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June 26, 2005

And Steve Pearlstein writes...

...about what's going on over there in Yurp:

Two Economies, Two Mind-Sets: Germany Gets It, France Doesn't : The Germans are better off than they fear, while the French are in worse shape than they smugly presume.... [W]hat growth there is in Germany comes from a growing and competitive export sector, while France's growth comes from private consumption, with almost no contribution from exports. Several factors are at work here, among them lower benefit costs, tamer inflation and higher productivity growth.... And while hand-wringing Germans might be better off in the short run if they stopped saving so much and splurged on a sporty new Ford coming off the assembly line just outside Cologne, they are likely to be better off in the long run than the profligate French, many of whom believe their country can spend its way out of double-digit unemployment.

The industrialized world, as we know, is moving toward a service economy.... Germans... take pride in providing efficient service.... In France... it's all about producers rather than consumers, whether the consumers are visitors renting a car at the Lyon train station, or thousands of Lyon residents forced to pass up the annual music festival this week because of a transit strike. It tells you a lot that local airport authorities and Air France have made sure that low-cost airlines have made few inroads in France. Or consider that the great triumph of French marketing in recent years has been to persuade the rest of the world to get excited about drinking foul-tasting Beaujolais nouveau....

At the Lyon chamber of commerce, the new, young director general, Jean Martin Jaspers, outlined the city's aspirations to be a player in global markets and a center of biotech, venture capital and nanotechnology. Then, when he almost had me convinced there might indeed be a "new France," Jaspers announced confidently that Lyon would be a big winner when the French government announced its new industrial policy next month, designating the clusters deserving of government subsidies, encouragement and protections. "We don't make the distinctions you do between government and markets," Jean-Paul Giraud, president of Grenoble's gas and electric utility, explained to me later that day.

But while France may not have broken free from its dirigiste roots, Germany is noticeably further along toward much-needed market reform.... Martin Welcker, president of... a maker of complex tooling machines.... "The companies and workers are way ahead of the politicians.

On the other hand, it's been twenty-five years since I first read--in a book by Jeffrey Sachs and the late Michael Bruno, Economics of Worldwide Stagflation--that the corporatist economic system built up in the first post-WWII generation in Western Europe had awful weaknesses and could not cope with the shocks of the present and future without economic and then political catastrophe. The Western European corporate-social-democratic model has taken plenty of lickings, but it keeps on ticking--so far.

Posted by DeLong at June 26, 2005 05:44 PM