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2005/09/25

France's fabled "social model" assumes that companies should operate like nonprofit organizations or charities

France's staggering jobless rate is largely the result of a fundamental misunderstanding of capitalism
writes The Wall Street Journal (merci à Hervé).
Somehow, the country's fabled "social model" assumes that companies should operate like nonprofit organizations. But neither do entrepreneurs create jobs out of charity nor do they lay off people out of malice -- despite French Employment Minister Gerard Larcher's calling Hewlett-Packard's plan "brutal."

It is the much-maligned drive for profit that creates growth and jobs. Labor laws that make it costly to lay off workers are not "social"; they discourage companies from hiring. And when not even unprofitable plants can be shut down, it will hardly prompt investors, foreign or domestic, to open new ones.

France isn't very investor-friendly to begin with. Rumors in July that Pepsi might take over dairy food company Danone put Mr. Chirac into protectionist overdrive. The government is drawing up a list of industries to keep out of foreign hands. Even Paris will have difficulty though arguing yogurt production is a matter of national security. And yet, despite renewed speculation this week, a Pepsi-Danone deal is in doubt. As one analyst told Reuters Wednesday: "If I put myself in Pepsi's shoes, do I want to invest $30 billion in buying a company in France with President Chirac, the chairman, unions and farmers hostile to the move? You'd be insane."

Smart investors rarely are insane, as France's unemployment rate demonstrates.
Read also Cristina Losada's It’s Expensive To Keep Them Poor!

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