The Slow Decay: France's Industrial Decline and Its Socioeconomic Implications
In what can only be described as apocalyptic scenes, violence, chaos, and looting have plagued various cities in France this summer, shedding light on the deep-rooted issue of "de-civilization" in the country. However, France is also grappling with another pressing concern - "de-industrialization," a problem that may be intricately linked to the current state of affairs.
Deindustrialization refers to the gradual reduction of industries, industrial jobs, and industrial companies within an economy, resulting in a decline in the sector's contribution to a country's GDP. Over the course of the past three decades, France has witnessed the loss of a staggering two and a half million industrial jobs. Despite recent efforts to address this decline, the share of industrial production in the country's GDP has plummeted to a mere 10% over a span of 40 years, with the trade deficit reaching a staggering 122 billion euros. While some level of reduction is natural during the transition from industrialization, France faces numerous challenges in navigating this process.
In an attempt to counteract the effects of deindustrialization, French President Emmanuel Macron unveiled plans in May to expedite the process of reindustrialization through a series of new measures. The government's proposed "green industry" law has been approved by parliament and is now enforceable. However, critics argue that the law fails to provide a clear message on how it will improve the country's economic situation, a concern that may deter foreign investors. Particularly worrisome is the fact that foreign institutions currently hold approximately 51% of France's gross public debt, which stands at a staggering 3 trillion euros. These apprehensions regarding France's economic future were further exacerbated when Fitch Ratings downgraded the country to AA- in late April.
The industrial sector holds numerous advantages, including economies of scale, cost savings, and a skilled workforce that contributes to the overall industrial network of a nation. Economists widely recognize the industry as a catalyst for growth and development, often leading to increased profits, wages, and subsequent contributions to GDP growth. Furthermore, industrial research and development (R&D) drive innovation, ultimately boosting productivity and GDP per capita. While industry is not the sole path to growth and development, as demonstrated by New Zealand's agriculture-based strategy, it undeniably possesses the potential for rapid progress, as evidenced by the achievements of countries such as Britain, Germany, the United States, and various Southeast Asian nations throughout history.
The deindustrialization of a private economy, if not offset by significant growth in other sectors, can have potentially devastating consequences. Not only are industrial activities, jobs, and areas lost, but this process also affects upstream sectors that rely on industry, such as services. Deindustrialization is often perceived as a threat to per capita GDP growth. While societies with extensive welfare states may temporarily offset this decline through increased public spending, taxes, and debt, such measures are not sustainable in the long run. Ultimately, a weakened and reduced GDP leads to increased government debt and expenses, leaving countries vulnerable in times of crisis. Events like the ongoing Covid-19 pandemic or conflicts such as the war in Ukraine can significantly impact nations lacking a solid industrial base, jeopardizing their strategic independence.
France faces a significant challenge in attracting industrial investors, as administrative and regulatory barriers have created frustrations and hindered the growth and development of industrial projects. Obtaining an industrial license in France typically takes twice as long as in Germany. Responding to criticism and protests from industrialists, President Macron has pledged to reduce administrative delays in obtaining permits for industrial sites from 18 months to 9 months. Additionally, the green industry law aims to streamline land usage for environmental protection, an issue that has concerned many industrialists. However, reforming the French administrative bureaucracy is a time-consuming process, as past experiences, such as François Hollande's slow and disappointing administrative reform plan, have demonstrated.
Another crucial challenge for France lies in securing a competent workforce. As experienced professionals retire, a void has emerged within the industry, and the transfer of knowledge and expertise has not been adequately addressed. Additionally, capable individuals are increasingly disinclined to pursue careers in the industry. To counteract this trend, the government has devised special programs to attract talent to the sector. Furthermore, the decline in the quality of education in France, particularly in subjects like mathematics that foster industry and creativity, poses another significant challenge that requires immediate attention. If France is to revive its industry and harbor hope for the future, it must prioritize strengthening its education sector, which serves as the bedrock of any successful industrial transformation.
These challenges and critical issues underscore the complex nature of France's industrial transformation and redefinition. The coming years will determine whether the nation's leaders can overcome these obstacles or if the second-largest economy in the European Union will gradually relinquish its pivotal role within the European industry.
