Vive La Resistance?
Published on: April 25, 2012
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  • counterparty

    “The most logical approach would be for Germany and a handful of others to exit the euro, but for the moment ideas like that are taboo.”

    Logical for who? That depends on perspective and what can only be seen as a subjective evaluation of interest. For Germany (though it is also important to consider the other relevant groupings of the stakeholders involved) it might not make much sense. The country would be surrounded by a Eurozone with a weaker currency, thereby blunting the remaining member countries’ demand for newly-Deutchmark-denominated German exports and allowing the periphery to regain competitiveness with Germany. Despite worried citizens and the trying politics of union, it’s easy to see how Germany could do worse than to maintain the status quo, considering that it has reduced unemployment to below 6% and seen about the strongest growth in the region – thanks in no small part to the still-growing dominance of its exporting industries.

  • Kenny

    1. “French want their kings, premiers, presidents and emperors to project a convincing image of French grandeur and importance even if they can’t deliver the real thing.”

    That’s funny because it’s so true, and the French don’t realize how ridiculous they look to the world as they reach back 200 years for their glory days..

    2. ” … he will have once again identified France with a cause greater than itself.”

    Exactly right. Hollande will be the leader of the enraged parasites. Parasites can do damage, but they can’t prevail.

    3. “For Europe — and for investors worldwide — that will mean interesting times.”

    Capital will flow out of France and the PIIGS. Some the the U.S.A., a lot to Germany and Switzerland.

  • Kris

    “Asia, where the new world powers see France, at most, as a source of good handbags.”

    You mean “as a source of ‘inspiration’ for good handbags.” 🙂

    Speaking of the French elections, Melenchon has received over 10% of the vote and has been actively courted by Hollande. This man believes that the best course of action for France is to massively increase spending. How is this to be paid for? Easy! A 100% tax rate on earnings over €360,000.

    “The next French president will take good care to look a bit less like Petain and a bit more like Clemenceau”

    Clemenceau? He of the Treaty of Versailles? The treaty that imposed heavy reparations on Germany, obligating it to pay large sums of money to other European countries? Thus wrecking its currency? Leading to the problems of Weimar and the subsequent developments?

    Just checking.

  • Mrs. Davis

    How much of the PFIIGS debt is held by German banks and what will they have to mark it too when the EDUro floats against the D-Mark?

    It won’t be easy for the Germans, but the French will do all they can to make it necessary and acceptable for Germany to exit the EUro one cold and dreary Sunday evening.

  • eon

    The elephant in the living room of course is that the present situation in Europe, “jailers” and “bailers” alike, is a massive indictment of socialism. Put simply, the Europeans have proven it cannot work, by trying it in every way conceivable from brute force (WARPAC) to the “Third Way” boutique style beloved of the British New Labour Party, Sarkozy, & etc.

    There just isn’t enough money out there to bankroll it. And there never will be. Period. Dot.

    What this means for Europe, and the rest of us, is that “progressives” will have to give up their delusions if they want their political power structures to survive. I don’t see this happening, because they are too firmly wedded to their dogmas, and frankly are too firmly entrenched in power that they enjoy wielding. Which means that the most likely outcome, in France and elsewhere, is a crash; economic at least, and possibly societal as well.

    The results could make 1848 and 1919-29 look like a kid’s birthday party by comparison.

    cheers (I think…)


  • thibaud

    The “handbags” slur may gratify the francophobes here, but it only that makes WRM look ignorant. Only someone with no experience or knowledge of global industry and cross-border finance would say such a silly thing.

    In reality, France has one of the most robust and diversified industrial economies in the world, with global leaders in aviation, telecommunications, defense, construction, oil & gas, oilfield services, semiconductors, specialty manufacturing, insurance and consulting.

    France’s corporate sector punches far above its weight, especially when you adjust for population. A little over half of the 500 biggest corporations in the world are to be found in four advanced countries: the US (133), Japan (68), Germany (35) and France (34). Here’s the number of Fortune Global 500 companies per million population for each nation:

    France 0.5
    US 0.4
    Germany 0.4
    Japan 0.3

    And lastly, just in case anyone still believes that France’s corporate sector is not a powerhouse that compares favorably with our own, here are a few of the cross-border acquisitions I recall in which a French multinational swallowed up an American top-tier company in its industry:

    – Alcatel took over Lucent

    – Capgemini took over Ernst & Young

    – AXA Financial acquired Bank of America’s private equity portfolio, also MONY group

    – French energy majors including Total and Electricite de France (EDF) are taking large stakes in US energy assets and energy companies across the board, including Chesapeake Energy, Constellation Energy, and direct purchases of acreage across the Utica and other shale deposits.

    I’m sure there are many others, but these are a few off the top of my head. As those of us who’ve worked for French multinationals know, French CEOs and senior execs are as shrewd, tough and farsighted as the best American execs.

    France has plenty of problems, including a large segment of the French populace that’s sullenly hostile to capitalism, but an absence of world-class industrial and advanced services companies is not one of them.

