Alberto Mingardi  

Macron, economic nationalist

The economic news is not good... Henderson and Cochrane on Clim...

Monsieur Macron has won the recent elections in France as, I would say, the more "market-friendly" option available, vis-à-vis the rampant economic nationalism of Madame Le Pen. Certainly, he won the election as the most "europhile" option available. And yet, economic nationalism is a well established feature of French politics and perhaps a more or less safe way to build further electoral consensus.

After a spectacular, and quite unexpected, victory in the legislative contest in addition to his election as President of the French Republic, Monsieur Macron's popularity went down by 10 points recently. I won't dare to say that this explains his recent moves concerning the shipyard of Saint-Nazaire, which he is threatening to nationalise, but he certainly doesn't believe that flexing his nationalist muscles will hurt his popularity.

Saint-Nazaire has a long history as a shipyard. It is owned by a joint venture of the of the South Korean group STX, which has filed for bankruptcy, and the French government (which owns a 30% stake). With STX's bankruptcy, Fincantieri - which is in turn controlled by the Italian government bank - signed a deal to acquire the Saint-Nazaire shipyard.

The European single market is founded upon the the free movement of goods, capital, services, and labour (the so-called four freedoms) and therefore this should hardly be a problem.

But now Monsieur Macron is stopping the deal. Instead of allowing Italians to becoming majority shareholders, he chose to nationalise the shipyard. Such a move is prompted by the realisation that, of course, shipbuilding is "strategic" and by the need for avoiding the new shareholder firing people in order to increase efficiency. One wonders why such "strategic objection" didn't apply to South Koreans but is used against fellow EU members.

What is a "strategic" business or a "strategic" industry? Many definitions can be advanced but, basically, "strategic" refers to those businesses that a government wishes to control, for whatever reason.

Per se, the deal is not particularly remarkable. The Italian company committed 79 million euros for 66% of STX France's shares. Shipbuilding doesn't seem to be a particularly profitable business sector these days, nor the most technology-intensive.

Yet this move will help to increase Macron's popularity in Brittany, where St. Nazaire is located, by showing that the state is coming to "protect" their jobs. It may prove that Macron doesn't lack resolve, to all those who were looking for a new tough guy in town. It would certainly be a disappointment for those who pictured in Macron a new champion of an integrated Europe: this is a blow to the single market. If the French cannot "trust" the Italians as shareholders of one of their "strategic" companies, and not just some Italian guy but the Italian government, how can they speak of a more integrated Europe with a straight face?

"Economic nationalism" never seems to go away, especially in France. But the Italian reaction has been perfectly symmetrical. While Italian public opinion is constantly upset when foreign investors buy stakes in major Italian corporations ("they're buying our family jewels!"), now we're all upset that "our" team is being stopped from acquiring a French company. Only a few years ago, our government stopped AirFrance which wanted to buy then government-owned Alitalia, preferring to sell it to a heterogenous group of Italian businessmen (not a very good choice, with the benefit of hindsight).

The tribal distinction of "us" and "them" has little relevance in a market economy. We should actually be welcoming foreign capital that comes to our shores, we shouldn't consider it a form of "invasion". Likewise, if there is such thing as a "national interest" I suppose it coincides with the interests of Italian consumers. In what sense is it related to an Italian company employing capital in French shipyards? I can see that a more open economy produces a better allocation of resources, but that is hardly a matter of a single business acquisition in France - particularly when the buyer is another government-controlled company.

Behind all of this lies an old idea. Sad as it is, we shall admit that the idea that exports (including exporting our own companies) are good and imports are bad is still "an article of faith", as a brilliant French economist pointed out a few years ago.

One of course wonders how prejudices so profoundly rooted are affected by EU membership. Very little, it seems. Alas, sometimes euro-philia and euro-phobia differ not so much in their reliance on the us vs them story, but only on their assessment of who is the "we". It seems that the emphasis was put on the "common" more than on the "market". It is hard to forecast that the common market will ever be completed, or taken truly seriously by Europeans and member-states alike, if we don't find some leader capable of explaining the virtues of trade, exchange, economic cooperation.

