The minister who dreams of a reindustrialized France

By Peter Gumbel
September 23, 2013

The body of Jean-Baptiste Colbert, Louis XIV’s wily finance minister, is encased in a marble tomb in the Church of Saint Eustache in central Paris. But if you believe Arnaud Montebourg, the enfant terrible of French politics, his spirit is still very much alive, 330 years after his death, and about to spark a new, digital-age industrial revolution in France.

Montebourg, 50, an ardent opponent of globalization, has for the past 15 months served as the nation’s “Minister of Productive Renewal,” in charge of industry, a post that — in theory — gives him leeway to implement some of his more radical ideas. He spells them out in a book published on Sept.18, “The Battle for Made in France.” Invoking Colbert’s grandiose interventionist approach, it is a strident call for industry to be protected and nurtured. Among other things, Montebourg insists that the outsourcing trend of the past decade needs to be reversed; he dreams of the day when televisions, textiles and toys will once again be made in France, as the nation recaptures its manufacturing glory.

Montebourg’s political fortunes hit a low point in December 2012 when he threatened to resign after being overruled in a very public clash with the London-based steel magnate Lakshmi Mittal. President François Hollande personally asked him to reconsider, and today, he seems to be back in favor.

On Sept. 12, Montebourg and Hollande stood shoulder to shoulder at the Elysée Palace to announce a new direction for French industrial policy. A video made for the occasion starts with a solemn pledge that “France is reinventing itself.” With Vivaldi music swelling in the background, images of great inventors and inventions of the past give way to more forward-looking activities, such as medical biotechnology and cloud computing. These are some of the 34 sectors Montebourg and his team have singled out, with the help of McKinsey and Co, as the standard bearers of French industry of tomorrow.

He describes the plan as “participatory Colbertism,” a concerted attempt by the state to underwrite the future prosperity of the nation by targeting manufacturing sectors. Where Colbert focused on glass and cloth for tapestry, Montebourg is putting the emphasis on nanotechnology, big data and other digital industries.

France, of course, has a long tradition of state dirigisme embraced by previous presidents, primarily Georges Pompidou. It’s why the nation has a high-speed train network, derives more than 80 percent of its electricity from nuclear power — but also has a big collection of expensive white elephants and commercial flops, from Concorde supersonic planes to Bull computers. This new push for a more interventionist approach is drawing a mixed reaction. Some industrialists including Jean-Louis Beffa, the chairman of Saint-Gobain (a company founded by Colbert), approve of Montebourg’s focus on digital technologies. But there has also been some disbelief about the mismatch of ambition and resources. Eric Le Boucher, a well-known commentator, ridiculed the announcement by pointing out that the government is planning to allocate just $5 billion to these 34 projects.

It’s instructive to take a closer look at Montebourg and his ideas, not just because they are already having an impact on foreign investors and will doubtless continue to do so, but also because they help explain the Hollande administration’s schizophrenic approach to economic policy.

It is an administration that decries European austerity policies even as it races to slash its budget deficit; that veers between chastising business and trying to woo it; that has declared finance to be “the invisible enemy” but has taken minimal steps to rein it in; that officially welcomes international investors even as it gets into fights with them. These zigzags reflect fierce ideological and policy disputes within the government, in which Montebourg is often overruled but by no means isolated.

His vision of the economy, which he spells out in battlefield language in the book, is heavy on autarky. The notion that expanding trade could bring prosperity and jobs is not broached; instead, Montebourg lashes out at the “stupidity” of the European Union in allowing cheap imports from China, accusing the European Commission of being “the idiots of the global village.”

One of his actions at the ministry has been to put in place a network of “commissars” across France whose job is to ride to the rescue of struggling firms. He believes the state must “once again become the big brother of entrepreneurs rather than of speculators,” and describes a France of the future when young inventors, the “sans-culottes of the third industrial revolution,” are financed by state banks rather than private finance.

