Why Hollande’s France can’t copy Switzerland

Last week there was much fanfare around French president Francois Hollande’s visit to Switzerland. Mr. Hollande spoke enthusiastically about Switzerland and as reported in 24heures went as far as saying that there was much in Switzerland that France should emulate. However, despite Mr. Hollande’s enthusiastic talk there is little chance France can copy Switzerland’s model of economic success.

The book Why Nations Fail, recommended by five Nobel laureates and the Financial Times, describes how a country’s system of governance determines its prosperity. Systems that are exploitive and create riches for a governing elite while leaving the exploited masses impoverished are generally poor. Countries that are inclusive and incentivise a large number of their citizens to be inventive and industrious are generally rich.

While replacing exploitive systems with inclusive ones seems like a simple path to national prosperity for failing states, exploitive systems are hard to budge because those in power stand to lose by changing, and usually won’t, even though they see a benefit to society as a whole.

While France is not poor and doesn’t have a particularly exploitive political elite, it suffers from a different kind of exploitation: groups of public sector workers that take more from the system than they put in. The financial cost of supporting these groups lands on French taxpayers and businesses that are forced to pay onerous tax, making it nearly impossible for them to compete globally. And like the exploitive elites of relatively poor countries these French public sector groups resist change lest they lose. The only difference is that their power comes via votes and strikes rather than elite dominance.

The BBC economics editor Robert Peston in his documentary Quelle Catastrophe! does an excellent job of describing the problem. Public spending consumes 57% of France’s GDP and employs five million people. In the city of Montpelier many public servants take 90 days of annual leave, much of it unauthorised, while getting paid for a full year – 90 days is over a third of a working year. Sending these slackers packing is not an option either given France’s obstructive politics and labour rules.

All this leaves France stuck with voting blocks that stand in the way of essential change that would benefit the country as a whole. Certain strike-prone voters stand to lose personally and won’t budge. And this, unfortunately, is the main reason why France is unable to copy Switzerland’s economic success, despite Mr. Hollande’s best intentions.