Opinion

The Great Debate

In France, where unions rule, a challenge from Hollande

In France, taking a person hostage or sequestering them against their will is a crime punishable by up to 20 years in jail. It also happens to be a very effective weapon in French labor disputes. Since 2009, there have been 15 incidents of “boss-napping” and only one resulted in sanctions: 11 postal workers who were fined $2,000 apiece for locking up their managers during a dispute over a change in how the mail is delivered.

Most of the time, it’s the unions who win. That’s certainly the case in the most recent incident, involving a bitter struggle over job losses at a Goodyear tire plant in Amiens. Earlier this month, union officials occupied the factory and sequestered the production manager and head of human resources for 30 hours. After the government intervened, the battle finally ended last week when the company agreed to triple the severance it had offered. Union leader Mickaël Wamen didn’t hide his triumph. “It was a grand and beautiful struggle,” he wrote in a blog post on Jan. 24, announcing details of the settlement.

This type of labor militancy is the exception in Europe today; union power has taken a battering along with the economy in crisis-ridden nations such as Greece and Spain, which were once bastions of organized labor. But it’s not the only characteristic of the French labor scene that is exceptional. Although only 8 percent of French workers actually belong to a union — a tiny proportion by international standards –  French unions wield enormous political clout over the national economy. Among other things, they run the national systems for unemployment insurance and vocational training, in joint management with employers’ organizations. In fact, they formally play as big a role in setting social and labor policy as organized labor does in Scandinavia, where 80 percent or more of the workers are union members. “The political influence of French unions is abnormal,” says Radu Vranceanu, research director at ESSEC business school in Paris. “It’s not at all in line with their capacity to mobilize people.”

This issue of the disproportionate power of French unions has become the biggest challenge confronting President François Hollande, now that he has sorted out his private life. In an affront to unions — and a move critics in his Socialist Party are calling a shift to the right — Hollande is advocating a new “responsibility pact,” under which companies would see their high social security costs reduced in exchange for creating jobs. Labor unions dislike the initiative because they believe it will mean cuts to social spending, which they oppose, and they don’t trust employers to create jobs in return. Even the more moderate unions that are prepared to accept some sort of a deal are insisting on a formal list of obligations that employers must fulfill — and are calling for a new state body to ensure that these obligations are actually met.

So far it’s just an announced intention, and the details need to be worked out. Employers groups  are sounding cautiously optimistic, but union reaction has ranged from skeptical to downright hostile. In a sign of their influence and central policy role, the pact needs not only the sign-off of the major unions, but also their active participation in creating it.

Foreign investment in France thrives despite gripes — for now

In France these days, every new industrial investment is welcomed with open arms, so when the Japanese machine-tools manufacturer Amada announced in mid-September that it was putting an additional $50 million into its existing production facilities, no fewer than two government ministers showed up for the signing ceremony. Much to their embarrassment, however, the chief executive officer of Amada, Mitsuo Okamoto, gave an interview that morning to a national French daily in which he castigated the national business climate, and said that if the company hadn’t already been in France for 40 years, “we would think twice about investing here for the first time.”

Chalk it up, one more time, to France’s investment paradox. Okamoto is just the latest example of a foreign CEO who moans and groans about the difficulties of doing business in France, even as he pours in money, in the form of fresh investment.

There’s certainly a lot to complain about. The law reducing the official workweek to 35 hours, passed in 2000, is still on the books. The outsized labor code that governs hiring, firing and everything in between is regularly cited by organizations from the World Bank to the World Economic Forum as a significant impediment to doing business; its printed version runs to 3,371 pages, or more than three times the size of the German equivalent. Unions are famously feisty, and labor costs, already high, have continued to rise at a faster rate than productivity, even after the 2007-08 financial crisis.

The minister who dreams of a reindustrialized France

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.

What Hollande can learn from Queen of Hearts

French President Francois Hollande’s predicament is, oddly enough, akin to one Alice faced in Lewis Carroll’s 19th century classic.

A year after taking power, Hollande is buffeted by the lowest popularity of any modern Gallic leader, a record number of jobless, a recession and shriveled business investment – while still needing to cut his budget deficit to hit European targets.

The protagonist of Alice in Wonderland, meanwhile, confused by her strange encounters down a rabbit hole, meets the Queen of Hearts, who tells her: “My dear, here we must run as fast as we can, just to stay in place. And if you wish to go anywhere, you must run twice as fast as that.”

Is France closing for business?

Arnaud Montebourg, a member of the French parliament, has a problem with the iPhone. He thinks consumers in France should pay more for it than they already do. Why? Because, he says, the iPhone is made by “exploited” laborers in China who are taking away the jobs of French workers and the best way to redress that is by putting in place trade barriers and taxes that will stop “excessive imports.”

Then there’s Renault in Morocco. When the French automaker opened a new factory in Tangiers in February, Montebourg decried the move as “a humiliation for French industry,” because Renault hadn’t built the plant in France even though the French state is an important shareholder.

Montebourg’s protectionist stance – he calls it “deglobalization” – is well known in his native France, but now he’s unleashing it on the world. In the new Socialist government, Montebourg is the “minister for productive recovery,” a job whose precise perimeter remains hazy but that appears to cover large swaths of industry and commerce. His first official statement was an announcement that he intends to lean on companies including Shell, ArcelorMittal, Unilever and Peugeot, that are planning to close facilities or lay off workers in France.

What happens if Hollande wins?

His political allies wrote him off as a lightweight, “a pedal-boat captain in a storm” as one memorably put it. European leaders, including Germany’s Angela Merkel, have gone out of their way to avoid him, and the markets have been unimpressed by his declaration, to the City of London, that “I am not dangerous.”

Yet with opinion polls in France unanimously predicting that François Hollande will be elected president on Sunday, this is a good time to be asking just how bad his presidency really would be for France, for Europe and for the markets.

If he does win, will he be able to inspire confidence and rebuild and renovate the fragile economy, with its heavy debt, stagnant growth and rising unemployment? Or will he preside over its rapid descent into Greek- or Spanish-style chaos, as Nicolas Sarkozy, the incumbent at the Elysée Palace, keeps warning?

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