Sunday, 24 September 2017

The centre holds

It is now almost four months since Emmanuel Macron was elected President of France. On Friday of last week he signed the executive orders reforming the French labour code that he promised during his campaign and that his government has been preparing all summer. The opposition parties are still struggling to find their feet after their defeat at the presidential and parliamentary elections and events of the past week have only made their divisions more visible.

This Sunday, September 24th, as Germany goes to the polls to elect its new parliament, it is worth noting that the French government under Edouard Philippe, unusually for France, looks a lot like Angela Merkel’s grand coalition that has governed Germany for the past four years.  After splitting both the traditional left and right-wing parties and bringing together the moderates of both, Emmanuel Macron is governing from the centre in much the same way.

For the moment, the forces opposed to him are still reeling from their defeat in the elections. The Parti Socialiste, after failing miserably to make the run-off in the presidential election and losing a considerable number of MPs in the parliamentary elections, has been reduced to putting its now oversized headquarters up for sale and is ruled by a 16-person committee. It has said nothing of note about labour market reform. On the radical left, Jean-Luc Mélenchon has styled himself as the only real opposition to Macron and has been attracting media attention by gimmicky tactics in parliament and outlandish statements to the party faithful. Just four months after a hotly contested set of democratic elections, he rallied supporters in a street demonstration in Paris on Saturday and claimed, in all seriousness, that true democracy was only expressed in the street because it was protestors in the streets who had toppled the Kings of France and the Nazis! Until he can find something more credible to say, he is unlikely to mobilise many voters beyond his hard core of unquestioning supporters.

The Front National, that could have been expected to form an opposition from the far right, is also in disarray, unsure of if its future path and leadership and riven by ideological divisions. Florian Philippot, its number 2 until the end of last week and the architect of the party’s newly won respectability, but also its ill fated “ditch the Euro” platform at the presidential election, announced his departure from the party on Friday after being stripped of his powers as vice-president. A lot of the party’s rank and file was never happy with the ideological shift that he persuaded Marine le Pen to adopt and wants to revert to its former focus on identity and immigration. The fact that Philippot is gay never endeared him to many party activists either, whose xenophobic, homophobic and anti-elitist leanings were naturally antagonistic to a gay, ENA-educated and media-savvy vice-president.  Many activists and voters would like nothing more than for Marine Le Pen’s niece, Marion Maréchal le Pen, to lead the party into the next elections. However, having announced just three months ago that she is leaving politics altogether, it is doubtful she will oblige, at least not yet. This being said, Marine Le Pen’s disastrous performance in the run-off presidential debate in May still rankles and has surely compromised her chances of contesting the next presidential election in 2022, especially if Emmanuel Macron stands for a second term.

Which leaves the rest of the right-wing opposition of “Les Républicains”. Now that three of its leading members are pillars of the government, the party is in the throes of redefining itself and seems to have split three ways.  Some members have formed what they call a “constructive” wing, offering qualified support for the government’s reform programme. Others have formed up behind Valérie Pécresse, current President of the Ile-de-France regional council and call themselves “Free” (Libres). It is not yet clear how they wish to differentiate themselves from the other parts of their party. The more hard-line members consider that only a resolutely right-wing opposition party can be a credible alternative to government.  Their standard bearer is Laurent Wauquiez, who passes for a disciple of Nicolas Sarkozy and who is likely to be elected to lead the party at their forthcoming congress in December. It will be interesting to see what the party’s attitude will be to those of its members who are now government ministers.

Whether this clarification, when it comes, will lead to greater permeability between Les Républicains and the Front National remains to be seen, and ultimately of course, it is voters who will decide. But as the next national elections are not until 2019 and 2020, there will be a lot of manoeuvring between now and then, starting with the parliamentary debates on next year’s budget in October.  

For the moment though, it looks as if Macron and Philippe have a firm hold on the centre ground, both in government and in parliament, with opposition from all sides either muted or lacking credibility.  Notwithstanding Mélenchon’s more outrageous statements, there will surely be challenges in the streets to the forthcoming announced reforms of unemployment insurance and vocational training, not to speak of the highly contentious issue of pensions. All three could be explosive. As often happens in France, a spark from an unexpected quarter could ignite huge popular protests. The government is said to fear more than anything demonstrations by university and high-school students or protesting lorry drivers blocking the country's roads and motorways. Macron’s future - and the future path of France - will depend crucially on whether he can exploit the window of opportunity that has opened up before him and demonstrate the necessary political skills to coax through the reforms on which he has staked his reputation.

Monday, 18 September 2017

Food, glorious food ! (1)

France has long and rich gastronomic traditions that are deservedly admired all over the world. Food is one of the country’s favourite topics of conversation and, on all possible occasions, people delight in swapping tips about food shops and restaurants, not to speak of wines. Foreigners often find it hard to understand why so many French people have scarcely finished one meal when they start planning the next. In the French language, many metaphorical expressions have food or wine as their theme. General de Gaulle, who had a reputation for colourful turns of phrase, once expressed a sense of exasperation with the French by exclaiming: “how can you possibly govern a country that has 258 varieties of cheese?" (“Comment voulez vous governer un pays où il existe 258 variétés de fromage?”)

