There was an error in this gadget

Monday, May 18, 2009

Why is France ahead?

Is this a case of French exceptionalism?

Hardly some may argue. But,does this exceptionalism actually mean full recovery from the financial crisis?

We can't answer that because we probably have the wrong question with the wrong premise. The question folks would really want to ask is, was France as bad off as the other countries at the same time now and then in this crisis? the answer is no. France was the last European country to show negative figures at the mid-way of the crisis. In fact, they were the only country as of late 2008 to have positive GDP growth figures.

While France boasts of having rolled out more of it's fiscal stimulus- about 26 billion euros- does this mean that the recovery will be higher than other countries?

Perhaps not. The fact is is that France is a heavy welfare state. But, on the other hand, they have better labour relations to employment than any other country- including the Nordic countries. While other social democracies in the Northern Europe are have heavy welfare spending programs as is France, France also has a very vibrant private sector with a high amount of outward capital investment by nationals.

In fact, aside from the USA and the UK, France, has one of the highest investor classes in the world with regard to outward foreign capital investment by nationals. While this also means that France has heavy exposure, to the extent that France has had it's financial services sector exposed to US sub-prime debt is something France has not had to worry about.

While, yes, Societe & General has had it;'s issues with the rouge trader, this was an internal anomaly and this trader, was working outside of the general financial services protocol within his organization and, for that matter, French financial services regulators.

Another important thing to note is that France can also feed itself. This is crucial. This means that they are not price takers and are not sending their hard earned money overseas, to purchase food and don't have to at any time. And, also, they are the price givers, meaning that they have a very wealthy European block as well as a middle east and Northern African block, which they supply.

France also has diversified it's energy portfolio, having nuclear and other forms of energy aside form fossil fuel bases.

France is the best bet for coming out of this crisis faster and better. While they will probably not have the size of GDP growth as will the US in the time to come, they will fair better than many and be sound in the short and long run.

So, while we bash France on it's socialist tendencies, they really have a better- although not as transparent as we would like- system of laissez faire governance, which has really evolved into a great state over the last century.
Post a Comment