His inspiration, he claims, comes partly from the U.S., “a nation where protectionism shocks nobody and is congenital, banal and popular.” In particular he evokes the Depression-era activism of Franklin D. Roosevelt, with its use of public funds to create jobs, and wants to see a “Buy French” groundswell equivalent to a “Buy American” one.

As revealing as what Montebourg says is what he leaves out. The word “competitiveness” is conspicuously absent from the book, and he makes no attempt to analyze the reasons why French manufacturing has lost 750,000 jobs in the past decade. He doesn’t mention that French wages and social security levies have risen far more quickly than productivity, putting companies at a clear disadvantage. Nor does he talk about the many French companies, from LVMH to L’Oréal, that have thrived by tapping new markets in Asia and elsewhere as a result of globalization.

The auto industry is a case in point. French manufacturers increased their worldwide production by 4 percent between 2007 and 2011, even as their domestic production dropped 22 percent in the same period. Financially, Renault and especially Peugeot are struggling. Britain makes for an interesting comparison: its national auto industry has undergone a big revival in the past few years, as foreign investors including BMW and India’s Tata Group have bought up brands such as Mini and Land Rover and turned them into thriving businesses. Overall, the British industry’s revenues rose by about 6 percent between 2007 and 2011 despite the world financial crisis.

What would Montebourg say if an Indian or other foreign company tried to buy up Peugeot? The answer would be a swift “non” — swifter even than his veto when Yahoo began talks to acquire the French online video company Dailymotion earlier this year.

Colbert, who imposed a plethora of complicated rules and restrictions on the companies he set up, might well approve of Montebourg’s return to favor. But whether it’s good for France’s struggling economy is at best questionable.

PHOTO: French Minister for Industrial Recovery Arnaud Montebourg (2ndR) and  Gregory Trebaol (R), President of Easybike, stand with a prototype Solex electrically-assisted bicycle, during a visit in Le Bourget, near Paris, September 5, 2013.  REUTERS/Jacky Naegelen

28 comments

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what about cheese, I would really appreciate more cheese

Posted by barenski | Report as abusive

The moon is made of cheese… we could go to the moon.

Unfortunately, it seems France has many more Wallaces than Gromits, so they probably couldn’t get there.

Posted by ARJTurgot2 | Report as abusive

France needs the same thing America needs: a 20% tariff on all imported goods.

Yes, that means other nations will retaliate and place a 20% tariff on French wines. But the end result is that French manufacturing companies, by the thousands will spring up all across France, hiring French people.

Today all the goods on French store shelves have the same label as those on American store shelves: “Made in China”.

It is a matter of survival of the French and American middle classes. A protective tariff, enacted by George Washington and Alexander Hamilton, is what allowed America to rise to become an economic and industrial giant.

The American protective tariff lasted almost 200 years, until President Bill Clinton signed NAFTA, sealing America’s death warrant.

Posted by AdamSmith | Report as abusive

Well, let’s hope Mountebourg’s plan doesn’t succeed to a point where France would have to conquer territories overseas and create colonies that would serve as markets for its booming manufacturing sector… That might put le Coq Gaulois in conflict with the natives in these places…

Posted by reality-again | Report as abusive

Unbelievable, it’s 2013 and some people are still clinging to the notion that tariffs will be their savior!

Posted by jambrytay | Report as abusive

The trouble is manufacturing doesn’t create many jobs. Modern manufacturing creates good, productive jobs but not many of them.
He needs to visit a factory.

Posted by Alisdair | Report as abusive

fdr made amerika, in times of Hamilton, Great English were what usa now and concidering Washington’s military record idk if economic policies were equaly successful

Posted by barenski | Report as abusive

France’s trade deficit is getting worse and worse. More and more of France is being bought by foreigners, as was reported in Reuters only two weeks ago. French unemployment is getting worse and worse.

Manufacturing in France is on a steep decline. The French middle class is crumbling.

A protective tariff is clearly the solution.

