Nationalizing Companies Is Part Of The French DNA

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In France, socialism isn’t a political movement that swept the elections this year, and it isn’t an economic philosophy that moved once again to the forefront, but it’s part of the DNA of much of the population. And it produces classic knee-jerk reactions to the current economic morass—such as the nationalization of tottering automaker Peugeot.

French automakers are in a death spiral, within a market that is morose. In October, auto sales fell 7.8% from prior year, and a breath-taking 15.8% once the two extra selling days this October (23 instead 21) are taken into account. Year to date, sales are down 13.3%.

PSA Peugeot Citroën dropped 5% for the month and 17.2% for the year. Its captive finance subsidiary, Banque PSA Finance, was bailed out by the taxpayer last week to the tune of €5 to €7 billion. More bailouts are on the horizon. Layoffs loom, but political resistance is enormous, and it might be impossible to shrink PSA’s capacity down to reality.

Renault crashed. October sales were down a catastrophic 26.4%, for a decline of 20.5% so far this year. All hopes rest on the arrival of its miracle car, the new Clio 4, which would not only stimulate Renault’s sales but goose the entire market. Good luck. In a few days, the company will start discussions with unions on how to improve its “competitiveness”—and everyone knows what that means for the hapless workers.

The killer? In October, the French brands together plunged 15.2% … but foreign brands rose 2.5%. For the year, the market is down 13.3%, a horrid figure, but PSA is down 17.2% and Renault 20.5%. They’re getting killed at home! You can blame the decomposing market on the government or on the debt crisis or on the weather, but if your market share is plummeting, you can only blame yourself—and if you don’t fix the problem, you become irrelevant.

Hence the ingenious idea to poll the French on what they thought about nationalizing Peugeot. Not bailing it out. Not resurrecting it from a pre-packaged bankruptcy, as the US had done with GM. But nationalizing it upfront. It would turn the manufacturer into a political entity. Layoffs would become impossible. As would success. And the French DNA spoke:

Overall, 56.7% were either for nationalizing it or didn’t care (32.2% and 24.5%). Only 43.3% were against it. Among workers, 64.8% were either for it or didn’t care (51% in favor, 13.8% shrugging it off). Even among managers and professionals, 33.7% were for it, though 58% opposed it, and only 8.2% didn’t know.

While the government is grappling with the crisis that has washed over France, almost a third of the population sees nationalization as a solution, and a quarter of the population doesn’t mind.

If it weren’t for EU rules that pried open markets, carved up national monopolies, and introduced competition, many of the largest French corporations would still be owned by the state. Yet, lots of vestiges remain—in a country where the central government’s big footprint amounts to 56.3% of GDP (2013 budget).

Air France, for example, was “privatized,” but even after its merger with KLM, the government still owns 18.6% of the group. Renault was privatized in 1996. Crédit Lyonnais, once the largest bank in France, was majority owned by the state when it almost went bankrupt in 1993; it was acquired by Crédit Agricole in 2003. EDF is still a mostly state-owned (84.4%) mega utility that owns, among other things, all of France’s 58 active nuclear reactors.

France Telecom was privatized in January 1998 under Socialist Prime Minister Lionel Jospin. Resistance was huge, and only a Socialist could overcome it. But then came the stock offering. I was living in France at the time. It was one heck of a hoopla. Shares were hyped for months. Everybody wanted a piece of the pie. It was the dot-com bubble, even in France. The stock soared. In March 2000, it hit €219 a share, and people felt rich and smart. It now trades for around €11. Employee suicides have become a problem. And the government still owns 27% of it … and names the CEO. Because it’s in the French DNA.

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  6 comments for “Nationalizing Companies Is Part Of The French DNA

  1. Roger Yates
    November 3, 2012 at 10:26 am

    Yes, France has decent roads, a world class rail network, civilised healthcare for all, beautiful architecture, a tradition of outspoken public intellectuals, a functioning trades union movement, outstanding civil society initiatives, it manufactures outstanding vehicles, aircraft, musical instruments and has evolved beyond burgers and half pound steaks in the culinary field. It also has in its DNA an evolutionary advance beyond the risible insistence that only a vast assemblage of atomised INDIVIDUALS in a mythical FREE MARKET can create a true society while they leave the real "State", which is the Corporations and financial war lords, freedom to tyranise at will in a complete totalitarianism. This State just loves atomised individuals who hate Big Government and "Socialism". Get real. We have a choice between an imperfect collective (everything except for nonsensical economic theory is imperfect in human affairs) and a perfect Corporatist tyranny. We will eventually get the stranglehold of US Imperial tyranny from our throats in Europe. We are going to have to.

  2. Rik
    November 4, 2012 at 9:32 am

    Next chapter the EU is going to subsidise (plans/proposals nearly ready) the dead horse and from its R&D budget nevertheless. You simply couldnot make it up.

  3. fatster
    November 4, 2012 at 10:45 am

    It's very, very confusing to get in to France/USA comparisons, unless you actually currently live, work, and do business in both.

