Sarkozy or the new industrial interventionism
You will probably start to think that La Parisienne de cafébabel.com has a slight grudge against Nicolas Sarkozy. That our approach on European politics is not really objective… we cannot be to blame as he is giving the stick to beat him with... On closer examination, each time he comes up with an economic choice, he seems to choose the solution most diametrically opposed to community principles.
The last event to date was the promise to Mittal workers in Lorraine a financial intervention from the State to save their factory in Gandrange.
We know the score ever since the rescue of Alstom: economic patriotism, “national champions” and fight against deindustrialisation. The big obsessions of our head of state are industrial tools, machines, and the production of goods. That must be his Marxist side… However, in the current context, he is completely mistaken from economic and legal standpoints.
First of all, on the legal side, community law very strictly controls State aids. They are forbidden because they distort competition in the internal market.
Why such a hard line? Else more powerful states would try to give advantage to their national companies and it would be the return of the old days of economic wars between European States! This is not really the spirit of European integration… This principle still has a few exceptions. It is possible to help certain activities when market mechanisms are insufficient. However, only emerging activities are concerned, new and innovating companies, which have little access to normal sources of funding.
Follow the logic
Here, we are concerned with the declining steel industry. Rules in this area are even stricter; for an aid to be authorised it must permit long-term sustainability. Here, the aim is more to drip-feed the Gandrange factory forever. This is not a really sane industrial policy.
This leads us to economic misjudgement. The President of the Republic makes the following reasoning: by keeping factories, jobs and purchasing power are saved and means of production on French territory is also preserved. The problem is that this is very short-term calculation. Protecting the French industrial fabric is not about clinging to our old industries against all odds. It is more about promoting reconversions, changing of activities and innovation.
An existential question
It is now apparent that France does not have the means to be competitive on all levels. This is not even in its interest. No, the only solution is to progress and innovate ever and ever. New sectors, new technologies will be the engines for growth and bring future jobs. This is where European rules on state aids are particularly relevant; they are more lenient to emerging sectors than to declining ones. Behind legal rules, there is often an economic rationale.
The question is thus very simple: is it better to spend public money to save site such as Gandrange or is it better spent to help innovation and personal training? The answer is apparently not clear for everyone.