France & the "French Model" of "Olde Europe" The Anglo-Saxon model The Nordic Model

1. France & the "French Model" of "Olde Europe" • The Anglo-Saxon model • The Nordic Model • The East European Model • The Mediterranean ………

2. France & the "French Model"of "Olde Europe"

4. France The regions

5. France: Period of Uncertainty & Anxiety • rejected the Constitution - a rejection by the people, not the government • unsure of role in Europe, world • severe strains through globalization - persistent high unemployment - threat to "French Model" - high government expenditure • Franco-German motor of EU now wobbly - Germany threatens to move to right • enlargement of EU threatens France's domination • poor relations with East European countries; (Iraq War - "they have missed a good opportunity to remain silent.") • poor relations with Anglo-Saxons, especially the USA - persistent anti-Americanism - resentment of English language • severe problems with immigration: failure to integrate immigrants into French way- of-life: ghettoes of high unemployment • social incohesion: powerful lobbies, civil servants, farmers, railway workers, "Université" • weak President approaching end of political career (court appearance?) • fragmentation of parties on both left & right • distance of people from government - arrogance of the French elite and "Enarques"

6. The "French Model" - magnificent, but under attack from "New Europe" AND economic realities? • excellent health facilities - financed through insurance • easy to see a doctor - short waiting times for treatment • excellent education facilities for young children - can start school as young as 18 months • super facilities for children in summer at "Centres de Loisir" • free state education from kindergarten to university • excellent benefits for parents with children • encouragement of large families • benefits include lengthy maternity leave as well as money • high protection against dismissal from jobs • high job security for civil servants • good benefits when unemployed • pension provision relatively generous • long holidays, especially compared to USA and Japan • close intervention of State in organization of society

7. The French Model - the downside? • high costs = high taxes in general • expensive to employ anyone - in bureaucracy & money • high unemployment - high proportion of CDD employment - (CDD v CDI) • public health system has growing deficit • abuse of "free" treatment - medicine, tests, doctors' time etc • free higher public education of dubious overall quality - general dissatisfaction • excessive power acquired by unions and the "université" • inflexibility to deal with change - tendency towards "street power" • excessive state interference and inflexibility: complications of setting up & running businesses • world-class major, prestige industries; weaker in small and medium business areas (PMEs)

8. A Tale of Two Payslips

9. The French Model - the State omnipresent & interventionist? • high percentage of workforce are government employees • many government institutions and bodies • government reaction to intervene, to spend state money - latest project to pour money into anti-Google browser (Project Quaero) • recent reaction to Constitution rejection? to spend still more state money on setting up regional technology centres

10. French Cultural Concerns - Anti-Americanism & The "Loi Toubon" • general fear of "cultural swamping" (mainly by Anglo-Saxons) • in 1994 France's National Assembly enacted "Loi Toubon" after its champion, French Culture Minister, Jacques Toubon • law called for ban, enforceable by fines of up to $1,800 and by prison terms, on use of foreign words in business or government communications, in broadcasting, and in advertising if "suitable equivalents" existed in French • committee previously established to draw up suitable equivalents where none existed; committee's work resulted in 3,500 new French words, mostly to replace English-language ones • France's Constitutional Council, country's highest judicial body, eventually weakened law, applying it only to government documents, but not before a bill was introduced in British Parliament authorizing British traffic wardens to impose on-the-spot fines whenever they heard a French word spoken • another law mandates that at least 40% of all songs played on the country's 1,300 FM stations be in French • considerable help given to film industry to protect it from Hollywood • little done to favourise learning of English - TV!!

11. The Other side of the coin • 12 million Britons holiday in France • 500,000 have homes in France What's the attraction? • space: France is four times as big as England with same population • climate: more sun, large, pollution-free beaches • food: fresh food easily obtainable: traditional local markets in every town - high quality of restaurants • cost: homes are much cheaper in France - couple retiring can sell house in Southern England, buy something much larger (especially with more land) and still have enough to serve as a pension • English people like DIY; there are many houses in rural France waiting to be renovated … • the French way of life ….. Part of the "French Model" that Mr Chirac defends • ease of access: low-cost airlines

12. The French Way of Life? • most Brits retiring to France live in small towns and villages • strong identity and independence • every Commune has a Mayor, and everyone knows his name • 80% of Communes have fewer than 1,000 inhabitants • Mayors have powers over planning and services • they are responsible for appearance, dignity, order and sense of identity • small schools, clinics, post offices and town halls are maintained - at a cost • strong sense of locality - refusal of purely commercial forces • large share of agricultural subsidies from EU • attempt to blunt the effects of market forces Is this sustainable? Is the "French Model" under threat?

