The Hindu Business Line : France gears up for reform

Sitting in the public square outside l'Hotel de Ville (town hall) in Aix en Provence, France, on a beautiful day in May, I watched the place come alive with enterprise. Horticulturists from the area unload tables and racks from their vans, set up stalls, and a flower market blooms before your eyes. People stand there, selling their wares, arranging and re-arranging their products, and bargaining with customers.

By mid-day, they start packing up their tents, and stalls, load the flower-pots and baskets into their vans, and are off. Somebody turns up with a water hose and cleans the area. Then, like busy drones, the waiters from the cafes surrounding the square haul out tables and chairs and create an outdoor cafeteria and the place is again full of people sipping coffee or pastis. In another plaza nearby, Place Richelme, a farmer's market similarly appears and disappears every morning to sell fruits, vegetables, cheeses and other farm products. On the main street of the town, cours Mirabeau, crafts shops appear selling santons (carved figurines), locally woven textiles and calissons (confectionaries), and disappear by the end of the day.

Displaying industriousness

A couple of blocks way, outside the Palais de Justice, a street market for clothing appears and disappears on a regular basis. Each one takes a lot of work, setting up the stall and winding them up a few hours later. Aix, a university town and the home of painter Paul Cezanne, is busy through the year with tourists and these street markets have to compete for their custom with all the established stores and their attractive show-windows. The street vendors display an industriousness that the nation now needs to transmit to the rest of the economy that seems to be mired in an entitlement mood.

There are five big unions in France that have a legal right to represent all employees in a workplace, whether they are members of the union or not. Like all unions, such rules give them the power to protect the benefits for their members but in the process, they do not expand the pie of industrial activity and create more members. Those who are outside the unions, such as the artisans, traders and farmers of Aix, become the under-privileged even among the working class, having to work long hours to make their living.

On May 6, Mr Nicolas Sarkozy of the conservative UMP party beat his rival 53-47 per cent to become President for a five-year term. Although belonging to the same party as his predecessor, Mr Jacques Chirac, and in whose government he served, Mr Sarkozy is expected to make changes that would unleash the entrepreneurial talents and allow for hard work among his people.

Time to sacrifice

France's GDP growth is slower than that of Germany and the UK, and it also suffers from an unemployment rate that is about 8.3 per cent. It is the second-biggest economy in the Euro Zone, but is burdened with a rising public debt and a bloated state that takes up about half the GDP. France is also the haven of liberal benefits. Excellent hospitals that are free, free nursery schools and generous maternity benefits that have kept birth rates healthy. The French love their social protections and the time has come for sacrifice without seriously threatening the economic security of the weaker sections. Other countries such as the UK, Ireland, and the Netherlands have managed to reform their economies while still retaining their social welfare systems.

Mr Sarkozy's majority is considered a mandate that should embolden him to make some drastic changes. He need not wait for the results of the Parliamentary elections due to take place in June. Even during the days of his campaigning, he stressed that the French need to change and work more. Since 84 per cent turned up to vote and gave him a majority, it would be fair to say that the people are prepared for the changes he wants to bring.

The mood in France seems to be turning towards reform. Even his close rival, socialist party candidate, Ms Segolene Royal, criticised the work restrictions that seem to hold the people back. But we cannot forget that opposition can still come from the likes of a fringe candidate, the anti-globalisation protestor, Jose Bove, who rose to fame a few years ago for vandalising a McDonald's restaurant in protest. His extreme Left positions managed to get about 10 per vent of the vote.

The items on Mr Sarkozy's agenda include making significant changes to liberalise the labour market. France has a 35-hour work-week, shorter than the 40-hour week in most industrialised countries. Changing it would invoke much opposition, so he wants to loosen it by exempting workers from tax and social-security charges if they worked overtime. This would allow those who want to work more to do so and benefit from it.

France also has a reputation for frequent strikes in the public services and he wants to pass laws to guarantee a minimum service on public transport during strikes. Other changes that he has promised that would significantly improve the job market include penalising those who claim unemployment benefits if they refuse two job offers. His plans also include cutting personal and corporate taxes and trimming pensions in the public-sector (railway employees, for example, retire in their fifties with full pension).

Lack of opportunities

Businesses grow and enter new areas, hire people and make investments more easily if they are sure that their exit will not be made difficult. The French system makes it tough to lay-off individuals, and that has affected employment opportunities. Due to job protections, employers tend to hire temporary staff that keeps them in a permanent state of insecurity

Change, in France, does not come easily. Even before the elections, a group of part-time entertainers and other unemployed youth squatted on the roof of the headquarters of Unedic, the organisation that administers the benefits for the unemployed, in protest against new strict rules on benefits for unemployed entertainers. After months of negotiation with unions representing these entertainers, the government had tightened the entitlement rules in an attempt to deal with the growing deficit in the operations of Unedic. The French have taken to the streets and burnt cars in the past to protest change. The lack of opportunities for the minorities in the suburbs and the high unemployment rates there led to rioting in 2005, all triggered by an incident.

In an effort to redeem the situation, when the previous prime minister introduced a new job contract in 2006 that would make it easier for employers to lay-off the worker within a limited probation period (and thereby encourage them to hire more), national strikes not only made the government withdraw the plan but also killed the ambition of the Prime Minister, Dominique de Villepin, who was Mr Sarkozy's rival for the party's nomination for the presidential election.

Soon after his election, Mr Sarkozy took off for a couple of days of vacation on a millionaire friend's yacht. My students at the Institut d'Administration des Entreprises d'Aix en Provence were both amused and aghast. Look, they said, this shows the kind of person he is. We should have elected the socialist. Let's hope he uses his connections in the business world for more ideas on what needs to be done to put France back on a growth path.

(The author is a professor of international business and strategic management at Suffolk University, Boston, US. He can be reached at cgopinat@suffolk.edu)

More Stories on : Economy | American Periscope

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Pay disparity

CSO'S data estimates in the economy — New light on savings and consumption

Inclusiveness and inequality

France gears up for reform

Populist practices belong to the past

`Prime homilies'