These infidels eat their damnation for breakfast, and other ruminations on the French economy.

"Why spend more [on your damnation]?" asks this
godless French ad in the Paris metro.

Anyone who has been to Paris and had the chance to be whisked hither and thither on the luxurious Paris metro -- it's bouquet, a mix of fresh urine and machine fumes -- has also noticed the adds (like the one to the right) pasted partout. You also know that any publicité within reach is either torn down or written upon, saying things about how advertisements steal your soul and objectify women or about how capitalisme anglo-saxon would destroy la Republique (along with various slurs directed at ole Sarko).

If there is one thing that French people seem to agree on, it's that (American) capitalism -- which is synonymous with greed, abuse, sweatshops, child-labor, closed factories, loss of jobs, desperation, McDonald's, and Britney Spears -- is not for them. That's fine. We at the B&G even have our serious misgivings about certain business practices around the world, but we place the blame squarely on the people who buy the products (French included).

We should pause for a moment and mention that we aren't expressing a sort of blanket disdain for everything French. We love France (more the smaller cities than Paris), and we love the culture. The French idea of working to be able to live comfortably, rather than working to get rich, is admirable. We think that's the way it should be.

However, we also think, to some extent, that the French need to face reality. You can't fight globalization when the world is already globalized. This, of course, is a reference to the government's recent moves to block "hostile" takeovers of French companies like Danone, Arcelor, and Suez. We've mentioned this before, the French idea of "patriotisme économique," and there was a wonderful article recently in the Washington Post warning Americans from falling into the same trap with the Dubai ports deal:

But what's really embarrassing about Cargogate is that it shows Americans acting just like the French.

I'm talking, of course about "economic patriotism," the charming phrase coined by France's poetic prime minister, Dominique de Villepin, for what is nothing more than pig-headed protectionism.

Under the banner of economic patriotism, de Villepin rescued Danone, maker of healthy yogurt and bottler of pure waters of Evian, from the clutches of PepsiCo, a purveyor of American junk food.

He recently designated 11 sectors of the French economy, including casinos, that are so sensitive that, heretofore, they will never be allowed to fall into the hands of the Dutch, the Germans or, heaven forbid, the Brits.

His government has made clear that it will never allow Mittal Steel -- a "non-European" company registered in Rotterdam and run out of London by an Indian native, with operations spread across four continents -- to go forward with its hostile takeover of its Paris-based rival, Arcelor.

And last weekend, de Villepin personally arranged the shotgun wedding of Gaz de France, the state-controlled gas supplier, and Suez, the French water and power supplier, to thwart a bid for Suez by Enel, a rich and attractive Italian suitor. So obvious was the patriotic intent that the boards of the two companies approved the deal on Saturday even before the price had been worked out.

Here's the hypocritical part:

What's so galling about all this is that, when it comes to cross-border mergers and acquisitions, French firms have been among the most aggressive, reflecting the widespread view among their executives that they can make better return on their investment in countries with lower taxes, more flexible labor laws and less government involvement in the economy. As the Economist magazine points out this week, only 43 percent of the jobs at companies on France's CAC -- the nation's index of publicly traded blue chips -- are actually in France.

This is a lesson for Americans and French alike about globalization. Companies, essentially, are no longer based in any country. Just look at the "Dubai" company, their cheif operating officer is AMERICAN Ted Bilkey. One could just as easily use the example of Mittal Steel mentioned above, as well as a hundred others.

The risk of not understand this is simple:

It is unclear whether the European Union has the power, or the will, to challenge the resurgence of economic nationalism that now threatens economic integration. But, in any case, it is hardly a model for the United States to follow -- whether under the guise of protecting the country against terrorists or protecting American companies and American jobs.

Instead, the future of the U.S. economy lies with tapping into rapidly growing economies of Asia and parts of Latin America, where there is acceptance, if not excitement, around the process of globalization, and deeper relationships with Britain, Canada, Australia and South Africa, which already embrace market capitalism. President Bush's trip to India this week is a milestone in that shift of economic focus and opportunity. Getting past Cargogate would certainly be another.

But, that's not the end of it, Frenchies. The recent protests from students all around France against the CPE (Contrat première embauche, roughly "First Job Contract") which, from what we understand, makes it easier to fire new employees. Anyone coming from an "Anglo-saxon" background may find it hard to believe how hard it is to get fired in France, but thereafter they wouldn't be shocked to find out how the quality of work and the money wasted on non-work are worsened as a result. According to the World Bank's Doing Business in 2004 :

Excessive regulation is associated with higher unemployment,30 especially for youths and women (figure 3.6). Cross-country analyses suggest that if France were to make its labor regulations as flexible as those in the United States, the employment rate might increase by up to 1.6 percentage points.

Not bad when your unemployment -- especially of youths, the one's protesting -- just increased again this month, ending a steady decline.

The French economic approach just seems completely backwards and juvenile to us. Then again, we're not economists. It just seems that every move made is either counterproductive or blind (like trying to defy globalization).

To close, we'd like to point out something that seems to be a pretty clear indicator of what happens when a country's population don't have much incentive to exceed expectations. We read it in Le Monde (our translation):

France's biggest economic powerhouses never change. The 25 biggest French companies have been around since before 1960, while one can say the same for only six in the US. France has no Microsoft, Google, Amazon.

Is the point made?

We're not against the 35 hour work-week, nor do we think five weeks vacation is bad. We just think that when the people are working, they need to have incentives (both punishments and rewards) to be effective. If not, you have a sluggish work force with no real drive to innovate.

Again, though, we're not economists, and we're not French.

Technorati tags: France, CPE, Dubai, patriotism, economics, globalization, capitalism