WORKED SO WELL IN JAPAN:

Tech Development A French Resolution (Peter S. Goodman, December 9, 2005, Washington Post)

The notion of a notoriously bureaucratic French government stage-managing innovations in the high-tech sector -- typically known for fierce competition and a libertarian ethos -- seems paradoxical. But in France, business remains a risk-averse activity in which industry looks to the government for succor. Proponents say this is precisely what makes the initiative necessary: France has proven skilled at research but weak at transforming ideas into money -- a step requiring government orchestration.

"In France, we have a lot of people who know a lot about high-tech, but they are not really put together," said George Kayanakis, chief executive of ASK, a Cannes maker of computerized tickets that is helping make electronic labels used to track inventory worldwide. "The Frenchman doesn't really like to gather. You need to have somebody who tells you, 'You have to get together.' You have to have a project that is fully approved by everybody, with all the details worked out and no risk for anybody."

Through the Competitive Poles program, the government hopes to create more than 84,000 jobs nationwide in three years and about 200,000 jobs over the next decade.

But even if the roughly 1,000 tech companies of the region can be knit together, a key question confronts the initiative and the future of the French economy: In a country in which a labor contract can be as binding as a marriage and in which steep corporate taxes fund a generous welfare state, will government incentives spur companies to hire significant numbers of people?

In France, firing workers is highly restricted and often subject to legal challenge. The national unemployment rate sits at about 10 percent, and 20 percent among those in their 20s. Economists say the greatest impediment to job growth is the reluctance of managers to take on new workers lest they get stuck with exorbitant, long-term bills for unproductive employees.

Moreover, some argue that France's continued nurturing of the welfare state -- the labor protections plus the social benefits and high taxes needed to fund them -- conflicts with efforts to make the country more competitive as it grapples with unemployment and the continued flow of investment to lower-cost countries such as Romania, Poland and China. Taxes to fund state-run pensions, medical care and other social services amount to nearly half of wage costs, according to the Organization for Economic Cooperation and Development.

France "is afraid to adapt to globalization," said Guillaume Sarkozy, president of a Paris textile firm, Tissage de Picardie, and head of the Industrial Textiles Union, a trade group. "The old model has to be changed."

He complained about a regime that taxes him based on the number of looms he operates, a disincentive to expand. He bemoaned a flood of inexpensive goods from China, India and Pakistan. He might have been able to adjust had he cut his workforce to lower costs, he said, but the labor code made that impossible. This year, he filed bankruptcy.

"We've invested in new machinery," he said. "We have trained our people, improved our design. I don't know what we can do better."

In many ways, France remains a monument to the virtues of resisting change.

Of course, these days the monument bears an eternal flame....

Posted by Orrin Judd at December 9, 2005 9:37 AM