The French national toy, Sophie the Giraffe — a popular gift for newborns — was, until recently, a symbol of “made in France”. An investigation has alleged that the plant said to manufacture it is fake; the lights are kept on only when the press swings by. The toy has actually been produced in China and shipped to France for the last ten years, and the Potemkin factory served only to keep up appearances for clients and journalists.
The promise of turning back the clock and transforming France into a manufacturing power was crucial to Emmanuel Macron’s reelection campaign. Now, as the second quinquennat nears its end, the promise of reindustrialisation seems more like a gimmick from the post-pandemic period than a neo-Gaullist agenda of strategic autonomy.
Macron has pledged ambitious goals for his reindustrialization drive: 15 per cent of GDP by 2035. Right now, it’s hovering around 9.5 per cent. To put that in perspective, Germany is at 19 per cent and South Korea at 26 per cent. According to Arnaud Montebourg — the former minister of the economy and of “productive renewal” — Macron’s reindustrialisation agenda seems wildly unrealistic. To accomplish its laudable aims, France would have to set aside $50bn, train 350,000 workers, and allocate 25,000 hectares of land. Is it attainable for a gerontocratic, over-regulated welfare state, burdened with ballooning debt and high taxes, to transform itself into an industrial heavyweight?
The governors of the Banque de France published an open letter in which they sounded the alarm: the gerontocratic turn could become a dead end if no radical measures are taken. For years now, the economy has been transferring deficits to future generations to maintain the standard of living of the grey electorate. The latter is the main political force in the country, and without it Macron’s electoral victories would never have come to pass. The youngest president of the Fifth Republic is the president of the oldest electorate in French history, managing an economy with the largest deficit in the eurozone, and one in which, since 2010, the debt has increased by 30 percentage points of GDP (while remaining more or less stable in the rest of the common currency area). The pivot from welfare state to industrial state seems like a tall order.
The premise of the French model is to preserve the spending power of the old through debt expansion. Reindustrialisation, on the other hand, requires delayed gratification. Each of the failures that shape the contours of the present moment — a frozen labour market, a deteriorating education system, regulatory hypertrophy, the decline of the nuclear sector — stems from the self-defeating logic of a welfare state in which present consumption drains the resources that would build the future.
Nicolas Dufourcq, the head of the Banque Publique d’Investissement — the French state investment bank financing SMEs and start-ups — tried to understand the process of erosion of manufacturing capabilities in his book Désindustrialisation de la France. Well connected and not politically biased, he sets the direction for the BPI, which is involved in shaping the new French industrial policy. The book launches its narrative with hard facts: between 1995 and 2015, France lost half of its manufacturing plants and a third of its industrial workforce, along with the know-how that disappeared with them.
It wasn’t only the choice of welfare state over productive state that set France on the path of industrial decline
French industrial decline is a story of two models. At the beginning of the 2000s, explains Dufourcq, Germany and France embarked on divergent paths. Gerhard Schröder understood that there was no alternative to reforming the labour market, and the result was a reduction of unemployment from 12 per cent to 3 per cent, alongside extraordinary trade surpluses. While Germany went through an economic reform verging on a moral one, Paris, confronted with the challenge of globalised competition — in line with the anti-productivist mood fostered by the baby boomers in the sixties — decided to reduce the working week to thirty-five hours. Dufourcq conducted dozens of interviews with CEOs and entrepreneurs from that period, diagnosing a souring mood. The reform was very popular in the media, where reflection about its future effects was absent. This united front of public opinion discouraged the industrialists, instilling in them ‘the conviction that if France is still capable of change, it’s only for the worse’. The attitude of anti-productivism, he observes, has conquered the country, trickling down steadily from the May 1968 revolt, which viewed the factory as a sort of prison. This was made easier by the fashionable views absorbed by the CEOs concentrated in Paris. While in Germany or Italy industry was dispersed throughout the country, France had a more concentrated structure, with CEOs flocking to the capital. According to Dufourcq, they quickly absorbed the idea that modern companies don’t need their own factories, and a wave of delocalisations ensued — all the more politically palatable as cheap Chinese labour protected the purchasing power of the French.