But the youth don’t read books anymore, and are completely ignorant of history. They no nothing of tariffs, only that tariffs are supposedly evil. That is the mantra repeated by the wealthy who benefit from outsourcing and globalization. The dullest of school children remember that mantra.

They don’t realize that protective tariffs are a powerful economic tool used with outstanding success by advanced, wise nations.

Every school child today is told that protective tariffs are evil. And the school child accepts it. But the child has no idea what a tariff is, the arguments for and against, the advantages and disadvantages.

He knows only the mantra, which he repeats by heart, over and over, in his ignorance.

Posted by AdamSmith | Report as abusive

During the early days of the Depression, there was much hand wringing over the jobs the US was losing due to imports. Lawmakers came to the rescue by passing Smoot-Hawley. Our trading partners quickly enacted reciprocal tariffs of their own, resulting in a drastic decline in international trade. Worldwide trade dropped 66% between 1929 and 1934. U.S. exports dropped from $5.4 billion in 1929 to $2.1 billion in 1933 (1930 dollars.) That was a loss $3.3B of business that a weak U.S. economy could ill afford.

According to a 2011 report done by S&P, S&P 500 companies sold $2.3 trillion in goods and services outside the U.S in 2010. This number actually understates the true international sales figure as only 255 out of the 500 companies reported their international sales. For these 255 companies, almost half of their sales come from outside the U.S. This doesn’t even count smaller US companies not in the S&P 500 who sell goods and services to foreign buyers. $2.3 trillion is a lot of business and a lot of jobs to put at risk by enacting a bad idea.

http://unrepentantcapitalist.blogspot.co m/2011/08/article-twelve.html

Posted by jambrytay | Report as abusive

FDR was certainly a great American leader, but he didn’t come to power until 1933.

By 1933 America had already become the mightiest economic power on Earth, all under the umbrella of protective tariffs.

In general, American farming interests, especially the plantation owning families of the South, tended to be against protective tariffs. While manufacturing factory owners and factory labor were in favor of the tariffs.

One thing everybody agrees on: Tariffs are extremely powerful economic tools, and very fast acting.

Posted by AdamSmith | Report as abusive

The critique of Smoot-Hawley is another of the propaganda mantras foisted upon the media by wealthy vested interests.

The S&P report citation draws attention to today’s exports but with the left hand, it slides under the table any mention of the problem: imports.

But speaking of American exports, they are now dominated by agricultural products. And American agriculture has radically consolidated so that the majority of ag production is not by a farmer but by a large corporation, often owned by foreigners such as Saudi princes or Russian oligarchs. These wealthy families finance the propaganda against any protective tariffs.

IMPORTS
But let’s turn our attention to the left hand under the table, the subject is American imports. That is the problem.

Without a protective tariff, the imports, especially from China, just grow and grow, year after year. The S&P citation neglects to mention that.

In every American city, everything on the store shelves says “Made in China”. Is that not a red flag signifying a national emergency? How can Americans accept that?

American factories, unprotected by a tariff, are closing their doors by the thousands. Americans are losing their jobs by the millions.

The American middle class is clearly crumbling, and quickly.

A protective tariff is clearly the appropriate solution for an advanced country like the USA, for the good of the nation itself, and its poor and middle classes.

On the other hand, for the American wealthy teenager of a wealthy family, who has inherited stock in a large agricultural holding company, a protective American tariff would decrease his dividend checks.

And it is he and his attorneys who form associations to lobby congress and the news media to tell us, repeating the mantra over and over, that tariffs are evil.

Posted by AdamSmith | Report as abusive

Agricultural goods make up

Posted by jambrytay | Report as abusive

Agricultural goods make up less than 10% of US exports.

The Chinese tend to compete in segments where the competitive differentiator is price. Competing on price is not where I want to be.

Check out a chart of US manufacturing output over time. The plot is consistently in an ‘up and right’ direction for many many years.

