Author Archives: Doug

Champagne – From Troyes to the Marne

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Champagne tour

Champagne is a glorious place, even in lousy weather. It has class. Not the pretentious kind, but rather a classiness that comes from attainment of quality and competence in wine-making and cuisine. The region can take on rustic and down-to-earth airs. But, it can also manifest excellence in presentation, for example in serving a fine meal based largely on local supplies. There is a sense of history and tradition, though this contrasts sometimes with the innovation and technological progress that are also in evidence (where appropriate). The scenery is bucolic and lush. And, of course, there is champagne!

The Aube and Points North

When folks think of Champagne they tend to think first of Reims and Epernay, with the splendid mountain between them surrounded by vineyards, with a branch stretching south to Vertus. But, there is another stretch of authentic Champagne vineyards further south, in the Aube region around Troyes. Long producing champagne-style wines and supplying grapes to the big name houses in Reims and Epernay, the Aube region was officially recognized as being part of the Champagne district in the early 1900s (after a series of revolts known as the Champagne Riots).

Troyes is the main town in the Aube region, as well as the historical capital of Champagne. Already settled in Roman times, Troyes has long been surrounded by wine production. While much of the city was destroyed by various fires in the Middle Ages, there are quite a few half-timbered houses and churches remaining from the 1500s. Looking at a map of the old town, one may notice that it is appropriately shaped like a cork.

The town has had a difficult history with various wars and social upheavals leading to troubles. Attila the Hun was stopped outside of town by a combination of force and compensation. The Jewish population, once thriving (e.g., the famous scholar Rashi established a center there for Talmudic studies in 1070AD), was abused and expelled in Medieval times. In later centuries, a Jewish population was reestablished but then fell victim to terrible oppression during WWII (see photo of the memorial below). After WWII a new synagogue was established in some Medieval buildings in the old town.

The vineyards of Montgueux spread across a small enclave to the west of Troyes, producing chardonnay grapes. The area is recognized on official maps showing designated zones for Champagne  production. Montgueux is a small island of production at some distance from the next officially recognized zones.

Heading north from Troyes one comes to the southern area of the Reims-Epernay champagne district. There is a wonderful chateau in the village of Etoges. It is now a bed and breakfast. A fine dinner can be had at the chateau, served with style in the former orangerie.

From Etoges, the Champagne route can be followed through the hills and vineyards to the town of Vertus, which is home to a number of champagne houses. Heavily damaged over the centuries, Vertus still has a number of remarkable old buildings and some nice parks well-suited for picnics, all set in the ambiance of a successful champagne-producing town. Heading north toward Epernay, the road hugs the cote des blancs district with famous wine towns such as Oger, Avize and Cramant.

Onward to Epernay and the Marne

Epernay is a wonderful town, home to some of the finest champagne houses, many of which are located along Champagne Avenue. Smaller and calmer than Reims, Epernay still radiates class. Many of the producers offer tours of their cellars and tastings, which can make for a very pleasant morning or afternoon, especially when paired with a fine meal at a local establishment.

The Marne River flows along the northern reaches of Epernay and its valley is home to some spectacular vineyards including a number of grand cru and premier cru areas (i.e., top-notch). The abbey in Hautvillers was home to the famous cleric Dom Perignon, who is sometimes considered the legendary father of champagne wines. While that has been challenged, he did in reality develop improved techniques for wine production, making a contribution that is still worthy of praise. We paid hommage to him at the former abbey church.

The vineyards skirting the hillsides to the north of the Marne are some of the best. From Cumieres to Ay to Mutigny one sees famous vintner names inscribed on low stone markers on the edges of their acreage along the roadside. In springtime, the countryside is verdant with forest land and crop fields bordering the vineyards. This week the vines were beginning to bud, a bit later than usual.

Really? Heading back to Paris so soon?

Heading west from Mutigny, we drove along the Marne through beautiful countryside. Flowering trees added splashes of color in the forests, as did the various orchard trees in farms and gardens along the river. The various species of early-leafing trees and plants displayed many contrasting shades of green, making the scenery look like an expressionist painting.