It wasn’t only the choice of welfare state over productive state that set France on the path of industrial decline. Interviewed by Dufourcq, Patrick Artus, former chief economist at Natixis Bank, suggested a different explanation that completes the picture. It’s the decline of human capital that bears much of the responsibility for waning industrial dynamism. The proof is in the PISA rankings, where French scores have tumbled year after year in maths, reading, and science. The mismatch between the skills needed to maintain a broad industrial base and those produced by the French education system is only increasing. While one in three German students choose STEM, roughly one in five French students do.
The École Normale Supérieure may still supply the crème de la crème of elite researchers, but the collapse of mathematical skill at the basic level is striking. According to the conseil scientifique de l’Éducation nationale, only half of 11-year-olds correctly answer the question: how many quarters of an hour are there in forty-five minutes? The Trends in International Mathematics and Science Study placed French children, in 2020, at the bottom of the European ranking when it comes to fractions. French human capital is deteriorating, Artus seems to suggest, making reindustrialisation attempts a misleading façade.
Apart from the erroneous choice of economic model and the degradation of human capital, another barrier is the escalating regulatory impulse. Last year France added more than a million words to its law. That is more than 4,000 pages, or twice over Les Misérables in complete paperback edition. The scale of French regulatory hypertrophy is astonishing: the corpus has increased by 80 per cent in the past two decades. All this despite ten years of promises of “simplification”. Some blame the chaotic parliament. In the last few years, MPs have taken over from the government as the producers of new regulations. This means that most of the proposed changes were not analysed by the Conseil d’État or any independent body (as in Germany), and their potential effects were not considered carefully by any experts.
The greatest comparative advantage French industry has over the rest of Europe is the nuclear sector. It should provide cheap and reliable energy in turbulent times. Industrial decadence, however, has not spared the atom. As the former director of the Nuclear Safety Authority, Bernard Doroszczuk, observed, in the last 25 years no single French nuclear project has gone as planned, be it on deadline, cost, or quality. The last completed reactor, at Flamanville, presents a case in point. Work started in 2007, was supposed to take 4.5 years, and was budgeted at €3.3 billion. It took 17 years and burned through €13.3 billion. The reactor still hasn’t become fully operational. It has already been shut down twice because of technical problems, and now a third, longer shutdown is under way. The inspection will last a year.
In many instances, industrial policy amounts to a few successes and a great deal of wasted public funds. France’s successes all happened many decades ago, in a stretch of years that seemed to yield remarkable effects from industrial policy, both in the country and elsewhere. Now, French industrial policy has reverted to the historical average of misplaced funds and priorities. The core weakness, however, is a lack of ambition.
To even have a shot at these things, the grip of the gerontocratic electorate must loosen
Perhaps the most damning instance of this lack of ambition is the fate of fast-breeder reactors. The country has abandoned the most advanced fast-breeder reactor project in the world — and did so twice. The most dramatic consequence of losing fast-breeder reactors is that, because they recycle spent fuel, they would have curtailed the dependence on foreign uranium supplies (located in hostile jurisdictions like Niger). The first abandonment came when pressure from ecologists pushed the Socialist government to shut down the Superphénix reactor. The know-how was transferred to a smaller project, Astrid. It was killed by Macron.
Anaïs Voy-Gillis presented during her deposition in parliament the most sober judgement of Macron’s reindustrialisation. In the best-case scenario, the pace of manufacturing decline has decelerated, despite some bright spots like Dassault. Rebuilding industrial muscle will require a lot more effort: shedding the welfare regime, cutting red tape, replenishing the industrial talent pool and fixing the nuclear sector. To even have a shot at these things, the grip of the gerontocratic electorate must loosen. That no one across the political class debates how to go back to the future remains the greatest weakness of French elites.