The American middle class is actually in pretty good shape. Middle income households are becoming upper income households. 40+ years of income date compiled by the US Census shows that the % of households in the middle class has declined and the % of higher income households has increased. The % of lower income households has slightly decreased.

There’s one thing here that’s accurate ‘Tariffs are extremely powerful economic tools, and very fast acting.’ Just like ramming a section of re-bar into the spokes of your bike.

Posted by jambrytay | Report as abusive

Agricultural goods make up less than 10% of US exports.

The Chinese tend to compete in segments where the competitive differentiator is price. Competing on price is not where I want to be.

Check out a chart of US manufacturing output over time. The plot is consistently in an ‘up and right’ direction for many many years.

The American middle class is actually in pretty good shape. Middle income households are becoming upper income households. 40+ years of income date compiled by the US Census shows that the % of households in the middle class has declined and the % of higher income households has increased. The % of lower income households has slightly decreased.

There’s one thing here that’s accurate ‘Tariffs are extremely powerful economic tools, and very fast acting.’ Just like ramming a section of re-bar into the spokes of your bike.

Posted by jambrytay | Report as abusive

Well maybe you are teaching me something, jamabrytay. I am perhaps wrong about ag exports. But I have questions.

Is lumber included in ag export figures? Are processed products like boxed beef and chicken included? Is fish included? Are packaged frozen peas included, or is that a processed food and not included? Are California wine exports included as an agricultural export? I don’t think so, but not sure.

Now what about other extractive products like oil and natural gas? Is that a manufactured good?

MANUFACTURED GOODS EXPORTS
Is an oil drilling control panel made from 90% Chinese computer products and 10% American products, exported by an American facility to Brazil counted? Yes, I believe it is counted at full sale price 100%, even though only 10% of the value was added in America.

To say the American middle class is actually in pretty good shape suggests to me a perspective out of touch, or an intentional twisting of the facts, or perhaps a more innocent wishful way of thinking.

As the ancients said, What man wishes he hopes and believes.

By the way all the arguments you offer about tragic effects of tariffs were also made by the great southern slave-holding plantation owners during Alexander Hamilton’s era and Abe Lincoln’s time. Yet the American protective tariff held even when England and France retaliated, for a hundred years, as America rose to greatness. The southern plantation owners spoke with the same certainty you do, that the protective tariff would ruin America.

What they really meant was that the protective tariff would increase their cost of manufactured goods (an expense for a plantation owner) and cut their already obscene profits. They wanted instead to buy cheap from British manufacturers instead of buying dearly from young American manufacturers. This is how American manufacturing sprang up with such vigor, from nothing.

It did not put any re-bar in spokes. Just the opposite happened.

Posted by AdamSmith | Report as abusive

lumber is construction/raw materials, agriculture is Greek word for farming probably.

I think its good when plastics are made somewhere else, the process is pretty poisonos

Posted by barenski | Report as abusive

Multiple sources will tell you what’s counted/not counted in the export pie. The point is, agricultural stuff is a small %.

Go check out the cost-build up on an iPad. A very small % is the assembly cost, while the IP of the device represents a much bigger chunk of the value. Again, the Chinese tend to compete on price which is not a good place to be.

My comments about the middle class are purely data driven. Go check out table H17 on the USCensus web site. They’ve been compiling household income data since 1967. Is it possible your comments about the middle class are a product of your wishes?

As far as plantation owners being anti-tariff, what can I say? Even a broken clock is ‘right’ twice a day.

Posted by jambrytay | Report as abusive

Jambrytay, you say the Chinese tend to compete on price which is not a good place to be.

But with unfettered globalization, devoid of protective tariffs, you are condemning the American middle class worker to compete on wage price with the impoverished masses of the world. As you say, price competition is not a good place to be. But that’s where the American worker has been shoved, with an iron fist.

Don’t get me wrong. We are not discussing fairness to the world. Nor are we discussing how to help the teeming masses of the giant impoverished over-populated, crime infested cities of India.

