For years, American fans of the blue model have argued that a more European approach would fix U.S. manufacturing job woes. Aggressive government promotion of favored local industries, they say, could reverse the decline of the blue-collar factory jobs that were the engine of our economy in the mid-20th century.Perhaps they should take a closer look at an actual European country to see how the European approach is working. France, for one, is struggling with the effects of massive deindustrialization, as factory workers lose jobs to automation and global competition. The FT reports that, during Sarkozy’s first five-year term, France lost 355,000 manufacturing jobs, and this trend shows no signs of reversing. Clearly, France’s industrial promotion isn’t working as well as its cheerleaders claim.The culprits here are familiar: France’s rigid labor laws, which make it extremely difficult for firms to fire workers, have made many businesses leery of opening plants in France; its social model, which forces employers to take on major expenses with each new worker; and finally—less well known, but no less important, a lack of innovation in its business community:
A recent European Commission survey found that 13 per cent of German industrial companies admitted doing nothing innovative between 2006 and 2008; for the French it was 47 per cent. Matthieu Pélissié du Rausas, a McKinsey management consultant, says: “If you have one industrial company out of two not innovating for two years, that is incredible. That has to change.”
The difference between the U.S. and European approaches isn’t that one avoids deindustrialization and the other does not; deindustrialization is coming, one way or another. Rather, the real difference is that the U.S. approach is more likely—unless prevented by statism, subsidies and backward looking policies—to help America find the shortest route to a healthy post-industrial economy.