Comments and Sharing


COMMENTS (7 to date)
Kgaard writes:

"The tribal distinction of "us" and "them" has little relevance in a market economy."

This is the problem. The 21st century is going to be a battle of culture vs capital. I'd say culture probably has the better argument. If tribal distinctions have no role in a market economy, why not open up the Italian border to all Africans who want to come to Italy. They bring human capital after all. Your position offers no argument against open borders with Africa that I can see. So it's basically something like Italian auto-genocide, at least culturally.

G writes:

I have one problem with this analysis, it doesn't really take into account that over 70% of the shares of Fincantieri are owned by the Italian government.

Ship building is an industry depending on the economic situation. If there is a downturn, I hardly see the Italian government accepting a market based approach to closing shipyards based on technical abilities or productivity. They are going to close the shipyards out of Italy first. At 79M it's probably cheaper for the french government to buy out the company now than to pay unemployment money in the next recession.

The strategic aspect, is that STX has a set of unique ability to build ship hulls for military use. Fincantieri has cooperation in place with China State Shipbuilding Corp.

It's not a black and white situation.

BTW, Saint-Nazaire is part of the Pays-de-Loire region not Brittany.

The Arthurian writes:

Alberto Mingardi reduces nation-states to a "tribal" concept. He has obviously taken the wrong side in the "battle of culture vs capital."

Adam Smith did not write The Wealth of Tribes.

Philo writes:

You lament the fact that "the idea that exports . . . are good and imports are bad is still 'an article of faith'." Fair enough; but you should not have filled in the ellipsis with: "(including exporting our own companies)." The article of faith is that exporting goods and services is good, but that productive activity should be kept at home.

Hazel Meade writes:

@Kgaard: It's possible to have open markets for good, but not labor, which is basically how things are now. It's a fair point that it's hard to make an argument against open borders, but I really don't the the opposite case either - if open borders are bad, then opens markets to goods and services must also be bad?

@Philo: Why should productive activity be kept at home? If we're trying to be as efficient as possible, we should all be trying to do as little work as possible in order to produce the goods and services we desire. If I can pay a Chinese person a fraction of what it would cost me to produce something myself, how is that not to the good? Less work means more leisure activity and/or time to work on something else which is more productive.

Kgaard writes:

Hazel -- I think the problem gets down to capital vs. race, actually. Capital is always universalist because it always wants more customers and cheaper labor. But culture is racial because it is kin-based. So capital and culture are in conflict.

For culture to make its point, it has to say, "Our race, our people and our culture are a valued resource. Capital does not have the right to dilute it -- nor introduce misleading arguments calling for its dilution."

The EU was originally the EUROPEAN Union -- and the underlying idea was that western and central Europeans (but not Russians) have enough in common to consider themselves one people. That sort of worked. Sort of. But that's not enough for capital. It wants an even bigger area of open intercourse -- Europe + Africa. Thus somehow multiculturalism (open borders) has become a "European value" which is of course nonsense.

Ultimately the convo is coming down to: Africans and Muslims are not Europeans, and there should be no free movement of labor between these regions. If the EU won't adopt that, then individual countries are going to increasingly rebel against the EU. The Visegrad 4 are doing that right now, and Brexit was about this too.

IronSig writes:

Kgaard and Hazel are trying to determine who must have carry the burden of proof, the protectionist actor or the free-market actor. The answer of who must substantiate their claim is often the holder of the new position, but can we call the free market position "new?" It seems to me that the answer will be found in the philosophy predicate of if an one person can be deflect the will of many.

An observation: an examination of any "Culture" will demonstrate that there are certain tools, techniques and institutions fossilized in the argument its execution advances. "Fossilized" is an entirely appropriate adjective, btw; no substitutions allowed.

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