France’s Anti-Business Orthodoxy

In France, running a productive business is not important. Simply creating jobs — not wealth or innovation — is the sole purpose of enterprise. At least, that’s the government’s mindset in economically stagnant France. And there’s a danger that this mental disease is spreading to America.

Last month, the French government threatened to nationalize the country’s largest steelworks plant run by ArcelorMittal, after the multinational had idled its blast furnaces due to a 29-percent drop in demand over the past five years. The Socialist government gave ArcelorMittal an ultimatum: restart the furnaces and put French metalworkers back to work, or sell the plant to a buyer willing to fire up production (a tall proposition in the current economic climate). If the firm would chose neither of these options, the government would take the plant by force and resume production itself.

ArcelorMittal and the French government reached a deal earlier this month, in which the furnaces would remain idle, but there would be no layoffs and the firm would sink 180 euros of new investment into the unprofitable plant.

Unions were outraged and accused Socialist President Francois Hollande of “betrayal.” He broke with the French orthodoxy of business’s inherent obligation to provide jobs regardless of cost.

Today, the European branch of ArcelorMittal absorbed a write-down in its value totaling a whopping $4.3 billion. The steelmaker has been trying to get out of Europe and move to higher-demand regions like North America, but the strong arm of the French government is holding it back.

In a twist of irony, French Minister for Productive Development Arnaud Montebourg said amidst the dispute, “We no longer want Mittal in France because they haven’t respected France.” If he was actually concerned about French productivity, as his title would suggest, he would have tried to make doing business in France more attractive instead of chastising ArcelorMittal for idling its plant — a decision clearly based on productivity concerns.

Reducing France’s sky-high labor costs would go a long way towards this end, as a recent government-commissioned report indicated that a $30 billion reduction in labor costs would put the country back on a reasonable footing of competitiveness with its European neighbors.

But to Monteburg, “respect” for France means running a business for the benefit of the workers, even if it means running the business right into the ground. With a government thinking like this, it is no wonder that France ranks 21st out of the world’s 31 highly developed countries in the ease of doing business, according to the World Bank.

Stagnating at 0.2 percent economic growth last quarter, France is among the slowest growing countries in Europe — and it has a lot of work to do if it wants to break free. The French government should start by changing the way it views business — from a mechanical tool used to create jobs, to a delicate art that, when handled with care, cultivates wealth, productivity, and human innovation.

Pay attention, America. President Obama chastised Michigan’s transition to a right-to-work state last week as a move to take away workers’ “rights.”  In doing so, he promoted the idea that business’s job is not to create wealth, but to serve as a sort of public good where workers line up for jobs like horses at the trough.

The oft-repeated joke, “that the problem with the French is that they don’t have a word for entrepreneur,” unfortunately has a lot of truth in it. America must be sure to not let this economically indispensable piece of vocabulary disappear from our minds or enterprising spirit.