tax cuts and reductions of social charges. The degradation observed today is revealing the failure of these policies, sometimes called supply side policies, and which can be found on economic indicators.

Industry and so industrial employment share in the economy is falling for ten years. It is even more important in manufacturing activities which are not more than 10% of the GDP. Industrial employment is near 13% against 20% in Germany and near 17% as an average in the European Union. But these criteria are not the most worrying. The French economy is diversified with a large financial sector and very important tourism activities. Numerous industrial companies have outsourced activities which are now included into services. These criteria are not enough to determine the magnitude of the degradation.

Foreign trade results are much more revealing. Despite the fossil fuels prices fall and the sharp recession provoked by the pandemic, France has registered in 2020 a 65 billion euro foreign trade deficit. Excluding energy, it has represented 40 billion and 57.5 billion for manufactured goods, excluding military products. The theory based on the point that this deficit would come from emerging countries, and notably from China, is not justified since the negative balance with European Union is the most important share of the deficit with 46 billion, which invalidates also the thesis according to which it would be the euro fault, which, being overvalued, would curb French exports. Tourism receipts usually offset a part of the deficit but the sanitary crisis has provoked a travels brutal stoppage and they fell. France current accounts balance so became heavily in deficit.

The most worrying is the trend. Regarding manufactured goods, in 2000 exports amounted to 300 billion and imports at 290 billion. Ten years later, exports reached 350 billion and imports 377 billion. In 2020, corresponding figures are 388 and 445 billion. We came from a 10 billion surplus to a 57 billion deficit. Benchmarks with Germany but also with Italy are overwhelming. In 2000, the first one had a 5% of its GDP surplus and it kept this level in 2020 and Italy, which like France was near equilibrium in 2000 has a 3.8% of its GDP surplus. Atop of that, French growth has been weak these last years. It is not an excessive internal demand compared to production apparel which has generated this heavier deficit.

Yet the speeches and public action have not stopped to put the strengthening of enterprises competitiveness at the heart of economic policy, in particular through a denunciation of high labor costs and the weight of tax and social charges. The successive governments have created the “research tax credit”, then the “CICE”, which they transform into a permanent reduction of social charges and, at last, have reduced corporate income tax rates without, we see it now, obtaining any result. A share of these fiscal receipts losses has been compensated by an increase of household taxes, which has weighted on growth and employment. As it was not enough, the claims are now about a reduction of “production taxes”.

The country innovation ability is also put into question with the Sanofi and Pasteur Institute failure to produce a vaccine as quickly as their competitors. But that must not lead to the stigmatization of these two prestigious laboratories. During the past, especially in vaccine domain, they have shown their proofs. But their failure has made us conscious of the France backing because they don’t constitute an isolated case. Fiscal incentives have not given the expected results and research expenditures have stagnated and their results have not been convincing, as we notice it today. Public research centers have known the same bureaucratic drift as health and they are cut from university world and from enterprises, as the CNRS with its 30 000 researchers. The best ones then live to go out and receive the most prestigious distinctions, as Nobel price. They contribute to France influence in the world but they don’t bring their talent to French companies where they would need a lot.

These ones have not adopted the good methods to take profit from globalization, what we find today in the figures. They thought it was enough to buy competitors to grow in the world and they launched themselves in costly acquisitions, frequently through indebtedness which has weakened there financial situation. Their executives have focused themselves on this part of their mandate, instead of going on the ground, of meeting and of listening their teams and their clients to take the good management decisions. They stayed in the world where they started their carriers, the great schools and the ministerial cabinets. They meet there these who succeeded them or their former colleagues, hired by management consulting firms or by banks.

They are there much more comfortable and it is not surprising that they mainly devoted themselves to this kind of management which has the Monopoly game in common. Banks are taking from it large profits through commissions or through financing these operations. They are focusing themselves on big clients and give few interests to midsize enterprises whose insufficient number constitutes a structural weakness of the French economy. It is also what makes the difference with the German model, always hailed as an example without France takes inspiration from it. In the industry, most of the executives made their whole carrier in the enterprise thanks to the priority given to internal promotion. . Banks are protecting family owned companies. The development and the success come from the quality of the products, from innovation and from the commitment all along the production cycle. At last, employee representation in the management institutions makes easier social consensus and a good sharing of profits. France is very far from this model. Instead of transferring billions without counterparts and precise objectives, the State would do better in encouraging a true corporate cultural revolution, which would be related to the executives hiring methods and their commitment in the operating management. The State must also encourage the bringing together public research and producing activities.

The French industry has still not found the good answers to the challenges created by globalization but it is still time to remedy to that. It must also be hoped that the country will do better to cope with the technological transformations made necessary by the climate change. It is not sufficient to put forward the risks. Yet it is necessary, as regarding globalization, to find the appropriate solutions to overcome them.      


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