Commentary: Now, France Must Score Some Economic Goals

The football team is a free-market model: Only performance counts

July 14 was a euphoric day for France, combining the weekend's World Cup victory celebration with Bastille Day revelries. In the lush grounds of the Elysee Palace, President Jacques Chirac feted the French football team, inviting hundreds of youths from throughout the country to mingle with the heroes. As the crowds cheered key players such as Algerian-born Zinedine Zidane and Ghana's Marcel Desailly, Chirac proudly noted that the multiethnic championship team exemplified the diverse origins of French nationals and sent a positive image of France around the world.

Bravo. The strength of diversity is one important lesson the French should draw from their World Cup victory, especially given the rising support in France for the right-wing, xenophobic National Front party. But there is an equally strong message for policymakers trying to improve the French economy. France's football team is in microcosm what its economy is not--a product of competition. It's made up of players with the best skills, not the best credentials. Only performance counts. If French politicians unleashed the forces of competition and allowed above-average economic players to reap above-average rewards, they might be stunned at the results.

True, France is privatizing and deregulating its markets. But the economy still bears the imprint of state intervention, and a protectionist mind-set lingers. France lags behind its European Union partners in deregulating the energy sector. And it still provides massive subsidies to bankrupt state companies such as Credit Lyonnais, which in other countries would have been sold or allowed to disappear.

The tendency to find a "French" solution to every problem is still the order of the day. Assets of huge state-owned companies that have collapsed, such as insurer GAN, are handed off to other French players in an end-run around foreigners and real competition. As long as French policymakers continue protecting their economic agents from international competition, they will be less fit to play in global markets.

TETHERED. And while private French companies have made progress in getting in shape for the global economy, the country has a long way to go. France remains saddled with a public sector that drains ever more resources from private enterprise. French taxes and social charges remain excruciatingly high to fund the inefficient state, whose transport workers retire at 52 with pensions of up to 75% of their pay. "Imagine how competitive we would be with lower taxes," says Ernst Antoine Selliere, president of the French Employers' Assn.

Unemployment insurance is so generous that it discourages the jobless from seeking work. And even though the state pension system is headed for bankruptcy, political leaders are scared to tackle reform. Together, the costs of France's huge public sector are the equivalent of a lead ball tethered to Zidane's foot.

And they are a major disincentive for France's economic stars to hang around. Just as many French football players earn their money playing in countries where the sport is more lucrative, many companies and entrepreneurs bolt for the U.S. or Britain, where their skills and performance generate better rewards. That's why French unemployment is so stubbornly high.

Unfortunately, in economics, there is no World Cup to draw the best players back to France. The arrival of European Monetary Union in January will expose France's weak spots even further. Other EMU members are pruning back their public sectors and opening their private economies to more global competition.

Now, while the French are riding high, is the time to deliver a strong message about modernizing the French state. To win in global markets, France must shed its public-sector fat and get in fighting trim. It has to stop meddling in its economy and let the best players win. If the government of Lionel Jospin misses the chance to sell that message while spirits are high, this summer's victory celebration will fade into a somber realization that France can't get the ball into the net.