13. The importance of agriculture in France • total agricultural area of metropolitan France is around 33 million hectares, i.e. 60% of the country • remainder divided between forest (15 million hectares) and non-agricultural land (7 million) • agricultural area slowly decreasing for many years; other uses increasing • French farmland about 23% of the total agricultural area of the fifteen EU States (before 2004 expansion) STRONG FRENCH ATTACHMENT TO PRESERVATION OF RURAL WAY OF LIFE …… The Danone Case!

14. Groupe Danone • multi-national food products company; headquarters in France • specializes in dairy products, especially famous for its yoghurt • owns Volvic, Evian, Lattella, Actimel/Activia,  Lu (biscuits) & HP Sauce (sold to Heinz June 2005) • world n° 1 in fresh dairy products & bottled water, n° 2 in biscuits & cereals • turnover 14,3€ billion; employees worldwide 88,600

15. Groupe Danone - history • founded 1919 by Isaac Carasso in Barcelona, as small yoghurt factory • at that time yoghurt not well-known in Western Europe, being from Balkans • name "Danone" chosen as diminutive of the name of his son  • 1929 first French factory was built • during WWII, company moved to New York, where Dannon Milk Products Inc. was founded • company returned to Paris in 1958 

16. Groupe Danone • excellent marketing - built up image as healthfood • strongly associated with farming & dairy industry in France • image of health, quality (contrast with coke & burgers!) • image also of ethical management, care for employees

17. Groupe Danone • July 19th - share price rose 8.10€ to 87.60€ on rumour of bid by PepsiCo • rumours frequent; Danone vulnerable to takeovers - 80% of Danone's capital freely-floating - no "poison-pill" defence against takeovers • rumour believed to have started in small article in "Challenges" • by coincidence, one of magazine's editorial consultants is sister of Danone CEO Franck Riboud …. magazine denied all connection • both Danone & PepsiCo denied all knowledge of any offer or takeover bid • French AMF (Autorité des Marchés Financiers) has launched investigation; some suspect rumour an attempt by Danone to flush out Nestlé

18. Danone Takeover - Establishment Reaction • French political establishment rallied to defend Danone from US "ogre"; one commentator compared takeover bid to Al Capone attempting to abduct Marianne • Dominique de Villepin: "A group like Danone is obviously one of our industrial treasures and we will of course defend the interests of France." • François Loos, French Industry Minister, repeated this by promising to list strategic French companies to be protected from hostile takeovers (even though there is free movement of capital in Europe and such protection is illegal if not impossible.) • Franck Riboud: "A hostile takeover, by whoever it may be, would mean risking losing our identity, our specificity, our culture." • Patrick Ollier (member of Jacques Chirac's party): "I find it scandalous to see the jewels of French industry going overseas, especially under the banner of Pepsi-Cola, when we're talking about Danone, the symbol of French dairy products and French quality." • Jacques Chirac said he was "particularly vigilant and mobilized." • some unions called for the nationalization of the company

19. Danone Takeover - Establishment Reaction • Olivier Peyrin, Paris investment banker: "If this government loses Danone, the left will say: 'They have given in to American capitalism.'More important, Danone is so intertwined with French dairy and agricultural policy that to surrender it would be tantamount to political suicide." • Pierrre Labasse, author: "The French in general have a very bad image of American multi-nationals. Big American companies are considered soulless, only interested in making money, the very incarnation of the worst aspects of globalization." • issue became a contest between purity of Evian water and sweet fizzy cola some French call 'American champagne' • affair taken to represent French quality and morality compared to American unfeeling (and low-quality) multi-nationals and consumerism

20. Danone Takeover - Business Reaction • Renaud Dutreil (Minister for PME - small & medium-sized businesses): "The government does not have the right to interfere in the affairs of private companies." • Business leaders remained mostly silent on the matter …….. Why? Hypocritical? • French companies very active in recent years in foreign acquisitions • Cap Gemini took over major US consulting firm Ernst & Young in 2000 • Vivendi bought USFilter for $6 billion • EDF has 25% of the electricity supply market in the UK • Alcatel has bought several US businesses, including Xylan for $4 billion • in 2001, French companies invested 5 times more in US than US companies in France • since January 2005, French companies spent over $60 billion on foreign acquisitions

