Which Production Model?

That model began to reach its limits in the 1980s, and was ill suited to face globalisation, as well as the accelerated pace of product and process revisions induced by innovation. France’s strengths in certain domains (infrastructure, major corporations, a well-trained elite, demography) were offset by real weaknesses in others; unemployment rose and its international trade position deteriorated continuously. Potential growth slowed.

These results are the consequence of a set of factors, including the weakness of the sectors exposed to international competition, stagnation in Total Factor Productivity (TFP), a decline in corporate profitability that impedes their ability to innovate and therefore to export, a dual labour market, a rigid system of initial and continuing education, and poor coordination amongst the institutions that underpin that production model. France must now make critical choices to increase the performance of its production model while organising the transition to sustainable growth. In particular, these choices bear upon the relationship between the training system and employment, the organisation of the labour market, the level of competition in the protected sector, corporate governance and finance, and presence in international trade.