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France, Put Down the Wine and Learn About Industry From Canada

07/15/2014 12:48 EDT | Updated 09/14/2014 05:59 EDT

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France: Stubborn ''Big State'' remains unemployed. Coincidence? I think not.

France must confront its demons: The Big State and a Gallic attitude to labour productivity, as its economy suffers. Compared with Canada, France is living on past glories while Canada pursues a way for its people to live as well as they can in the here and now. In essence, the French need to go easy on the vino.

France had little to celebrate on its national day, after the announcement that unemployment in the country had risen to a new high, bringing the total number of those without work to a record 5 million people, a first that pushed France's unemployment rate, now at 9.8 per cent, ever so close to the dreaded 10 per cent mark. The rest of the year is showing no signs of wanting to improve.

With GDP growth at close to 1 percent, and business and consumer confidence at an all-time low, France is being forced to confront its demons -- the State is being forced to decrease its involvement in the economy.

''In France, the State is too big. About 27 per cent of the population is employed by the state. Another problem is that there are not very many people working. Only 45 percent of the population is in the labor force (compared to 49.3 per cent in the U.S.), '' warns Professor Stephane Garelli , director of the World Competitiveness Center, at the IMD business school in Lausanne, Switzerland. In fact, nearly 57 per cent of the French economy still flows through state hands.

As Garelli points out, the French still like to take the "pont" for the weekend, and to work less whenever possible (paradoxically, French workers spend longer hours in the office than most other workers when they do work, they just aren't productive) -- per capita economic performance is 8 percent lower in France than Germany, after adjusting for differences in purchasing power. The average French employee labours for just 1,580 hours a year, compared to more than 1,800 in Canada. And the French love to go on strike. Between 2008 and 2010, France lost an average of 27 working days a year for every 1,000 people, compared to just 3.4 days in Canada.

Mr Hollande in July convened a conference of "social partners" aimed at adding labour market changes to the pro-business programme of more than €40 billion in tax relief and €50 billion in public spending cuts he has adopted in an effort to boost stalled growth and stimulate employment. This year, payroll taxes paid by firms will be cut by 6 per cent. Public-sector pay has been frozen. Transfers to local government, the chief source of public-sector job growth, are to be chopped over the next three years by €11 billion.

It's a small start. Yet the government persists in supporting a social system that props up unemployment rather than seeking a means to incentivize job creation. There are still no proposals to support industrial investment in growth industries within the country -- almost all of that money is being taken abroad by French industry. The theory is to let companies make money outside of France, and to let the chips fall where they may back home -- high taxes will provide bread and soup for the unemployed.

Compared with France, Canada is pursuing a much more progressive and innovative policy to create jobs and restructure its economy. But France prefers 'la gloire historique' to living in the present. Vive la France? No, thanks.

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