21. Danone Takeover So why the nationalistic, almost hysterical reaction? Why all the fuss about Danone, when Groupe Taittinger's recent acquisition by US Starwood hardly caused a flutter, though Taittinger also traditional, French luxury brand? • general anti-Americanism • suspicions of globalization (when it doesn't suit France!) • assertions of moral supremacy (especially over Americans) in way companies are run • closeness of Danone to French agriculture & dairy industry • need for government to be be seen defending farming interests and France in general • government a wounded tiger lashing out after rejection of Constitution referendum • when weak, go onto the attack …… like attacking Britain's rebate at EU summit in July

22. The Nordic Model

23. The Nordic Model…. The rest are green with envy …. • many social benefits "from cradle to grave" = high taxes • yet, economies generally doing well …. • Finland, Denmark, Sweden & Norway in top 6 for competitiveness • high standards of education, health & living standards – low corruption • unemployment relatively low (but how real are figures?)

24. The Nordic Model….

25. The Nordic Model….

26. The Nordic Model….

27. The Nordic Model….

28. The Nordic Model…. HOW DO THEY DO IT? • painful restructuring in 80s/90s • manufacturing allowed to decline without paranoia • R&D and development of services privileged • example: Getinge, maker of medical respirators, 120 out of 300 in R&D • "mature", realistic attitude to globalization, outsourcing, delocating…… • workforces flexible – agree to adapt hours to work • more acceptance of dismissals • co-operative unions – management-union partnerships, not confrontation • workforce generally rejects protectionism – accept restructuring COST OF NORDIC MODEL? • high taxes: 50% of income compared to Anglo-Saxon 35% & French 42% • people accept it, as benefits are good ….

29. The Nordic Model…. SO, ALL IS ROSY IN GARDEN? • Nordic countries on upward curve, but nothing lasts for ever • high taxes are brake on economy: IKEA, TETRA PAK, SKYPE all based outside Scandinavia • massive benefits of oil to Norway, Steel in Sweden & wood pulp to Finland • Norway just elected leftish government ….. WHY NOT EXPORT THE “MODEL”? • human nature to want the benefits, but not the pain • cultural gulf between Northern & Southern Europe • being a large country not always a help (pretentions ….) • Adoption of Nordic model demands change in "Olde Europe" mindset

30. Bureaucracy typical of "Olde Europe"? France, Germany, Belgium & Luxembourg ….

31. E.U. Bureaucracy? • the Italian pilot • the new traffic lights • farmers paid not to grow anything • farmers dumping apples, collecting their EU guaranteed payments, then going home to grow more apples • EU projects • The Denied Boarding Directive • the Scottish hill water insanity (http://www.guardian.co.uk/comment/story/0,3604,1558418,00.html • the Thai shrimps: (http://timworstall.typepad.com/timworstall/european_union/) Jose Manuel Barroso, boasted that the EU had given €2 billion in aid (about £1.4 billion - three quarters of it raised in private donations to charities). But the prime minister of Thailand, Thaksin Shinawatra, sternly responded that his country did not want aid from the EU. It wanted a repeal of the crippling tariff imposed by Brussels on Thai shrimp imports, which had cost his country, the world's largest prawn exporter, £3 billion since 1997, twice as much as the aid the EU was now offering.

32. And German red-tape? • four million civil servants • 90,000 laws & regulations • many claim this stifles business • estimated costs for German business = €46 billion • paradox of great business and poor bureaucracy Patricia Ferer wanted to open tea shop • not allowed to serve milk in jugs, only plastic containers (requirement to show expiry date) • forced to watch four-hour "kitchen-horrors" film at Chamber of Commerce; then given Certificate saying she'd watched it • multiple permissions required from different bodies Running a business • with more than six staff, you have to register them • 18 different forms from different departments • each extra employee costs company extra €4,500

33. German red-tape continued • municipalities suffer from flood of legislation from Federal Government and Länder • small town Lippe set up foundation to lend venture capital to new entrepreneurs in region: district council unanimously approved establishment of the new foundation, but state politicians debated nine months on whether establishment of such an institution violates the municipal rules or not • The small town of Barntrup is even supposed to close down a 30-year-old school because it does not comply with the latest fire regulations. It is a one-storey building in which "nothing has ever happened". • "BASS" one of worst examples of red tape. The "BASS", which is the acronym for the "Consolidated Official Collection of School Rules", stipulates how many teachers must accompany a class on swimming trips, what helmets pupils have to wear when skating. (school trips in Europe …) • "BASS" contains so many rules and regulations that people supposed to apply them can no longer find their way through them • Germans aware of problems - some attempt to improve things, but don't hold your breath …