What we are discussing is what is in the best interest of the people of the United States, or, as per the title of this Reuters article, the people of France. These are both economically highly advanced countries.

The cold hard fact is this: It is in the best interest of the people of America, and also, coincidentally the people of the economically advanced nations of Europe, such as France, to invoke meaningful protective tariffs on all imported goods.

Retaliation by other countries is a small price to pay. And the alternative is the complete destruction of our middle classes as is happening today at an alarming rate.

If we were standing in a less advanced country, let’s say Peru, the answer would be different. But America and France are coming from positions as the greatest, most lucrative markets in the world. China could hardly believe it when, 15 years ago, we opened ourselves up to them. Their thought was, these guys must be crazy.

And history now shows we were crazy, suicidal, to do it.

It is the advanced nations like America and Europe, whose proper chess move in this deadly competition is clearly one thing, a plain, across the board, protective tariff on all imported goods.

Otherwise China will own them, in tandem with the international wealthy class the daily guides the WTO toward a tariff-less, wide open exploitation of the world economic wealth.

Posted by AdamSmith | Report as abusive

wouldn’t you have to print even more moneys to cover extra numbers from increased tariffs, and it will be same just everything costs more and moneys are less in value?

Posted by barenski | Report as abusive

and again china and india are trading off their ecology or population health in other words. I think its a quote from book

Posted by barenski | Report as abusive

Here is an article from Reuters just today.

Notice that it mentions a U.S. tariff does indeed still exist for door lock parts, and, how that tariff is part of the calculation of the American company, Hampton Products, is using to move its production from China back into the United States.

Put your browser on the article and search for the word tariff.

Posted by AdamSmith | Report as abusive

I’m not suggesting that our workers compete on price; far from it. I’m suggesting we compete and win through our much greater worker productivity. The Chinese dig with shovels, we dig with backhoes.

Again, I urge you to check the data on the middle class. It’s accepted as common knowledge that our middle class is in bad shape, the data tells a different story.

You can check out a study I’ve done on income data (http://unrepentantcapitalist.blogspot.c om/2010/08/act-one.html) scroll down about ½ way into the post, or you can also check out table H17 on the US Census web site to see their household income study.

Imposing the tariffs you’re suggesting is a really bad idea.

Posted by jambrytay | Report as abusive

I’ve done backhoe work myself in my younger years.

Did you know that wage rates for backhoe operators in the US have fallen over the past 15 years? While at the same time the cost of living for American backhoe operators has increased substantially. Are you aware of that? Backhoe operators are now falling out of the middle class into the lower class.

But the point is that the Reuters article of today shows that a protective tariff has profound benefits to an advanced nation like America. Did you read the article?
http://www.reuters.com/article/2013/09/2 5/us-walmart-manufacturing-insight-idUSB RE98O04Q20130925

I get the impression, jambrytay, that you inherited some money or stocks or real estate, or something, to help you get started in life. But maybe I’m wrong.

Posted by AdamSmith | Report as abusive

Backhoe was an example. Point is our workers tend to be much more productive v. the Chinese workers.

Tariffs = bad idea.

Inherited my grandmother’s washer and dryer when she passed.

Posted by jambrytay | Report as abusive

No financial help from living family? No money, stocks, real estate, etc., given to you by family member or relative? No schooling paid for you?

Posted by AdamSmith | Report as abusive

Sorry to disappoint you, but no, I am not from a well-to-do family, but you’re way off topic.

Tariffs are a bad idea. You will pick up some jobs in industries you choose to protect, and will lose many more in exporting companies who are hurt by the resulting trade war.

Amazing, it’s 2013 and we’re debating tariffs.

Posted by jambrytay | Report as abusive

hmm , tarrifs is just a reason to find a way around em, e.g. german folk making companies in Canada and mexico to take advantage of nafta, which is a good thing, arguably

Posted by barenski | Report as abusive