When Will France Free Its Economy?
While Germany begins to face up to the need to reform its industry to compete in global markets, France remains stuck. The government's likely decision to "privatize" Thomson, a debt-laden defense and consumer electronics giant, by selling it to Alcatel, a money-losing telecommunications equipment company, reveals a nation unwilling to break with its dirigiste past. The message in this rigged transaction is simple: Foreign investors are not welcome when it comes to selling off national corporate champions. Impartial analysis of bids is out of the question. Transparency isn't valued in France. Just the opposite.
Good business sense has not penetrated the thinking of the Elysee Palace minions in charge of the deal. They're being driven by domestic political considerations, not global market logic. Alcatel will probably win the bid against rival Lagardere Group because the government still yearns desperately to create an electronics champion. The Lagardere bid involves selling Thomson's consumer electronics subsidiary to a South Korean conglomerate, Daewoo Corp., something Paris opposes. Alcatel is the anointed torch carrier.
A year ago, Alcatel was a symbol of hope and change. It had emerged from a series of corruption scandals with a new CEO who promised that shareholder interests would come first. Alcatel was to be a lightning rod of change in corporate France, dispensing with old-boy networks and murky backroom deals.
But old habits die hard. The statist urge to control market forces is making France less competitive. Alcatel, a fearsome competitor in world communications just a few years ago, has stumbled badly. It missed market cues on mobile communications, software, and services. Further distraction with political wheeling and dealing over Thomson will only serve to make it a second-rate corporate player. France deserves more than this failed 19th century economic strategy.