This post is coauthored with Ambroise Fayolle and a related version has been published in French in Les Echos. Views expressed in this post are the authors’ own.
Optimism is warranted. The European Investment Bank (EIB) surveyed 12,500 companies in Europe: the study shows that French companies spend more than others to improve their organization, modernize production processes, exploit their data, develop their websites, finance R&D and continuously upgrade the skills of their employees. Sources of future growth to exploit!
Moreover, French companies have a conquering spirit: even though they have restricted their recent investments to the narrow “replacement” of their capital stock, they would like to mobilize more resources in the future to develop new products and open up their horizons. They acknowledge that they have invested too little in recent years and consider - more than their peers in Europe - that their productive apparatus has become aging. Why then do they remain so cautious?
First of all, because they face a high level of uncertainty and labor market regulation that prevents them from being flexible. These constraints, which, according to this survey, are common to many European countries, are well known.
More surprisingly, the scarcity of skills at all levels of qualification is yet an even more important barrier to investment. What is very true in Germany is also true for French firms. This deficiency must be taken seriously.
Last handicap for growth: public investment in Europe is at its lowest level ever since economists started to measure it, resulting in a contraction in investment in infrastructure, which is particularly protracted in France. This is problematic, knowing that the so-called "smart" infrastructures like connected roads will be tomorrow the spine of potential growth as well as economic, social and territorial cohesion.
Uncertainty, unsuitability of skills, public investment at half-mast: this trio constrains the creative momentum of French growth.
In order to take up this challenge, the focus should be on the skills-innovation training.
First, the economy as a whole should invest heavily in skills, education and training. First, households: when they invest time and energy to provide the best education for the youngest and to improve the ability of the eldest to adapt their skills throughout life, they generate positive externalities on the community - culture, peace, quality of life. Second, the private sector: continuing education expenditure must be sustained, efficient, performant. Third, the public sphere: education should no longer be thought of as a current spending but as an investment in the future.
Europe can help us in this direction. For example, what about a generalised Erasmus for continuing education? Or a European scheme for language- and digital- skills which would not substitute, but complement, the supply of education at the national level? This would boost European cohesion.
Second, innovation should be put at the heart of investment for the competitiveness of companies and the attractiveness of territories. Again, Europe is helping us, in particular, through the EIB's financing for the deployment of very high-speed broadband, particularly in rural areas. And this is only one example.
Third, future-oriented, strategic, public investment should be fostered: smart infrastructure, energy efficiency, human capital sound like the best guidelines.
France can be proud of its businesses and the potential of its economy, which requires only a deep continuous effort to allow individuals to adapt their skills, and an adequate level of public and private investment. Europe can help in this process. Europe is a chance, and the Single Currency a precious vector of resilience and cohesion.
First, the economy should invest heavily in skills, education and training. First, households: when they invest time and energy to provide the best education for the youngest and to improve the ability of the eldest to adapt their skills throughout life, they generate positive externalities on the community - culture, peace, quality of life. Second, the private sector: continuing education expenditure must be sustained, efficient, performant. Third, the public sphere: education should no longer be thought of as a current spending but as an investment in the future.
Europe can decisively help us in this direction. For example, what about a generalised Erasmus for continuing education? Or an European scheme for language and digital training which would not substitute, but complement, the supply of education at the national level? This would boost European cohesion.
Second, innovation should be put at the heart of investment for the competitiveness of companies and the attractiveness of territories. Again, Europe is helping us, in particular, through the EIB's financing for the deployment of very high-speed broadband, particularly in rural areas. And this is only one example.
Finally, future-oriented, strategic, public investment should be fostered: smart infrastructure, energy efficiency, human capital sound like the best guidelines.
France can be proud of its businesses and the potential of its economy. Europe can help the country in this process. Europe is a chance, and the single currency a precious vector of resilience and cohesion.