Changes in Industrial and Financial French Capitalism
The end of the XX century is marked as the primacy of capitalism as an economic system. Nevertheless it is not question of one single capitalism, but distinct kind of capitalism according to the development steps reached. In other words capitalism of the Rhineland lived with the Anglo-Saxon and Asian capitalisms.
France is notexcluded from this phenomenon. Indeed, industry and finance sectors got through very significant changes. That’s why the former structures and organizations tend to disappear in favor of other ones linked to efficiency and globalization requirements.
I- Changes in French industrial capitalism:
Over the past decades, the French industry has been getting through a lot of penalizingdifficulties, but some long-term transformations of the sector let us still hope about an serene future.
A- The weaknesses of the French industry:
The decreasing of labor productivity gains and capital productivity has been proved since the decade 1960. Over the past few decades, French growth (as in most of developed countries) is slow and negative sometimes. The long-term change isnecessary because of four relevant weaknesses of the French companies in the industry sector.
1- Under-market capitalization:
The first weakness is under-market capitalization. In fact, nowadays French companies are under-capitalized that keeps them vulnerable in comparison to the competitors. Besides, the big nationalized sector and the large protection of a regulated economyallowed the development of “a without-equity capitalism” in which equity is substituted by public subsidies. To illustrate, in France market capitalization is only a 50% of national wealth whereas in the United Kingdom is 130%. So we can note that a weakness of the French industry is its dependence of the French State.
2- Low profitability of the French companies:
The secondcritical point of the industry sector is the low profitability of the companies. Profitability is an indicator of companies’ performance, but in France, profitability is low because of: on one hand, the importance of the public sector in the industry whom unprofitability penalized the whole French economy, and on the other hand, the stagnation of companies’ profits.
Besides, we cannot forget tospotlight the consequences of low investments in order to develop capacities of production such as the operations of mergers and acquisitions, OPA…
3- Inadequate corporate governance:
The third weakness is represented by inadequate corporate governance in France. The companies, which need a high level of capital for its activities (an individual of a family’s capital is notsufficient), becomes the property of a large number of economic agents like: States, firms, individuals, organizations… Corporate governance is the consequence of the shareholders’ actions which try to organize the power. France still uses “colbertist traditions” for which capitalism is characterized by the French State’s importance (interventionism and exercising its power within firms thanks tothe national elites). So to summarize the French situation, we can highlight three aspects:
➢ Interventionism: financial helps, subsidies and a significant tax system.
➢ A public sector which was very heavy but it tends to decrease with a privatization policy.
➢ The presence of manager elite which comes from the highest level of the Public Administration and themost famous political schools.
The creation of “hard cores” is also a specificity of the French corporate governance. In fact, with the “hard cores”, the efficiency of corporate governance depends on the network power and density. As a study noticed it, a 45% of CAC40’s CEOs and members of the board (that we can find in many boards of directors) come from the highest level of the public...
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