Given this deeply entrenched food and eating culture, it is sad indeed that the French, above all peoples, seem to have become so readily accustomed to the mediocre produce they now find in most of their shops and supermarkets.

When was the last time any reader can remember eating a tomato, an apple or chicken that tasted like a tomato, an apple or chicken?  Not to speak of strawberries, now routinely sold out of season, that often taste no better than cardboard soaked in water. The answer is probably many years ago, unless of course you grow your own fruit and vegetables and keep hens in your back garden. But most people no longer have the space, the time or the inclination to do so. Perhaps also, French taste buds have been slowly numbed by having so few alternatives to bland and mediocre fare. It is only when one visits a deserted corner of rural France or a less developed country, in Asia for instance, that one fully realises how much taste has been lost over the years.

The underlying reasons for all this have been well rehearsed: In the space of just three or four generations, France has gone from being a largely rural, agricultural country to a constellation of large cities and built-up areas with big, almost abandoned spaces between them. Large retails chains like Auchan, Carrefour, not so long ago the world’s 2nd largest retailer and the more home-based Leclerc, have grown fast by serving large concentrations of population with large stores and fierce competition on prices. According to INSEE, the national statistics office, the average household spent 35% of its budget on food in 1960 but that figure has now shrunk to 20%, a quarter of which is spent outside the home. Of course, the general increase in living standards goes some way to explaining this, but there are also the attendant changes in life styles, with more two-adult households going out to work and children eating lunch at school. In parallel, agriculture in all its forms has become an industry and quantity has largely replaced quality. In all this, France has typically, some would say tragically, followed the same trend that has been apparent in the U.S for decades.

Even that time-honoured myth about France's two-hour lunches has faded. In French cities today, despite the willingness of some to perpetuate the myth by taking clients or foreign guests to a top-class restaurant, most employees are only allowed an hour’s break from their work and many are content to eat a baguette sandwich or a McDonalds cheeseburger. In the evening, after a long trek home in overcrowded buses or trains or through endless traffic jams, there is little energy left to do much more than heat up a ready-to-eat meal out of the freezer or fry fish fingers accompanied by pasta or rice, finishing off with a milk based, over-sweetened desert in a plastic container. Picard, a chain of frozen food stores, is now strategically placed in most high streets but its convenient and attractive-looking offerings turn out, more often than not, to be bland and devoid of real taste. Supermarket shelves overflow with sweet deserts of all kinds.

The food industrialists have not been slow to jump on the organic food bandwagon to try and persuade the French that they cannot only eat better but also more healthily. And, by and large, French consumers have fallen for it. In the town in which I live in the western suburbs of Paris, there are now no less than four organic food shops within a mile of each other, three of them belonging to national retail chains and the fourth a small shopkeeper. Having tasted their fresh produce, I must honestly report that I am not convinced of the need to pay more for apples or carrots that may have been grown without herbicides or pesticides but which do not taste perceptibly better. And some of their best ideas like cereals, nuts and dried vegetables available in bulk have been largely copied in the normal supermarkets. I wonder which one of the four will go out of business first  - and which will survive when the organic bubble bursts.

In a word, food in France has been largely commoditised, in the same way that so many other goods and services have been, and commoditisation is having the same impact it has had on other industries. There will continue to be a mass market served by large retail chains charging the lowest prices they can without going out of business. To remain competitive, they will continue to squeeze every possible cost, from staff to transport to produce. But for a smaller number of more discerning consumers, perhaps more in France than in other European countries, who are willing to pay much higher prices for much tastier produce, there will be up-market specialist shops or market traders who either grow their own produce or source from carefully chosen suppliers. The losers will be the shops, supermarkets and traders with no discernible advantage in terms of price or quality.

I suspect that this fate is already befalling Carrefour, which used to be one of France’s most successful retailers, as well as an exporter of French food and retail know-how to the rest of the world, but is now struggling to reinvent itself. But that will be the subject of a future post.

(1)  The title of a song from Lionel Bart’s musical “Oliver”, based on Charles Dickens’ novel “Oliver Twist”.

Monday, 11 September 2017

Amazon in France:a love-hate relationship!

In just a few years, the Internet giants that even French journalists now call “les GAFA”, have made as profound an impact on everyday life in France as in most other countries. In doing so, as perfect examples of digital-driven globalisation, they have generated highly ambivalent attitudes among consumers. Quite often, the same people who engage with them intensely on their desktops or smartphones on Saturday, will vote for avowed anti-globalisation parties on an election Sunday. This ambivalence became clearer to me through two recent chance encounters.

