L'Ombre de l'Olivier

The Shadow of the Olive Tree

being the maunderings of an Englishman on the Côte d'Azur

12 March 2007 Blog Home : March 2007 : Permalink

Ou Sont Les Entrepreneurs d'Antan?

About a year and a half ago I blogged about the amusing (but false) urban legend that President Bush once said "The French have no word for Entrepreneur". At the time I said that, while false, it had a kernel of truth in it:

Surrounding Cambridge in the UK - to pick a town not completely at random - are half a dozen Science Parks and maybe the same again of general business parks dedicated to technology companies of one sort or another. Doing a search on google for phrases like "Cambridge Entrepreneur" or "Cambridge Startup" produce masses of links to companies or articles in newspapers etc. talking about them. France has a number of Science parks (such as Sophia Antipolis) but searches (even in French) for equivalent phrases tend to produce links to government funded bodies like get-telecom or partially EU sponsored conferences such as innovact and a large number of links that recycle the same text about one or two startups. If you think this is somehow just an accident of google consider the lists of exhibitors at trade-shows such as 3GSM world or CeBIT. From my personal recollection of attendance at the former there were perhaps half a doozen French companies present (I only strongly recall a VOIP softswitch vendor - Cirpack - and an antenna company whose name escapes me), whereas the British were represented by masses of companies led by successful startups such as ARM and CSR (both with HQs in Cambridge).

France certainly produces people of an entrepreneurial bent, and it certainly produces smart people. But somehow despite all the conferences France seems to produce fewer startups and certainly fewer successful ones than its neightbour to the north. Indeed I would hazard a guess that it produces less than its eastern neighbour Switzerland too.

I was being a little harsh on the French start up scene in that piece, but only a little. This year at 3GSM there were a quite a few small French companies strutting their stuff, but they were undoubtedly overshadowed by the masses of British companies and, for that matter, by the masses of startups from the Nordic regions or Israel. I'd have to be a bit more scientific that I really care to state this as fact rather than anecdote but it seemed like there were more Danish companies at 3GSM than French ones. It was certainly the case that the "French Pavillion" at 3GSM was about half filled with "Invest in X region of France" booths rather than startups originating in said regions. This was not the case with the Swedish, Scottish or Irish pavillions.

I'm returning to this subject for two reasons. The first is that over at the ASI blog Dr Madsen Pirie complains about governmental/political unfriendliness to business in Britain and the second is that I had a fascinating chat with a very loquacious Frenchman on Saturday about the French economy. Dr Pirie makes a fair point:

It's not a good time to be a successful business person. The money's fine and the peer group praise is nice, but you have to endure ranting drivel from those guys in politics and media. Daily in the papers and on TV you are being accused of failing the poor, trashing the planet, and lining your pockets. Scarcely a look in for the wealth you generate, the jobs you create and sustain, the valued goods and services you provide for others, or the part you play in helping the world solve its problems through wealth and innovation.

At the moment the UK is not anti-business in the way it was before M Thatcher showed up or the way that France seems ot be now but if we continue the current tax'n'regulate ways of ZaNU Labour it may well get that way. And I know I am not alone in noticing that all the fixes to "global warming" seem to include raising taxes on trade, travel or something, making it look like the whole "save the planet" campaign is a sly way for the government to increase taxes without having the population complain. I hope the UK will reverse the last decade or so of post Thatcher statist drift and I have some fairly good news, namely that it will take a while before the statists can succeed and drive all the entrepreneurs out.

On the other hand it can happen. The Frenchman I talked to on Saturday works in the field of mergers & acquisitions and the majority of the clients he advises are small to medium French ones. He pointed out that the French economy is extemely unbalanced, there are the enormous companies (Michelin, Airbus etc.) which are, on the whole, relatively successful and there are a lot of very small companies (bakeries, bars, plumbers etc.) but very few companies in the middle. He blames this lack on the last 3 decades or so of French government (starting with Giscard d'Estaing) because their ever increasing rates of taxation and  regulation have suffocated the medium sized companies one by one. As I wrote in "Scofflaws", most, if not all, small French businesses break the law and evade tax. They can do this because the French authorities are almost certainly aware that a general crackdown on small businesses would lead them to simply quit working and thereby utterly wreck the French economy (and probably overthrow the government too). Large companies, those that are "too big to fail", can avoid many of the most burdonsome taxes if not regulations by a form of blackmail - "if you don't give us a tax break/subsidy/... we'll be forced to close a factory and blame it on you politicians". This is what Airbus is doing but it also applies to companies like Toyota who have negotiated very favourable terms for their French car plant. The ones in the middle, big enough to get attention but too small to cause a political storm when they fail, are the ones that suffer and, increasingly, these are the ones that are selling up and getting out.

According to this man, unless you can hide some of the money, you really don't want to be a successful businessman in France because you spend well oer half the year working for the government. He used the example of Johnny Hallyday, who has earned some €150m over his 40 years in show business. He estimated that the French government has probably taken around €100m of that one way or another. It should not be a surprise that eventually Johnny decides that he'd prefer to keep as much as he can of what he has left and hence that he should quit France. Johnny is not alone, according to this man. He said that most of the clients he has advised in the last year or two have been business owners looking for a way to sell up their French assets and spend their retirement in the sun somewhere else. Most would like to remain in France but simply decide that the difference in potential lifestyle is so great that it makes sense to up sticks.

The other problem that businesses face is that the cost of full-time employees means that they look for all sorts of ways to keep as much of the workforce on temporary contracts and/or use low-paying "work experience" programs (stages) to meet their need for bodies without paying the social charges extracted for real jobs. Even a taking on a lowly paid stagière is not trivial. The paperwork needed to get the temporary worker on board can easily take a couple of man-days of work by various HR peopleand under some circumstances another day or so of work by the stagière him/herself, mostly involving gathering copious and pointless bits of paper and then sitting in various government offices waiting for fonctionnaires to stamp other bits of paper.

Because, comparatively speaking, Britain is a business friendly society, the entrepreneurial French, Dutch, Belgians etc. are coming to London to work. And hence the anti-business tilt in the UK is not yet causing trouble because for every entrepreneurial Englishman who decides to head off to the (ex)colonies there is an entrepreneurial European deciding to do a Dick Whittington and head off to London to seek his fortune. If the supply of Europeans dries up the UK economy could go south very quickly.

I despise l'Escroc and Vile Pin