Wednesday, June 8, 2011

French Neoliberalism

Henry Farrell, borrowing from Pepper Culpepper, makes a good point:

This [the idea that France has a relatively large state-owned sector in its economy] isn’t exactly wrong – there is still a quite significant state-owned sector in France. But it isn’t exactly right either. Pepper Culpepper tells the story in Quiet Politics and Business Power. His argument goes as follows. First – the 1980s saw the beginning of a large-scale privatization of state owned companies in France. This did not lead to an immediate embrace of neo-liberalism, but instead to the construction of networks of firms with cross-ownership – so-called noyaux durs – to resist foreign takeovers. However, these networks effectively collapsed in 1998 and 1999 leading to a major change in the organization of French business.
The result has been not only an openness among the French business elite to hostile takeovers that would be unimaginable in Germany, but a desire to open up other European markets for corporate control so that predatory French firms can more easily expand internationally. As Culpepper argues:
These interlocking French shareholdings among large French firms were replaced by the growing weight of foreign (mostly British and American) institutional investors, which by 2003 owned more than forty percent of the outstanding shares in CAC-40 companies. … As Michel Goyer has demonstrated, the influx … has been dominated by mutual and hedge funds, not pension funds.
French politicians like nothing better than to proclaim their opposition to free markets … Yet the reality of markets for corporate control is often far removed from the rhetoric of political leaders.

1 comment:

randcoop said...

Excellent post. Farrell should also have disagreed with Yglesias about the possibility of controlled shareholders in more than just France (Yglesias says it would be a bad thing).

Culpepper says that Germany and the Netherlands are the alternative to the French capitulation to a world of hostile takeovers. I haven't read the book, but will. I'm wondering if Culpepper addresses the General Motors bankruptcy and what happened in Germany with Opel. It would be interesting to contrast that with the French auto industry.