The small Breton seaside village in which I have spent most of my summer holidays for the past 40 years has a population of about 500 for most of the year that swells to more than 10,000 during the peak tourist season. Thanks largely to the income from tourism, the village can support a small supermarket, a doctor’s surgery, a pharmacy and, somewhat surprisingly perhaps, a small bookshop selling books, maps, postcards and the like. They all manage to stay open throughout the year. This in turn means that the village is still a reasonably balanced community with people of all ages, including enough young children to justify a small primary school. It has thus escaped the fate that has befallen so many small villages in France that do not have the attraction of long sandy beaches and boat trips round the islands.

Although, like many people in France, I buy most of my books these days on-line and read them increasingly on a Kindle or similar device, I always make a point, to salve my conscience perhaps, of buying my summer holiday postcards from the bookshop in the village. I was in there doing just that this summer when another customer came in and asked for a book that the bookseller told him was out of print. He said he would try and find it through his “own network”, as he put it. Oblivious for a moment to the thin ice I was about to fall through, I ventured that it might perhaps be found on Amazon or the Amazon market place. This caused the bookseller, normally an affable and mild- mannered man, to launch into a long and blistering attack on the Amazon “bandits” who pay no taxes in France and who even manage to have their VAT refunded! The survival of his shop in the village, he went on, was due mainly to the fact that, under French law, all new books are sold at one and the same retail price regardless of their distribution channel, as well as to the presence of the supermarket, the primary school and the pharmacy next door. If it weren’t for all that, he concluded, he would have to close down his shop as there was no way it could survive by being open only during the summer.

Many politicians of course, and not just on the extremist fringes, have had a field day exploiting such sentiments and the popular media are quick to relay the complaints of “hard-working over-taxed small shopkeepers” confronted with the “freeloading Internet giants” like Amazon.  You have to go to the more serious media to find out that, at the instigation of governments confronted with the same phenomenon throughout the EU, the European Commission, among others, is working hard do something about what it calls “aggressive tax planning”. It is indeed abundantly clear that the GAFA, together with many other multinational corporations, have devised sophisticated tax optimisation strategies to avoid having to pay high rates of corporate income tax in relation to their actual sales and profits in a particular country. One article I read showed a detailed diagram tracing the multiple financial flows between national subsidiaries towards holding companies in Luxembourg, the British Virgin Islands and the State of Delaware, where corporate income tax can be minimised. As an example of one of the many and various national, EU and OECD initiatives that are currently on the drawing board, the European Commission is working on a “CCCTB (common consolidated corporate tax base) directive”. If adopted and implemented, this directive would oblige the GAFA to consolidate their revenue from all countries in the EU and pay an agreed level of tax that would be apportioned to the member states on the basis of the revenue generated in each one.

Whether the CCCTB directive, if and when it eventually comes into force, will make the position of my village bookseller any more secure is a moot point. But it would in theory put him on an equal footing with Amazon in selling books, and maybe, all other things being equal, ensure the continued presence of his bookshop in the village. That being said, as Internet becomes more and more prevalent, consumers clearly find it more convenient to buy books, as well as many other items, on-line, as the large number of other on-line booksellers testifies, not to speak of Amazon’s smothering embrace of many other retail markets.  But Amazon will probably continue to be a convenient popular scapegoat for the inevitable ills of globalisation.

But there is of course, as always, another side to the story. It makes fewer breathless headlines but will probably have an equally lasting impact. It concerns the investments made and the jobs created by the Internet giants. The GAFA have made substantial investments in France, in European or national headquarters, flagship stores, research laboratories and, as far as Amazon is concerned, logistics centres.  Over the last ten years or so, it has built four large logistics centres in France. It is building a fifth in the north of the country, an area hit by industrial decline and high unemployment, and has just announced its intention to build a sixth in the Paris area. To date, it has created about 5000 jobs.  Naturally enough, it has been encouraged to do so by generous public investment subsidies, including one of over €1 million for the building of a giant warehouse in a part of rural France where the former “minister of productive investment”, Arnaud Montebourg, used to be an MP. During his ministerial tenure, he was mainly known for his “buy French” campaigns and occasional violent criticism of globalisation. In this case, he clearly used his ministerial powers of persuasion to help the local authorities clinch a deal with Amazon.

Nor is it entirely accurate to accuse Amazon of paying no taxes at all in France. Like any business, it pays local property and business taxes and, more importantly, contributes through compulsory payroll levies to the health care and pension provision of all its French employees. One of them is a young woman I was sitting next to on a plane last year. Definitely a member of the Y generation and a child of globalisation, she was on her way to Tokyo to take up her first job as a junior manager for a French logistics company operating in Japan. A few days after my conversation in the bookshop, I found out, through LinkedIn, that she has now returned to France and taken up a position as area manager at one of Amazon’s largest logistics centres in France.  She is no doubt happy to have a good job doing what she trained to do in school.

Whether her story will be of comfort to the village bookseller in Brittany is a matter of some doubt. She, after all, is a winner from globalisation whereas he is a potential loser. I nevertheless hope that I shall still be able to buy my postcards in his shop for a few summers to come.