Rebonjour, Monsieur Colbert!
Having read in one of the papers that the American government had assumed control of
Fannie Mae and Freddie Mac, I thought I must have woken up in France. The ghost jumping
triumphantly from his grave was a French bureaucrat, Jean-Baptiste Colbert, who brought
industrial policy to the court of Louis XIV, rebuilding the economy around national champions.
In the months since, America’s government has given its carmakers $25 billion in loans. Nicolas
Sarkozy, France’s president, has floated the idea of a group of European sovereign-wealth funds
taking stakes in the continent’s most important firms. And Western governments have spent
hundreds of billions of dollars buying up the banking system. Much fuss has been made about
the return of economic intervention policy, which is anything but a sensible solution.
Patchy as their knowledge about it seems to be, every politician now has ideas about
how to run a business. Thus Congressman Henry Waxman lambasted the rescued American
International Group for spending $440,000 on a junket for life-insurance agents (no matter that
the reps were self-employed). Not only do Britain’s Tories want to rescind bonuses in the banks
their government has just bought (clever idea: driving away good staff just when you need
them) but they also want banks to be free with their credit, which is not normally the route to
profits. What a bunch of amateurs. Never will these new dirigistes be able to find out how to use
their new toys unless they all go to France. With three rounds of nationalization, business has
long been the business of the French state with two-thirds of the country’s 20 biggest companies
having had experience of state ownership. Here surely is a blueprint.
Sadly the main lesson from modern Colbertism is simple: return companies to the
private sector, irrespective of all repercussions. A few industries, such as nuclear power and
high-speed trains, have certainly benefited from “the planners’ vision”, and Mr Sarkozy is also
proud of the state’s rescue of Alstom, an engineering giant. However, most went the other way:
Groupe Bull turned out to be an apter name for France’s answer to IBM than could ever have
been intended. It was re-privatized in 1994, having undergone many reforms after its imprudent
nationalization. And banks seem especially vulnerable to dreams of glory. Credit Lyonnais set
out to be the banking champion of Europe. In 1991 it even took over MGM studios (would you go
to a film made by a bank, even a French one?). The state’s use as a shareholder in the bank, a
government inquiry found, had been close to nil. The Credit Lyonnais' collapse, which the
extensive media coverage certainly did a bad turn, would have been staved off had it not been
for state ownership. Its other costs, albeit harder to spot, are equally disquieting. Putting civil
servants with no experience of business at the top of large companies was not a shrewd strategy.
In some groups, several ministries would each appoint board directors, prompting, which was
not unforeseeable, turf battles. And what proved to be by far most unpropitious was that
protecting old champions hindered the emergence of new ones. Of the largest 25 listed French
companies, none was founded in the past 50 years.
France has been unwinding state ownership for the past two decades, but in 2003 the
then finance minister, Francis Mer, set up an agency to reform the government’s unprofitable
shareholdings. Colbert may well be back; yet his solutions have long since become feeble.