As British crowing about last year's return to growth increasingly irks the struggling administration of François Hollande, it is worth remembering that London and Paris have more in common than they care to admit.
While London looks like a vibrant city of skyscraper developments and trendy pop-up nightclubs in contrast to the Napoleonic boulevards of Paris that appear more dishevelled by the month, nevertheless the fight to survive in the global economy is a shared experience for the two historic rivals.
Neither really knows how to tax companies and individuals that have become elusively mobile. Both are struggling to generate decently paid jobs in a world where there is a massive oversupply of labour.
And crucially, once a job is created, taxed or untaxed, governments face the task of persuading a reluctant employer to invest to boost productivity.
Without such a rise, workers will struggle to raise their wages faster than the level of inflation and improve their living standards. On the face of it France has the bigger problem.
When prime minister Jean-Marc Ayrault said a few days before Christmas that his government would not copy British economic policies for fear of creating poverty and inequality, he was being a little disingenuous.
"I see a lot more poverty, more inequalities, and if I were to look for a model to reform France I would want to save the French model, reforming it, and certainly not copy what others do – especially not if we're not talking about the best," he told French private TV network TF1.
Ayrault criticised Britain's zero-hour contracts for helping create "mass poverty far worse than in France". Yet he sidestepped figures that show the similarities outweigh the differences. Britain has a youth unemployment rate of 21%. In France it has reached 25%.
Both countries disguise the level of youth unemployment with an array of training schemes, some more useful than others, and a university system that packs in great numbers of students on courses of sometimes dubious value.
France's economy may have almost recovered to its previous 2007 output record while Britain's economy remains 2.5% smaller, but the direction of travel will see the two economies reach parity in a year.
UK exports, the favoured growth vehicle in Downing Street, have proved lacklustre and risen only marginally despite a 25% drop in the value of sterling since 2007.
France has also struggled to export. In manufacturing survey figures last week a drop in exports dragged the country's industry index further into contraction territory.
A fall in business investment was a key factor in last week's dire news for France, and Bank of England lending figures last week told the same story for the UK.
While mortgage approvals in November were at their highest level since January 2008, net lending to businesses took its biggest fall since comparable figures began in May 2011.
"Overall the picture from the data today remains consistent with a UK recovery that has been fairly household-led," said David Tinsley, UK economist at French bank BNP Paribas. "We would look for that to change in 2014, but a risk remains that corporates will remain reluctant to borrow and invest."
It is a point made recently by Howard Davies, the man conducting the government's airport review and a former chief financial regulator.
Writing in the Financial Times, he described France and Britain as being like two bald men fighting over a comb. Economists tend to believe the UK's dire business investment story is temporary.
The Treasury's own forecaster, the Office for Budget Responsibility, has predicted a significant rise in business investment next year – on the basis that it normally follows a rise in consumer spending.
Likewise, Paul Krugman, the Princeton economist and cheerleader for Keynesian policies, has argued that governments can create the right conditions for business investment by pump-priming demand for goods and services.
He argues that once businesses see a solid rise in output backed by consistent government policies, investment will follow, bringing decent jobs for young people.
But the question must be why any global business would opt for France or Britain to manufacture increasingly homogenised goods to be sold across the world, when Turkey will supply land, factories and a cheap skilled workforce tax-free.
The only gain for the Turkish exchequer from business activity in its many enterprise zones is the tax applied to workers' incomes. That is why Ford closed its Southampton factory last summer, after 40 years making Transit vans at the site, in favour of extending its base in Turkey.
Maybe this trend would not matter if the 80% of businesses that are entirely domestic – and so in many ways divorced from the pressures of international competition – invested in new plant and machinery, developed new techniques and processes and trained staff on a large scale. The problem is they don't. Most research and investment is carried out by big companies.
Even the European commission, which dispensed grants for research and development worth €2.9bn (£2.4bn) to British firms between 2007 and 2011 (and €2.4bn to French companies) directed most of the money to big corporates. Much of the UK's subsidy was soaked up by GlaxoSmithKline and a small number of major pharmaceutical outfits.
The manufacturers' body, the EEF, highlighted in a recent report that foreign-owned companies, which tend to be large, are responsible for 45% of UK manufacturing business investment.
The figures are smaller in France, but to its detriment: car manufacturing in the UK, largely foreign-owned, is a success story – in sharp contrast to France, where indigenous carmakers Renault and especially Peugeot Citroën are sacking staff and closing plants.
Yet carmaking is an isolated example in Britain, where manufacturing is still 9% off its 2007 peak production and a fraction of the size it was in the 1980s. Britain is further forward in playing the global "race to the bottom" by offering low corporate tax rates, enterprise zones and a labour force where internships are rife and international graduates available on tap.
France, though, is following, and is not far behind. It may be resisting cuts to established workers' terms and conditions, but it is content to make life miserable for younger entrants and immigrants, who are far more likely to be unemployed or on low wages than immigrants to the UK. Hollande is also shifting his stance to please big business.
Not by cutting headline tax rates so much as allowing a raft of reliefs and subsidies for employing new staff, even when they are on short-term, flexible contracts. For the political right wing there is no alternative but to join the race to the bottom.
