The French Economy’s Adaptation to Globalization Has Been Remarkable

Philip H. Gordon and
Philip H. Gordon Former Brookings Expert, Mary and David Boies Senior Fellow in U.S. Foreign Policy - Council on Foreign Relations
Sophie Meunier

April 16, 2002

In your book [The French Challenge: Adapting to Globalization], you mention the reasons why you think that France has trouble adjusting to globalization. In your view, which difficulties have been the hardest to overcome?

Sophie Meunier: France is, of course, far from being the only country where globalization poses political problems or is contested by part of the public. However, globalization poses a particular challenge to France for at least three reasons. First, it directly threatens the French “dirigiste” tradition, because of the loss of state control of the economy—and society—that it implies. Moreover, globalization irritates the French because they are historically very attached to their culture and their identity, which seems today to be directly threatened by a globalization that is often confused with Americanization. Finally, globalization is particularly difficult to accept because it seems to make France’s aspiration to an international role even more elusive. Thus, when, in a European poll conducted before September 11, people were asked: “what does the word ‘globalization’ primarily evoke for you?”, 25% of French people questioned answered “domination of the United States,” compared to only 8% in Italy, 6% in Great-Britain, and barely 3% in Germany…

How has the French economy experienced, during the last thirty years, this “globalization by stealth” that you describe?

Philip Gordon: The French economy’s adaptation to globalization during the last twenty to thirty years has been remarkable. We should not forget that twenty years ago when the left came to power they wanted to end capitalism and flirted with the idea of economic isolationism. Today this same left—even the same individuals—is managing an unprecedented international integration of the French economy: international trade has risen to 25% of the gross domestic produce (GDP)—to the same level as that of Germany, and two times more than that of the American economy; French privatized companies conduct mergers and acquisitions everywhere in the world and like never before; foreign direct investment (into and originating from France) has never been as high; the single European market for goods, services, and capital exists and functions; nearly 40%, on average, of the stocks on the French market (la Bourse) are held by foreigners; many “French” companies—such as Alcatel, Renault, and Michelin—earn more than half of their revenue overseas.

The most fascinating part of this is that French leaders refuse to admit it. This is why we call it “globalization by stealth.” Faced with a public that always counts on the state—among other things—to provide jobs, to insure social protection, and to guarantee pensions, French politicians do not want to admit that they have, in reality, less and less control of the levers of the French economy.

What obstacles remain for French society and its economy?

Philip Gordon: Dirigisme in France no longer exists. Lionel Jospin has privatized (even if he prefers to use the euphemism “opening up of capital”) more than all the governments of the right that preceded him. New CEOs no longer turn to the state before making decisions on their acquisitions, their mergers, or on anything. Even the famous 35-hour work week has been applied in a rather flexible fashion, with the annualization of work time and the re-negotiation of contracts, for example. From now on, it is no longer the state but the shareholders—including foreigners—who decide the future of companies. Of course obstacles remain. Social charges represent a little more than 44% of GDP. There are too many regulations and entrepreneurs face too many obstacles. France has made enormous progress in the domains of the Internet and computer use, but it remains behind its European partners. The “new French challenge” consists therefore of continuing to liberalize the economy and to adapt to globalization, while not abandoning the social protections of the traditional French economy, and without losing French identity and culture.

In the presidential campaign, the candidates seem preoccupied by national issues. Is this indicative of the politicians’ powerlessness with regard to large global economic phenomena they cannot control?

Sophie Meunier: The debate on globalization, like the debate on European integration before it, contributes to a realignment of traditional political cleavages. On this subject, the extremes have more in common with each other than they with the center, and the parties “of the government” have more in common amongst themselves than they do with the extremes on their own sides. Jacques Chirac’s discourse on “humanizing globalization” and Jospin’s on “managing globalization” are practically interchangeable, no matter what they might say. And this is not surprising: in a country where the citizens are used to turning to the state for the protection of their interests or to find solutions to social problems, it is difficult for the guardians of the state in question to admit that there is little they can do in the face of the markets and tendencies of the global economy. Paradoxically, Europe, the precursor of neo-liberal globalization, has become the best asset that France can have in countering the harmful effects of this same globalization, and this is why there is so little debate today in France on the subject of European integration. It is also striking to note to what degree globalization has permitted the emergence of increasingly influential new political forces, from associations of company directors to non-governmental associations and organizations.

French reticence with regard to globalization is often interpreted as a resistance to the American model. Do you think the current stakes—diplomatic, commercial, cultural—tend to lessen or aggravate these differences?

Philip Gordon: Yes, French resistance to the anglo-saxon model has a long history. Franco-American tensions today resemble in part the tensions of the 1960s, with the criticisms of De Gaulle of American monetary, diplomatic, and military hegemony, and also, of course, the “American challenge” of Jean-Jacques Servan Schreiber (of which our book is a sort of echo) concerning the large companies that threatened to dominate Europe. Today these differences are not about to disappear for at least three reasons. First, if the United States was already a superpower during De Gaulle’s time, it is even more so today, and France does not tolerate the American hyperpower very well. Secondly, Europe is more and more in a position to meet American challenges, whether it be in the area of the environment (the Kyoto protocol), trade (steel and the WTO), or perhaps in the future, defense. Finally and especially there is the fact that globalization is often seen in France—not always incorrectly—as the equivalent of Americanization. The more trouble the French have in managing globalization, the more likely they are to resist the American model.

Sophie Meunier: The equation often made in France between globalization and Americanization is not about to disappear, on the contrary. And this is why it is necessary to engage in a constructive dialogue in order for both sides to learn something about the other. This is what we have tried to do with this book, published at the same time in France and the United States, and written by an American specialist on France and by a French woman living in the United States. Overall, the French do not go far enough in their frank acceptance of the positive sides of globalization. This is largely the responsibility of politicians, on the left as well as the right, who choose an easy short-term solution in the form of demagogic speeches that criticize globalization. But accepting the positive sides of globalization does not mean giving a blank check to the American social, economic and cultural model. We do not think that economic development follows a linear trajectory that inevitably ends up with the American model. It is in this sense that the notion of “managed globalization” has more to it than pure rhetoric. This is also the “new French challenge”: a challenge launched by France to the rest of the world (the United States included) not to accept or reject globalization as a whole, but to adapt to it in way that exploits its benefits and at the same time tries to manage its potentially harmful effects.