  • Jim.

    “Whatever happens, we have got
    The Maxim gun, and” well, so have they now. Oops.

    Runaway government spending on social programs will not restore growth. If anything, it will do the opposited, long term.

    Europe is finally sliding down to the position it has been destined for ever since China and other formerly third world countries started picking up industrialization. The point is not that France is no longer special; the point is that Europe is no longer special, in terms of economic comparative advantage.

    So, as the world becomes a fairer place (income and thus consumption is redirected to the 3rd world) and the global economy fails to increase anywhere near as dramatically, France, et al, find their debt-financed standards of living unsustainable.

    More debt will not make unsustainable social spending more sutainable. Hollande will fail, long-term. Austerity is inevitable. “Growth through social spending” is a mirage– a cruel hoax, most of all falling on the young.

    Growth– real expansion — requires new frontiers, new productivity, and not just a bunch of slackers demanding their subsidy.

  • Anthony

    “Europe’s debt crisis is threatening a political order that has been built up over the course of more than a half century.” As you say WRM, France feels trapped. Yet, France’s problem is part and parcel of aforementioned quote as well as consequence of globalization – crisis of the old order (how do we reconcile globalization and the Westphalian state system).

  • thibaud

    More disinformation, this time from Gideon Richter: he writes that “The French know that their cherished social model – with its excellent infrastructure, healthcare and pensions – has been built upon an unsustainable mountain of debt.”

    “Mountain”? Really? Since the crisis, French debt-to-GDP has gone from around 60% to 85% – right where German debt-to-GDP is, and substantially below our own triple digit ratio. Long-term rates on French debt remain quite low.

    Austerity is fine for tiny island nations like Ireland and Iceland whose problems are almost entirely due to property bubbles and out-of-control speculation abetted by corrupt pols (in Ireland’s case) and dishonest bankers (both nations).

    Austerity is not appropriate for the rest of the Eurozone, which needs growth, not more root-canal economics. Dropping the euro and a sharp, swift devaluation of the local currency is the obvious answer for Greece, just as devaluation and (de facto) default was for Russia in 1998.

    A smaller eurozone will allow Germany, France and the other powerhouses of Europe to get back to the high-growth track that Sweden is pursuing.

    btw, here’s Swedish and American GDP growth compared:

    GDP Growth, 1997-2007
    Sweden 3.57
    USA 2.84

    GDP Growth, 2008-2012
    Sweden 1.41
    USA 0.62

  • Walter Sobchak

    “Over at the estimable (but paywall protected) Financial Times”

    If you give us the full title and author of the article, we can search Google. If we find the article on a Google search we can click through and read the whole thing.

  • Walter Sobchak

    Is this it?

    GIDEON RACHMAN: Ailing ‘French exception’ will be EU’s problem

  • thibaud

    @ Jim – “Growth– real expansion — requires new frontiers, new productivity, and not just a bunch of slackers demanding their subsidy”

    Economists know that France for a variety of reasons (both good and ill) has traditionally surpassed the US in productivity. Partly this was due to high marginal labor costs – which ironically meant that French firms spent much more on cutting-edge IT than their US counterparts, making them more competitive than their US rivals (cf post above about French multinationals acquiring US firms).

    But thanks to the 2008 crash and the sharp drop in real wages for many US workers, we American slackers have just caught up to the French. Here’s the latest OECD productivity data:

    GDP per hour, current prices, US$:

    France 57.7
    Germany 53.6
    Netherlands 58.8
    USA 59.0

  • Jacksonian Libertarian

    @thibaud is presenting a bunch of data above in an effort to say that the French economy is stronger than it appears. So I searched and found this site

    Which shows France’s share of Global GDP going back to 1980 when they had ~4.4% of Global GDP, this has dropped quickly over the last 30 years and is expected to be 2.65% in 2015 for a 40% drop. The US on the other hand has been maintaining its share of Global GDP, only losing some of its share in the last decade as Government borrowing has reduced the capital needed for growth, by some $10 Trillion. In any case the French and European share of global wealth is dropping like a stone and it’s because paying for the Welfare State is bleeding their economies dry of capital from massive Government borrowing.

  • Mark Michael

    WRM: “Bailers and jailers.” That’s a clever phrase, but are those the only two practical options for the Eurozone? What about the Political Class just letting things be for awhile? I realize for a government-oriented, we’re-all-in- this-together-oriented person, that’s heretical, but if the ECB, the national central banks (CBs), the pols privately tell the private-sector bankers and the PIIGS pols that “That’s it, folks! No more German taxpayers’ euros, Dutch euros, Finnish euros, etc. No more printing lots of euros by the ECB. You’re on your own.”

    The private sector investors were just forced to take a big haircut on the Greek debt. They’ve gotten a pile of euros from the ECB to reinforce their balance sheets. They now know that “sovereign debt” is NOT riskless as they were allowed to assume under banking rules. They need to properly assess the risk of the sovereign of each country of which they hold its debt.

