Wolf Richter www.testosteronepit.com www.amazon.com/author/wolfrichter
“I need to hire more people, but the government won’t let me,” said my friend, an internet entrepreneur in France, one of the intrepid figures still slugging it out over there—in a country whose relentlessly deteriorating unemployment problem is gnawing at the very fabric of society.
We spent an hour and a half on Skype, talking about topics that were a bit, let’s say, delicate under the current regime in France. So he and his company, both well known, will remain unnamed. He has been successful in the startup sense: his company has had two solid rounds of funding from venture capital investors. VCs are another phenomenon that hasn’t gone extinct in France yet, testimony to the mind-boggling human capacity to adapt and survive no matter how hostile the environment.
The public got an inkling of it last October. The government was jacking up taxes left and right to rein in the deficit for 2013. So the capital gains tax would be raised to the same astronomical level as the tax on earned income. But an explosive editorial by the exasperated head of an internet VC fund resonated with entrepreneurs, investors, artisans, and mom-and-pop business owners. Their anger flooded the social media and eventually even prime-time TV and turned into a successful revolt [read A Capitalist Revolt in Socialist France].
Early on, he’d hired an expensive law firm to draft the required labor contract for his future employees. When the document was finished, they tried to get it approved by the administration, the catch-all word for any of the thousands of governmental entities that impact every part of life in France, sometimes in a Kafkaesque manner. “When you go there, they treat you like a criminal,” he said. And they turned it down. When he asked for suggestions, they refused to help. It would be up to him to come up with an acceptable document.
Which they eventually did—after considerable time and expense. Now 15 people work in his company, and he’d like to hire more, but he is afraid of the administration, and particularly the labor code, that unwieldy, impenetrable monster of thousands of pages, plus innumerable texts, decrees, and orders that drown every little detail of the employer-employee relationship in a sea of inscrutable complexity. “I have to violate some of these terms,” he said. It’s not like he has a legal staff on board.
And if it didn’t work out and he needed to let someone go, the employee would drag him before the prud’hommes (elected industrial tribunal) where 80% of the cases were decided in favor of the employee, “because even they don’t understand the labor code,” he said. That would get expensive. So he doesn’t hire anymore and uses free-lancers as much as possible.
Why not incorporate the business, like so many French entrepreneurs, in a more hospitable country? “I’m too French for that,” he laughed.
France needed to be reformed, he said, but instead of fundamental reform, for example of the labor code, they just tweak it by adding amendments, which make it even more complex and contradictory. “They need to throw it out and start over,” he said. “It needs to be simple, like in Switzerland.”
Sarkozy tried to push through reforms, he said, but when he told the top functionaries of the administration what he wanted, they told him, “Yes, Monsieur le Président, but we can’t do that.” They’re all énarques, graduates from the École Nationale d’Administration, an elite university where the kids of the elite learn how to run the country. They all know each other, they know the CAC-40 CEOs who they went to school with and who get recycled as ministers. “They all think alike,” he said. They need each other to progress in their careers, so they stick together. Sarkozy, who wasn’t an énarque and didn’t think like them, didn’t have a chance. “They just stonewalled him,” he said.
Over the last few days, the media have talked about nothing but the tax fraud debacle of ex-budget minister Jérôme Cahuzac, but the French don’t care if politicians lie about taxes, he said. What they care about are jobs. “And no one is talking about jobs, not the way they should,” he said. “People like me want to create jobs, but the administration makes it impossible.”
So the mood has become dark and has turned away from politics, he said. People always expressed their hatred for certain politicians, but now they express their hatred for the system. The comments online were getting more violent. They’re looking for a strong voice that can pull them out. “When the Fourth Republic collapsed, we had de Gaulle,” he said. “Now we have no one.” And then he wondered, “What if the wrong person came along?”
The French media might not even notice if the Eurozone fell apart—that’s how tangled up they are in the Cahuzac fiasco that blew up with phenomenal effect. Former Presidents Chirac and Sarkozy were dogged by investigations and trials that laid bare misdeeds they personally had been involved in. By contrast, the Cahuzac fiasco doesn’t implicate President Hollande. Not yet. But it’s tearing up his government. Read.... The French Government Spirals Elegantly Into Self-Destruction