Finally, as we passed through Chatillon-sur-Marne, we knew our Champagne meandering time was coming to the end. As we headed toward the highway home, a statue of Pope Urbain II loomed above us pointing the way and perhaps raising the question as to why anyone would be heading back to the metropolis after such a short visit.

Photo Galleries

Use the arrows at the bottom of each gallery to scroll up or down. Double click to expand a picture. If the galleries do not display, then click on this link: http://wp.me/p2sfPf-mO .

1) From Troyes to Etoges

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2) From Epernay along the Marne

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(Copyright: Doug, 2013)

Take a hike: on the trail to Versailles

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Trail to Versailles

Today was the day to return to the forest trails. Seven weeks after a bad fall while working in the garden, it was finally time. So, out I went from Chaville, into Meudon Forest, along the trail to Versailles, and then back along the old road through the town of Viroflay. What a gorgeous environment and what a privilege to live in the middle of it all!

A few blocks from our front door I found the trail head and started up the hill, through the working forest of mostly deciduous trees. Some substantial cut oak tree trunks lined the path, ready to be hauled to the mill. But, thanks to the selective logging approach used in this forest, the hike still offered the prospect of immersion into nature.

The trail gained a bit of altitude and through the winter forest I had some great views of the valley leading to Versailles. After rounding a low rise, I approached a clearing and there — after doing a double take — I realized were a couple of kids practicing tight rope walking between the trees. And, they were pretty good at it. Not your typical forest activity!

Coming down the trail towards the Versailles city limit, I turned and took the old road through Viroflay. Parts of the road there were already in existence in Roman times. Later on, the road served as the route taken by the royal guards traveling between the Louvre Palace and Versailles. A couple of stretches of cobblestone still provide a hint that the road has been around for a while.

The town of Viroflay has preserved some nice bits of architecture pre-dating the French revolution. The manor of the Lords of Viroflay remains, nowadays serving as a music school. The former city hall and first school building are still there, next to the medieval church and several proper homes from royal times or shortly thereafter.

Before modern transport gave us all access to citrus fruit, the wealthy sometimes built a special structure called an “orangerie”, which is a sort of green house for keeping citrus trees year round. Today, I discovered that the town of Viroflay had installed solar panels on the roof of the local orangerie, proudly displaying the power production on a monitor on the side of the building. They re-purposed the sunlight!

With that, it was time for me to return home. I walked along the rail line back past the recently completed apartment complex for university students (also with solar cells on the roof). The new blends in well with the old. I came home feeling restored, ready to plot a future hike, perhaps going even further into the forest next time.

 A few photos from the hike (use arrows at bottom to scroll)

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Chaville to Versailles: A map

RIP: Albert Hirschman Exits

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Exit, Voice and Loyalty

Some 20 years ago I was working with a Russian colleague to assess labor market developments in Russian enterprises during the economic transition. As these firms struggled in the face of a transition to a market economy, I was struggling to get a handle on the behavior of their management, workers and consumers. Then, my co-author pointed me to Exit, Voice and Loyalty, a little book by the economist Albert Hirschman.

Published back in 1970, Hirschman’s book offered a succinct and nuanced view of human interaction in economics and politics. Economics, in particular, had tended to oversimplify decision-making, emphasizing the role of price in driving choices of consumers, managers, suppliers and others. The decision to buy or sell was mainly seen as being driven by price. But, Hirschman took note of other factors that may on occasion cause some stickiness in the way the market functions.

Consumers, for example, may demonstrate loyalty in the face of declining quality in a product and, instead of switching, may agitate for management to fix the problems. Workers in a failing firm may speak up for reforms instead of simply quitting. Members of political parties may lobby for change within, rather than changing their allegiance to a rival party. On the other hand, in other cases, these folks might simply break the existing relationship and move on. Using engaging illustrations and clear explanations, Hirschman noted conditions that may shape the paths that such decision-making might take.

Hirschman’s optimism and clear writing style made Exit, Voice and Loyalty a pleasure to read. Discovering the analytical framework laid out in the book was a real eye-opener for me. It helped me to tackle the confusing situation in the Russian enterprises that we were studying. Here is one illustration: Back in the mid-1990s, why would so many Russian workers stay on with their employers, despite being unpaid for months? Answer: They still reaped some social and economic benefits from their affiliation, like housing or healthcare. Outside of the firms, conditions could be even worse for these individuals.

