This op-ed was first published on Forbes, on Jan 7th, 2012
Five thousand! Since the election of French socialist President François Hollande in May 2012, 5,000 senior and chief executives, entrepreneurs and business owners moved out of France to Belgium, Switzerland and the United Kingdom. That is three times more than in 2011. Usually only French Fortune 500 people would flee fiscal pressure, but they are joined now by businessmen. International companies are relocating their executives in neighboring countries, and this never-seen-before trend is likely to grow in the coming months. The fiscal exile has become an entrepreneurial exodus.
This momentum was caused by the socialist government intervention into the economy. In a speech given last month, French President Hollande enacted the government’s takeover of the French economy. He explained to entrepreneurs and businessmen gathered in front of him which sectors of activity he wanted to be developed: “I have identified three sectors in which we can be number one, if we mobilize all our resources.” Acting as a CEO, the president detailed what must be developed in each chosen sector. First, he cited the “energy transition” and “everything that will allow us to adapt our buildings, to change transportation, energy networks, but also waste disposal.” He then moved on to healthcare—specifically “the drug industry we know very well, biotechnologies, but also nutrition and agribusiness.” And finally, he referenced “general technology”—mainly “digital technologies, electronics, telecoms, connecting technologies, everything that connects tools to each other in order to go faster.”
Then the French president went on to explain how his government is going to finance companies: “These sectors, as I have described them, will be supported by the Public Investment Bank.” This government-controlled bank is charged with financing companies—in other words, distributing subsidies—and implementing economic development as decided by the president. Last, but not least, the president “asked the government to establish a strategy for both public and private investments aiming at modernizing France by 2020.” The takeover is complete.
These socialist economic policies, pure products of the welfareship, will be implemented this year. Entrepreneurship will be severally hampered in both human and financial terms.
Humanly speaking, French economist Frédéric Bastiat described the negative impact of government economic intervention for entrepreneurs and businessmen: “when the law, by means of its necessary agent, force, imposes upon men a regulation of labor […] it acts upon people. It substitutes the will of the legislator for their own wills; the initiative of the legislator for their own initiatives. When this happens, the people no longer need to discuss, to compare, to plan ahead; the law does all this for them.” The consequences are devastating, Bastiat explained: “Intelligence becomes a useless prop for the people; they cease to be men; they lose their personality, their liberty, their property.”
Financially speaking, new bureaucracies will be created, such as the Public Investment Bank; new regulations will be enforced, since the president has pointed out the fact that “the very idea of regulation is not challenged;” and public agents will be hired to check and control private businesses that will receive government subsidies. The overall functioning costs of this bureaucracy will increase public spending and be burdened on companies and taxpayers.
Loss of property and growth of bureaucracy are the two results of the government intervention in the economy. It is a danger for the free market and becomes lethal when the economy is planned. Free enterprise cannot be planned nor subsidized; if it is, it stops being free and loses its purpose, which is the enrichment of individuals. That is why French entrepreneurs are discouraged: they end up working only to finance the welfareship system, not for their own interests and improvement. That is why they are leaving for neighboring business-friendly countries. As a consequence, France is going through an entrepreneurial brain-drain that has recessive effects on its economy.
For Americans, the lessons to be drawn from the enforcement of these policies in France should help identify the ideas that drag business down. The driving principle behind socialism and welfareship is that wealth is to be shared, not created. Ayn Rand pointed out that “men had always thought of wealth as a static quantity—to be seized, begged, inherited, shared, looted or obtained as a favor.” Then another socialist idea completes this one as Ayn Rand, again, has perfectly described it: “every man … owns an equal share of the technological benefits created in the world.” These two ideas gave birth to the planned economy, which intends to meet the welfare aim of providing each citizen an equal share of labor production. That is exactly what is happening in France now. And as such, a planned economy, as President François Hollande wants it, is tantamount to seizure.
As Russian-born Ayn Rand wrote in “Atlas Shrugged,” “Americans were the first to understand that wealth has to be created.” If they keep this understanding, they shall be protected against welfareship and remain free entrepreneurs.