Skilled workers can bid up their wages while those with few skills operate in a twilight zone. But where are the rising aggregate wages going to come from? They have declined since the crash and the trend is still heading south. Without investment, France and Britain are going to continue struggling.
theguardian.com
While London looks like a vibrant city of skyscraper developments and trendy pop-up nightclubs in contrast to the Napoleonic boulevards of Paris that appear more dishevelled by the month, nevertheless the fight to survive in the global economy is a shared experience for the two historic rivals.
Neither really knows how to tax companies and individuals that have become elusively mobile. Both are struggling to generate decently paid jobs in a world where there is a massive oversupply of labour.
And crucially, once a job is created, taxed or untaxed, governments face the task of persuading a reluctant employer to invest to boost productivity.
Without such a rise, workers will struggle to raise their wages faster than the level of inflation and improve their living standards. On the face of it France has the bigger problem.
When prime minister Jean-Marc Ayrault said a few days before Christmas that his government would not copy British economic policies for fear of creating poverty and inequality, he was being a little disingenuous.
"I see a lot more poverty, more inequalities, and if I were to look for a model to reform France I would want to save the French model, reforming it, and certainly not copy what others do – especially not if we're not talking about the best," he told French private TV network TF1.
Ayrault criticised Britain's zero-hour contracts for helping create "mass poverty far worse than in France". Yet he sidestepped figures that show the similarities outweigh the differences. Britain has a youth unemployment rate of 21%. In France it has reached 25%.
Both countries disguise the level of youth unemployment with an array of training schemes, some more useful than others, and a university system that packs in great numbers of students on courses of sometimes dubious value.
France's economy may have almost recovered to its previous 2007 output record while Britain's economy remains 2.5% smaller, but the direction of travel will see the two economies reach parity in a year.
UK exports, the favoured growth vehicle in Downing Street, have proved lacklustre and risen only marginally despite a 25% drop in the value of sterling since 2007.
France has also struggled to export. In manufacturing survey figures last week a drop in exports dragged the country's industry index further into contraction territory.
A fall in business investment was a key factor in last week's dire news for France, and Bank of England lending figures last week told the same story for the UK.
While mortgage approvals in November were at their highest level since January 2008, net lending to businesses took its biggest fall since comparable figures began in May 2011.
"Overall the picture from the data today remains consistent with a UK recovery that has been fairly household-led," said David Tinsley, UK economist at French bank BNP Paribas. "We would look for that to change in 2014, but a risk remains that corporates will remain reluctant to borrow and invest."
It is a point made recently by Howard Davies, the man conducting the government's airport review and a former chief financial regulator.
Writing in the Financial Times, he described France and Britain as being like two bald men fighting over a comb. Economists tend to believe the UK's dire business investment story is temporary.
The Treasury's own forecaster, the Office for Budget Responsibility, has predicted a significant rise in business investment next year – on the basis that it normally follows a rise in consumer spending.
Likewise, Paul Krugman, the Princeton economist and cheerleader for Keynesian policies, has argued that governments can create the right conditions for business investment by pump-priming demand for goods and services.
He argues that once businesses see a solid rise in output backed by consistent government policies, investment will follow, bringing decent jobs for young people.
But the question must be why any global business would opt for France or Britain to manufacture increasingly homogenised goods to be sold across the world, when Turkey will supply land, factories and a cheap skilled workforce tax-free.
The only gain for the Turkish exchequer from business activity in its many enterprise zones is the tax applied to workers' incomes. That is why Ford closed its Southampton factory last summer, after 40 years making Transit vans at the site, in favour of extending its base in Turkey.
Maybe this trend would not matter if the 80% of businesses that are entirely domestic – and so in many ways divorced from the pressures of international competition – invested in new plant and machinery, developed new techniques and processes and trained staff on a large scale. The problem is they don't. Most research and investment is carried out by big companies.
Even the European commission, which dispensed grants for research and development worth €2.9bn (£2.4bn) to British firms between 2007 and 2011 (and €2.4bn to French companies) directed most of the money to big corporates. Much of the UK's subsidy was soaked up by GlaxoSmithKline and a small number of major pharmaceutical outfits.
The manufacturers' body, the EEF, highlighted in a recent report that foreign-owned companies, which tend to be large, are responsible for 45% of UK manufacturing business investment.
The figures are smaller in France, but to its detriment: car manufacturing in the UK, largely foreign-owned, is a success story – in sharp contrast to France, where indigenous carmakers Renault and especially Peugeot Citroën are sacking staff and closing plants.
Yet carmaking is an isolated example in Britain, where manufacturing is still 9% off its 2007 peak production and a fraction of the size it was in the 1980s. Britain is further forward in playing the global "race to the bottom" by offering low corporate tax rates, enterprise zones and a labour force where internships are rife and international graduates available on tap.
France, though, is following, and is not far behind. It may be resisting cuts to established workers' terms and conditions, but it is content to make life miserable for younger entrants and immigrants, who are far more likely to be unemployed or on low wages than immigrants to the UK. Hollande is also shifting his stance to please big business.
Not by cutting headline tax rates so much as allowing a raft of reliefs and subsidies for employing new staff, even when they are on short-term, flexible contracts. For the political right wing there is no alternative but to join the race to the bottom.
Skilled workers can bid up their wages while those with few skills operate in a twilight zone. But where are the rising aggregate wages going to come from? They have declined since the crash and the trend is still heading south. Without investment, France and Britain are going to continue struggling.
theguardian.com
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