Hirschman’s analytical framework also had many other applications for me. Suddenly, I found a new means to assess, for example, my own difficult employment situation at the time or to ponder the political developments in my country. From time to time I still make reference to this book, which is now more than 40 years old.

Thus, it was with some sorrow that I learned last December that Albert Hirschman had passed away. Aged 97, he had lived a long and fruitful life. Hirschman made other contributions to economics, in particular with respect to challenges of economic development in Latin America. But, it was only upon reading his obituary that I learned of his other impressive  accomplishments.

And here is the amazing part

According to the New York Times obit, Albert Hirschman was born in Berlin in 1915 and by the 1930s had advanced in his study of economics. However, he also made time to join in the Spanish civil war on the side of the anti-fascists. He later joined the French Army to resist the Nazis. After France fell, he worked as part of a team helping people escape via routes over the Pyrenees. He then made his way to the United States and joined the Office of Strategic Services to assist the US army in North Africa and Italy, as well as to serve during an early war crimes trial. And that was all before he moved to Bogota, Colombia, as an economic adviser for a few years and then launched a 30 year academic career at Yale, Colombia and Harvard.

Wow! A full life indeed! Thank you, Albert Hirschman. May you rest in peace.

A concussion, but then came the siskins

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The past month has not been a fun one for me. A bad fall left me with a concussion and other injuries. I had my first-ever hospitalization and drew on medical services from a range of providers across the region south-west of Paris. Friends, family and colleagues lent their support, while nature also chipped in some entertainment.

Access to health care – mending a concussion

The experience gave me a first-hand look at emergency health care in France and really reinforced my appreciation for the social protection available to me. I had ready access to quality medical care. My employer was extremely helpful in providing moral support, sick leave and insurance coverage. In addition to all the care provided by my dear spouse, friends and colleagues checked in on me and helped me to maintain a positive attitude despite the slow pace of recovery. While I was able to do a little work from home, I am grateful that the system encouraged me to focus first of all on my health.

Support from nature

Male Siskin in full spring courtship plumage (c) Martin Pateman, Schutterstock

Male Siskin in full spring courtship plumage
(c) Martin Pateman, Schutterstock

Meanwhile, nature was also doing its part to give me a boost. This week a new type of bird put in several appearances by our feeder: the siskin (in French: tarin des aulnes). They arrived in little flocks of 6 or 8, sporting striking spring plumage and spreading out to comb the ground in search of seed. At the same time, our various chickadees — especially the blue ones (mésanges bleues) — happily accommodated the siskins. The chickadees rooted through the food offered at the feeder, searching for peanuts and casting other seeds overboard in the process. Like manna from heaven, the siskins were bombarded with all sorts of goodies from the feeder, which helped to top off the ground-level food supply already available in our organic garden.

Complementary activities

This little show of nature complemented the other care and support that I’ve received in recent weeks. Taking place outside our dining room window, it boosted the morale of residents and visitors alike, and left me smiling. One more thing for which I am grateful!

 

 

 

 

 

State of Diversity: California

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Saturday:

A news report on National Public Radio today noted that by next year, Hispanics would be displacing non-Hispanic whites as the largest ethnic group in California, the most populous state in the United States. A SF Gate article highlights the diversity of California: minorities already constitute the majority of the state’s population.

Visiting friends and family in Los Angeles this week, the diversity was clearly evident. During my late morning walk around an inner city neighborhood today, there were a number of people coming and going from the local conservative synagogue. I heard some of the men disputing on the sidewalk in a language that I did not recognize (not Hebrew). One block down the street I passed the local Coptic Orthodox Church (with a sign in Arabic by the door) and then, a few meters further, the Guru Ram Das Ashram. In the corner park, a group of Hispanic men sat on benches sipping coffee and discussing something engaging, as a group of young African-Americans played a pick-up game of basketball on the court behind them. In the distance, there were signs with Korean and Chinese characters for several Asian businesses. Billboards with images of pop star Psy hawked a brand of soju, a distilled beverage from Korea.

What an amazing mix of people and cultures is this California! And LA is a particularly mixed up corner of this great state (so to speak)!

