Can France innovate? Apparently not without the nod -- and a handout -- and state-engineered market advantages -- from the government.

CHIRAC PLAN MAY BE FLAWED BUT IT IS BOLD

President Jacques Chirac, the comeback political pensioner, has this week outlined a grand vision to transform France's economy and industrial base over the next decade and make of it a genuine rival to the United States - and China and India. [H]e has proposed no less than a new "agency of industrial innovation" that will promote the "national champions" of tomorrow in the manner of Airbus in aerospace or Ariane in space technology.

There's more but let's stop to catch our breath after the explosive bombast of the above. (Breathing slowly returns.) Probably the last place to look for innovation is a government agency in the business of financing innovation. Government agencies, as can be illustrated in any modern over-organized state, are not unlike landless states. Budgets and projects are the landless agency's territory, and like a land state, it will fight tooth and claw to preserve this territory. Not subject to market forces, an agency has no incentive to improve -- much less give up -- its failing hobbyhorses. An agency typically spends more than is required in the course of doing less than is needed. As for "national champions", we dare say if the United States were to designate native "national champions" endowed by the government with all the market advantages of the American economy, well, Airbus would be a very different bedtime story.

Chirac, drawing on plans presented to him by Jean-Louis Beffa, the chairman and chief executive of St Gobain, the glassmaker, has come up with the idea of 10 "programmes of mobilisation for industrial innovation." These include the clean (non-polluting) car, solar energy, new treatments for infectious or neuro-degenerative diseases and secure broadband networks. ... The Beffa scheme endorsed by the president sees the agency funded on a 50:50 basis by the state and private sector, with the state's share largely coming from privatisation receipts...which would normally go to reducing public debt and the budget deficit. Public money would be repayable, moreover.

Budget deficit? Pffft. (See post below.)

The new agency will be given at least €2bn over the next three years but...promises to avoid simply being an executive arm of the state, chucking taxpayers' money at picked-out winners -- or, worse, pouring it into ill-conceived and badly executed R&D programmes and investment schemes dreamed up in the board rooms of nationalised industries run by énarques (graduates of France's grandes écoles such as the national administration college).

Large companies or a cluster of small and medium-sized firms would be in charge of both R&D and investment in new programmes and products which, supposedly, would gear France away from its traditional success in autos or airframes into new territories such as information technology or bioscience. State aid would be more concentrated and, with an eye to EU rules, would be less than €100,000 (£70,000) over three years for any one firm. ... Chirac wants to invite other European countries and firms, especially German, to join his new agency. He wants the Franco-German axis to seize control of the EU's so-called Lisbon strategy to surpass the US by 2010 as "the most dynamic and competitive knowledge-based economy in the world ...." - due to be revised and updated this spring.

€100,000 (£70,000/USD $131,680.52) over three years seems pretty mingy to launch and sustain an innovating company. The burn rate for start-ups in the markets targeted by France typically runs to millions a month.

Scoffers might point out, drawing on the recent Kok report [Facing the Challenge], that the US accounts for three-quarters of the top 300 IT companies and almost half of the top 300 ranked by R&D spend or that America is simply better at making productivity gains through innovation. But Airbus has proved that, with government backing, it can out-compete Boeing in the marketplace [see above comment] and in new technology. The Chirac plan is bold; it may be flawed. But then there's no reason why Europe should just do nothing - leaving the field clear for the Americans or the new Asian giants to clean up.

We concur with the report's conclusion. But France does not have an entrepreneurial disposition. She is regulation heavy, she is tax miserable, and she is constitutionally resistant to change. She romances and is fascinated by her yesteryear achievements. She has sizable minorities that wage open war against large and small innovations, e.g., genetically modified foods, irradiated foods. And France is becoming a multipolar nation, as unworkable in miniature as Jack's international multipolarity is unworkable writ large.

To succeed, France does not need Jack's government assist. To succeed, France must become something wholly other than France as we find her today.

Your conclusion is directly on target. There may be areas of true innovation in Europe but they will come from the new EU countries of the East with their low tax rates and cultural ability to attempt change. This is what France and Germany fear and drives their desire for tax harmonization across the EU. They use the EU to wrap layers of regulation and restriction around everyone else.

The governments of Western European nations understand the need for reforms but lack the courage to explain to a population coddled for 50 years why these reforms MUST be taken and taken NOW. If persistent 10% unemployment and stagnent growth during a period of global expansion dont set the stage for change, what level of misery will?

It's kind of a question of "when will the water get so hot that the frog will jump out?" Or will the frog rot and die, and let a new, more energetic nation take over its terratory? Under Sharia law of course.

Article in Washington Times last week about American/European industry. One stat that I found interesting was the number of international patent applications filed in 2003.

The US led with 39250 (35.7%) followed by Japan 16,774 (15.2%) and Germany 13,979 (12.7%). The Frogs were 5th with 4,723 (4.3%).