    If Italy, Spain, Portugal run into trouble rolling over their sovereign debt, tough! You and your creditors figure it out. You’re on your own here on out. Cut a deal, promise to rollback the pay of your government workers, shave a little off welfare payments, stop funding low priority things.

    I’d mention that this is pretty much what Ireland has been struggling with for 3+ years. They’re still alive and breathing it seems. They still use the euro. I saw some figures that the average Irish wage has dropped in double digits – forget the exact amount. Maybe 12% since the crash. Lots of foreign workers went back home.

    An analogy is any big American state that’s being profligate at the state level. For example, California has 33 million people and an economy that’s bigger than many European countries. They can’t issue a “California dollar” and proceed to devalue it, making their exports more competitive with Nevada, Arizona, & the other 47 states (and foreign countries).

  • thibaud

    @Jack #13: “thibaud is presenting a bunch of data above in an effort to say that the French economy is stronger than it appears”

    You’re distorting my posts and my intention. WRM made the bizarre judgment that France is perceived “at most, as a source of good handbags.” This is a silly and embarrassing remark, as I pointed out. I did not make a judgment about the relative economic weight or growth rate or attractiveness of any particular national economy or economic model.

    I simply wanted to point out the absurdity of a common misperception that I’ve repeatedly heard voiced by ignorant Americans, especially those of a certain ideological persuasion who have no global corporate experience in fields such as aviation or energy or oilfield services etc.

    France may well be losing the global economic battle, but there’s no need to pretend that it is not a major economy with many great and influential global corporations.

    American ignorance of the actual state of European economies and European standards of living does us no favors. There’s much that each side of the pond can learn from the other.

  • Kris

    [email protected]: “Economists know that France for a variety of reasons (both good and ill) has traditionally surpassed the US in productivity.”

    They know no such thing. What they know is that France has in the past surpassed the US in productivity per hour. In other words, when the French who do bother working actually bother doing so, they are indeed productive. (In other news, it’s amazing how much more productive I am in my first weekly hour of work than in my 60th.) And as you note, France has slipped by this measure as well.

    And regarding your point @6 about the strength of French multinationals, do the statistics you present take into account the differing levels of government “support” for big multinationals in France and in the US.

    (Not that some of your points aren’t well taken, but you seem to be pushing the pendulum farther back than warranted.)

  • thibaud

    Kris – “productivity per hour” is the preferred definition. If you look at productivity per worker, you get a distorted picture when unemployment is really high, as it is in the US. (Which, as you probably know, has an unemployment rate nearly twice as high as that of France’s continental European peers Germany and the Netherlands).

    In my experience working for a French multinational, my French colleagues were more efficient and productive than my US colleagues in large measure because it was not acceptable to spend countless hours refining, say, a powerpoint presentation that had already hit diminishing returns, especially when such busywork took one away from family and friends.

    As to French multinationals, I see no evidence that they receive more state support than their US peers, which are in the main rather lavish recipients of US corporate welfare and Buffett/Hathaway-style favoritism (see his investments in GS, GE, the railroad that carries much of the oil that Keystone would have and should have carried, etc). Neither Boeing nor Airbus is more distinguished in this regard: they both benefit hugely from government contracts and support for “strategic” sales overseas.

  • Tom

    Although, I would like to point out that WRM did not say that France was, at most, a source of good handbags–he said that the rising Asian powers saw them that way, and I’m not sure if he’s far wrong about that perception.

  • thibaud

    @Tom – so when Airbus (or Bouygues, or Schlumberger, or Alcatel, or Total, or Capgemini) closes a multi-billion dollar deal in Asia, you mean the Asians are convinced they’re actually buying handbags?

  • Jim.


    Apologies for using “productivity” in something other than its usual sense.

    Please reconsider my last paragraph in the following sense:

    We need new frontiers, new sorts of things being produced (e.g., computers, smartphones — or cars and dishwashers, back when they first appeared on the market), and not just a bunch of slackers demanding their subsidy.

    Again, I apologize for not communicating my thoughts clearly.

  • “In my experience working for a French multinational, my French colleagues were more efficient and productive than my US colleagues in large measure because it was not acceptable to spend countless hours refining, say, a powerpoint presentation that had already hit diminishing returns, especially when such busywork took one away from family and friends.”

    A THOUSAND times no! Better that your top performers should be engrossed in countless hours of pointless and even counterproductive busywork, than that they should betray to their co-workers even the slightest hint of having a life outside the workplace. Don’t you realize there are REPUTATIONS at stake here?!

    Levity aside, many thanks for a priceless anecdote.

  • thibaud

    JR – funny, but a colleague of mine who spent most of his career in the military (air force intel) said that the most highly regarded senior officer in his group used to force the office employees to leave at a predetermined hour by ordering their reporting officers to go around the office and summarily shut down their computers at that time.

    The American corporate culture worships busy work. Other countries do not.

    There’s plenty we can learn from them about work-life balance and a TRULY pro-family version of capitalism.

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