France, a lucky nation poised on the brink of sustained prosperity

We veer between inferiority (their trains, food and style) and superiority (our airlines, food and style)

HOSTING THE World Cup is a great way of getting noticed so, of course, for the past few weeks, France has found itself under the microscope.

Britons always find it hard to come to terms with our neighbour, for she always seems to present two, very different, faces. We have seen this clash between the two realities again and again: the grand, beautifully organised stadiums and the hopeless ticketing arrangements; or the excellent electronic transmission facilities and the Air France strike.

We veer between admiration and irritation, between a sense of inferiority (their trains, their food, their style) and superiority (our airlines, our food, our style). How else could you explain the fact that we have elevated London past Paris to the status of restaurant capital of the world except as a mixture of our insecurity and our cockiness?

Over the past five years the cockiness has been more in evidence, for two solid economic reasons. One is cyclical: our economy has grown faster than the French, which has only really improved into a solid recovery this year.

The other is structural: we have made a number of painful changes to our economy over the past 20 years which France is just starting to make. Together these have helped not only to cut our unemployment to half the French level, but also to push the pound back up to 10 francs. Whether it is eating at a posh Paris restaurant or rioting in Marseilles, we can afford it. Economic success is not the only component of cultural self- confidence, but it helps a lot.

But do not expect this to last. The economic pendulum will swing back. In fact yesterday's news on rising unemployment in the UK shows that the pendulum is swinging now. France will again start to enjoy faster growth than Britain, possibly even this year. And eventually France, too, will make the structural changes it needs to make. One small example: by facing down that Air France pilots' strike the Prime Minister, Lionel Jospin, may have managed to do from the left what his predecessor failed to achieve from the right: start to reinsert some discipline into French labour practice.

If you stand back and look at France's international comparative position, there are great strengths that will serve it well. There are also three serious problems, of which more in a moment; first focus on those strengths.

It is very clear that the world economy will shift further to services during the next couple of decades, and that what remains of manufacturing in Europe will rely on high technology, productivity and craft skills to survive. Well, France is a larger exporter of services than the UK: its strength is more than anything else in tourism, while the UK's is in financial services. But maybe tourism will grow even faster over the next couple of decades than finance.

Look at manufacturing, and the areas likely to prosper are precisely those in which France has comparative advantage: high tech, high productivity (currently still higher than the UK), and high craft.

These are deep strengths, embedded in the culture of the country. By contrast, many of the weaknesses can be fixed, given the political will. One of the main reasons why unemployment is so high in France is misplaced job protection legislation. It is expensive to get rid of people. Insiders, men with secure jobs, do well; outsiders, the young, the poorly educated, women, immigrants, tend to do badly.

France's rigid labour market, unlike Britain's of the 1970s, is not principally the product of excessive union power, though it sometimes seems so. It is the product of poorly crafted laws, something that is easier to fix. As it happens, some of the present government's policies, such as limiting the working week to 35 hours, take things in the wrong direction. But on a 20-year view this does not matter. At some stage these policies will be reversed, because they have to be.

There has been a problem of political leadership in France, winning popular support for unpopular measures. It is possible that it will be easier for the left to gain such support than the right. The left has continued the budgetary cuts needed to meet the Maastricht targets; it could continue the market reforms too, albeit at a slower pace.

In any case the single currency will act as a discipline on the whole of continental Europe, forcing convergence of good practice in industry and commerce just as Maastricht has forced convergence in government. When it does, the underlying strengths will come into play.

So what can go wrong? There are a couple of real concerns, which will dog France over the next 20 years. One is that reform will take place in a discontinuous way. It is tough to go through any period of big social and economic change unless you can buffer that change by compensating the losers. If people are going to lose their jobs you need to make sure that they have secure pensions. Given the ageing population there will not be a lot of spare resources available to compensate those who lose out. The French may therefore go through one of the sudden, searing, political changes that take place there every couple of generations.

The other concern is economic. France has a problem with French. Or rather it has a problem with English. There has been a rise in the importance of English in the world economy. This is partly a function of the increased importance of the entertainment industries in world trade. These account for about 7 per cent of US exports, the country which dominates the market. It even dominates the French league. I looked at the list of top films in the French box office a few weeks back and all but one of the top five was American. A generation ago British students were brought up on French films; now even the French don't seem to want them.

But it is not just entertainment: English is enormously important in the adoption of information technology, the fastest-growing single area of growth in the economies of developed countries. The US leads the way, but other countries which score high in investment in information technology are the UK, the Scandinavian countries and the Netherlands - all countries which either speak English as a first language of are very proficient in it. Investment in information technology is much lower in France, Italy and Spain. Internet use is surprisingly low in France despite the fact that the technology is theoretically language-neutral.

To crank more productivity out of service industries particularly requires investment in information technology. The problem is not evident now, but 10 years down the line countries that have not embraced the new technologies will find themselves at a serious competitive disadvantage.

The balance sheet for France is still positive. Its underlying strengths will become more significant in the new service-oriented world. It is a lucky country in a tantalising position. The prize of sustained prosperity through the next two decades is there to be grasped, but the country needs to reach out and grasp it. The gap in economics between relative success and relative failure is such a narrow one, as we know in Britain. I suppose that applies in football, too.

Arts and Entertainment Musical by Damon Albarn


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