Slapping the invisible hand

As the coffin lid was being nailed down on the EU constitution, columnist Tom Friedman suggested that the Europeans were trying to hold back the tide of globalization: “It is interesting because French voters are trying to preserve a 35-hour workweek in a world where Indian engineers are ready to work a 35-hour day. Good luck.” The Wall Street Journal’s Opinion Journal chided the Europeans for clinging to a welfare state that produces both a high unemployment rate and anemic growth: “In sum, European nations penalize work and subsidize non-work, and, no surprise, they have gotten a lot of the latter and far too little of the former. By contrast, the U.S. model--allegedly cruel and "laissez-faire"--has done much better both by economic growth and worker opportunity.”

The problem with business opportunity in France is highlighted in this WashPost article: “What’s American and envied in France?” (Hat tip: Arts & Letters).

But there's one area in which France would love to emulate that place across the Atlantic -- the ability to foster small businesses and turn them into big ones.

It's not exactly haute culture , but these days this is a vital topic here in France, where the unemployment rate has been stuck between 9 and 10 percent for a quarter of a century and where not a single enterprise founded here in the past 40 years has managed to break into the ranks of the 25 biggest French companies. By comparison, 19 of today's 25 largest U.S. companies didn't exist four decades ago. That's why France is looking to the United States for lessons. And it's why it was meant as a compliment when the French media dubbed the former finance minister, newly appointed interior minister and potential president Nicolas Sarkozy "the American."

That’s remarkable: there is no French equivalent to Microsoft. No Home Depots, no Verizons, no Intels, no Pfizers. The socialist states of Europe have stunted the “creative destruction” of capitalism:

Capitalism, then, is by nature a form or method of economic change and not only never is but never can be stationary. And this evolutionary character of the capitalist process is not merely due to the fact that economic life goes on in a social and natural environment which changes and by its change alters the data of economic action; this fact is important and these changes (wars, revolutions and so on) often condition industrial change, but they are not its prime movers. Nor is this evolutionary character due to a quasi-automatic increase in population and capital or to the vagaries of monetary systems, of which exactly the same thing holds true. The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers, goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates.

A flourishing, free-market economy drives out the old and ushers in the new. In France, where the same 25 companies have reigned since 1965, they seem locked to a marketplace of horse carriages and typewriters.

Extra: Pejman adds some thoughts on the same issue.