The Dismal Results of Dirigiste France

Whenever I despair of the intrusiveness of government in the United States, I cheer myself up by looking at France and recognizing how much worse things could be.   President Francois Hollande recently announced he would try to block General Electric bid’s for the energy business of Alstom, a French company. While France itself owns only one percent of the shares of Alstom, Hollande has arrogated to himself the authority to block such  a bid because he does not believe the combination as currently structured is in France’s “strategic interest, “whatever that means. One of President Hollande’s ministers even suggested that GE make a different deal with Alstom, combining the railroad-related divisions of the companies as well.  An independent analyst concluded that the minister’s idea was “ludicrous,” because GE produced diesel engines for freight trains while Alstom was in the passenger rail business.

One must be grateful for the consensus in the United States that executives and shareholders generally make the decisions about mergers and acquisitions under the laws of property and contract. Government discretion to interfere is limited to antitrust and national security considerations. The bailout of GM and the distortion of bankruptcy law was an unfortunate exception, but it was made at the time of the greatest economic crisis since the depression. In contrast, French intervention is common and constant.

The behavior of the hapless Mr. Hollande and his agents show how wise are the limitations in the United States on government fiat in the marketplace. Politicians possess little comprehension of business in general and no understanding of the details that make particular acquisitions succeed or fail.  Markets require local knowledge and depoliticized decision making to flourish. France with its dirigiste tradition of centralized decision making and political interference diminishes spontaneous ordering and its advantages.  France has also imposed large legal impediments to that order with restrictions on firing workers and limitations on working hours.

The results of a French model that combines onerous regulation of the labor market with government discretionary interference in the merger and acquisition market are dismal.  It is not widely commented upon by our press, but the per capita income of France as whole is  below that of our poorest state –Mississippi. French employment has been high for a long period with the current unemployment rate standing at over ten percent. And since unemployment is one of the greatest sources of unhappiness, this is the cause of much despair. France’s lack of economic dynamism also makes it hard to integrate its largely immigrant minorities into the rest of society. And youth—at least those with skills—are departing the nation in record numbers for London and even the United States. The word “entrepreneur” has roots in French but French entrepreneurs are taking their startups elsewhere.

France remains a wonderful place to visit. But its greatest value to Americans now is as a warning—a reminder that with a more heavy-handed state the glory that was France could become the glory that was America.

John O. McGinnis is the George C. Dix Professor in Constitutional Law at Northwestern University. His recent book, Accelerating Democracy was published by Princeton University Press in 2012. McGinnis is also the co-author with Mike Rappaport of Originalism and the Good Constitution published by Harvard University Press in 2013 . He is a graduate of Harvard College, Balliol College, Oxford, and Harvard Law School. He has published in leading law reviews, including the Harvard, Chicago, and Stanford Law Reviews and the Yale Law Journal, and in journals of opinion, including National Affairs and National Review.

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Comments

  1. gabe says

    Aaahhhhh! But our croissant loving friends are just attending to “externalities” after all! Long live externalities and the comfort they ultimately bring to statists!!!!Viva la externality or perhaps, “Liberty, Fraternity and Externality!!!!!! Or are equality and externality synonymous in the minds of the Progressive?

  2. R Richard Schweitzer says

    “. . . its greatest value to Americans now is as a warning -”

    “Warning?” more likely an example or demonstration of where our current U S trend will probably take us (with some differentiations).

    France, historically, and currently has been on the track of a “Managed Society” and extensively centralized (over 200 years) in that format.

    The current French Managerial Class is largely “cookie cutter” ENACS and Ecole Polytechnique sourced, but draw from scholastic merit in open competitive exams.
    The competition within the Class (so formed) continues as between those who enter government and those who enter industry, distribution or finance.

    The Alstom matter is a case of the government sector of the Class insisting on prevalence over the other members of the Class – at a time when the government sector has displayed incompetence, made significant errors and run out of resources (for the time being).

    We are beginning to see similar clashes in the sectors of the Managerial Class in the
    U S, where the format is less centralized (but the governmental sector of the Class is pushing hard on that) and the sources of the Class (for both sectors) are much more diverse – but individual motivations throughout may be pretty much the same. There is a symbiosis of sorts, of which there is evidence of propagation and increase.

    France gives us an example of what a centralized Managed Society comes to, right down into every facet of personal lives (as we see the trends here). Germany gives us another; England another; and Russia the extreme because of the sources of its Managers.

    Managers are the necessary adjunct of an Administrative State. An Administrative State is the predictable result of a polity that determines to provide to particular interests particular benefits and ameliorations from specific burdens. We now have that Administrative State; it has managers. Industry, distribution and finance are dominated by managers. They have “frictions,” but the motivations are similar; sometimes symbiotic (finance, e.g.) and generally becoming accommodative.

    France is more than a warning.

  3. johnt says

    I daresay the current Administration and those who support it cast a wistful eye upon the problems of France, they ask themselves, why do the French get to have all the fun? Power and destruction are the twin indissoluble pillars of the Left, their fingers itch, their brows sweat, their hearts palpitate at the thought of causing harm.
    It is hardly a question of misguided but innocent error, a factor of power lust and the unalloyed pleasure of destruction most certainly tickle their fancy, brighten their days, and give them hope for the future. So many things to destroy, so little time.

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