    (The article at hand is nutty – note that the US has, in fact, already governmentized all auto production .. at least it's "just a plan" in France/Europe.)

    One confusing issue is that the clichés from when "we were kids" are now utterly incorrect……

    For example, it used to be that everyone in the US would use France as an example of somewhere with "high taxes".

    This is today nonsensical as taxes as just as bad, or worse, in the Usa as in France.

    It used to be that in the US one could use France as an example of "unions" and "socialism" …

    Whereas today public unions are throttling the US to an incredible degree (utterly unimaginable in europe, or indeed anywhere).

    It used to be that libertarian! privatization! was something that never happened in France or Europe…

    However, today in the USA we have (1) the more or less insane student loan ultra-fiasco, where the government-banking complex has managed to enslave / governmentize education (2) the insane government control and ownership of the entire real estate sector through fannie/etc everything.

    Whereas in France, all the freeways are privatized. (It's a libertarians dream .. you just deal with an ordinary private company, and you pay them per mile you use, if you happen to want to use them.)

    There is basically no regulation in France compared to the US – the reason why France is the world's primary nuclear engineering center, for example (20 yrs ago it would be utterly unbelievable that France (for goodness sake) would be the leader by a mile in nuclear engineering – and the US would be totally hobbled and unable to do anything nuclear – it's beyond belief).

    Even in bizarre fields like say video games – the biggest money maker for two years is Skylanders, a French game – the (relative!) ease and red-tape-freedom of France compared to say California leads to bizarre results.

    Again — all the clichés from the past have really changed….

    Of course, the overwhelming difference, particularly in the last 5-10 years,is the more or less total functional fascism in the US. Everything from TSA screening your nuts to the NSA on email to Drones to .. the list unfortunately goes on and on. This is all just seen as "utterly insane madness" from France, Switzerland, etc.

    What about healthcare – that solid cliché where in the US we'd use "sweden" or "france" to mean "socialized medicine." Tragically, simply look at the dollar amount spent per person in the US of today compared to the "socialist cliché" countries.

    The US of today suffers socoalism writ incredibly large. (1) the ultra-enormous military budget. (2) the ultra-enormous socialized medicine and handouts budget (3) the ultra-enourmous student loan socialization catastrophe (4) the ultra-enormous (5) the epic nationalization of housing-finance (6) the epic theft to the government-banking complex via the ultimate statist instrument ever seen on the planet, the Fed (7) the "decade of plain fascism" seen recently in the US, the Droneland effect … and a number of other major points, and a 100 "minor" points.

    Unfortunately the US has far, tremendously, by a factor of 10 or 100 (in dollar terms) surpassed any of the "old world leaders!" in socialism .. sad news.

    In France, people have a love/hate relationship with the yanks. There is no political correctness in France, so they openly say what they hate about fast food, etc. But on the other hand they adore US style, fashion, and the "dream". It's quite sad in a way that the French tend to be puzzled / feel sorry for the "new US socialism", as opposed to gloating.

    If there's a story on the yanks spending Z zillion on war, or not even being able to build a simple little nuke plant or oil well due to statism .. the talking heads are more mystified, shocked, than gloating. (I'd guess in say China they'd just openly gloat, eh!)

    What a world .. so many changes.

  4. November 4, 2012 at 4:11 pm

    Looks like you got some idealists commenting on your blog. The "free market" is evolving order that emerges when populations respect the sovereignty of the individual. It's about as much of a human construct as a forrest ecosystem. The only true "control" that can be imposed upon it by the "collective" is a simple set of rules to enforce the protection of the rights of the individual, allowing the system of voluntary action to evolve on it's own. Allowing, letting it be. Laissez-faire (that's French).

    State intervention in the natural process of the free market and the effects that occur as a result are disastrous, increasingly difficult to finance and enforce, reprehensible, and predictable. Corportist control of a large government is what happens when populations become corrupt and lazy (even large corporations are made up of individuals who make the choice to lobby for government favors). Notice I said populations. It's millions of individuals making bad decisions that causes it happen, not a lack of collective control over the process (which can't be controlled anyway).

    Laissez-faire CALIFORNIA!

  5. Rik
    November 5, 2012 at 8:11 am

    @Most Guys
    You simply miss the point. Nobody really cares what kind of system the French prefer even a system with free coke and hookers for all would be fine as far as I am concerned. Next to eating garlic all day, drinking wine for breakfast and not washing themselves of course.
    The problem is their lifestyle looks simply UNAFFORDABLE. And they might run out of people willing to lend them money for that as well.
    That is the problem.

  6. Frenchie
    November 6, 2012 at 10:33 am

    All the clichee about France are wrong.

    Fewer than 8 per cent of French workers on average (5% in the private sector and 15 % in the public sector) (Vivier, 2009) belong to a trade union.

    Education is also affordable: in a public universities, one year will costs you less than Euros 1,000.

    A consultation with a cardiologist will cost you Euros 30 and France has better health care outcomes than the US

    Vivier B. La syndicalisation dans le monde. 27 octobre 2009. Institut Supérieur du Travail.

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