View from the landing of an apartment on an alley in West LA

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Claremont, California

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People of the sun: Claremont, California

There is something about the availability of ample sunshine that sometimes transforms the way people view the world. At least in temperate climates, it seems to me that sunshine tends to encourage an active lifestyle and lingering in the great outdoors, which in turn gives people opportunities to mix. These conditions can promote greater openness and perhaps friendliness among people. Although ozone depletion and climate change are giving the sun a bad name, it still seems that this sunshine effect continues to operate in many places. (NB, I freely admit that there are many exceptions, including for example Oregon, which is grey and damp for much of the year, yet generally open-minded, outdoors-oriented and friendly).

In recent years, we have spent some time with people of the sun in Claremont, California. The Santa Fe Railroad gave the town its name and promoted its development in the late 1800s. A place in the sun! Pomona College served as a catalyst for further development. Nowadays, Claremont is an open and outgoing place, a great town to walk around, with a vibrant town center, farmers market, cafes, restaurants and delis, colleges and academic institutions, botanical garden, cinema, and more. Trees arch over the roads. There is a hint of Spanish influence in some of the architecture. Outdoor opportunities abound via nice parks and access to large nature reserves in the mountains bordering the town to the north. Claremont is not entirely a world apart, of course. It remains surrounded by the Southern California sprawl, and all of the good and bad that that entails, from excellence in the creative economy, natural beauty and cultural diversity, to frenetic freeways and seasonal air pollution. Nonetheless, inside Claremont, calm tends to reign and the good vibes win out over such troubles.

The Wikipedia entry for Claremont gives a great overview of the town:
http://en.wikipedia.org/wiki/Claremont,_California.

Looking over a courtyard wall in Claremont

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Recommendations for great, low-key dining around Claremont

1) Downtown Claremont

42 Street Bagels, 225 Yale Street, Claremont, CA 91711; excellent bagels, friendly atmosphere, a low key and basic set up, but does a great job of delivering on its promise. Draws a crowd of regulars.

The Last Drop Cafe, 119 Harvard Ave., Claremont, CA 91711; excellent sandwiches and soup, way good chocolate chip cookies. This is a small establishment frequented by locals and students from the Claremont area. Free wifi.

Walter’s Restaurant, 308 N. Yale Ave., Claremont, CA 91711; quality dining, relaxed atmosphere with interesting menu (including some Near East-influenced fusion dishes) and great desserts, nice selection of wines & beers

2) In nearby (by LA standards) Arcadia

Din Tai Fung, 1088 S. Baldwin Ave, Arcadia, CA 91007; authentic Taiwanese-Shanghainese dumpling and noodle house, with a bustling atmosphere and great food, served by an attentive and friendly staff, without much fanfare; expect a line, but it is worth a short wait.

French-American Cultural Exchange: Fulbright, Cassatt & Bismarck

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Tradition of French-American Cultural Exchange

Since the early days of the French and American republics, their political relations have been intense, vacillating between amity and periodic squabbles. Cultural ties, however, have been more consistently positive. From the Marquis de Lafayette to Patti Smith and beyond, there is a long tradition of French and Americans crossing the Atlantic and contributing to the cultural life in both countries. French-American cultural exchange plays an active and on-going role in intellectual cross-fertilization between the countries, contributing to wide-ranging developments such as the US Constitution and the rise of hip-hop in France. Much of this exchange is spontaneous, but some of it is more structured and supported via programs such as the Fulbright program for academic exchanges.

While French-American cultural exchange takes place through a variety of channels, its scale is quite significant. One indication of the scale can be found in Disneyland: In 2012, Disneyland Paris was the top tourist destination in France with 16 million visitors (though, of course, just a fraction of the visitors were French). Another indication can be found in several recent best-selling histories by authors such as David McCullough (1) and Stacey Schiff (2) documenting numerous exciting stories of the deep French-American cultural ties over the centuries.

A recent example

Living as an American in Paris, one has the opportunity to participate directly in the dynamic cross-cultural relationship between France and the United States through a variety of institutions. This weekend, for example, two wonderful institutions — the Mona Bismarck Center for Art and Culture and the Fulbright alumni association — came together to offer a great cross-cultural experience in the form of a guided tour of the first exposition in France of a special collection of Mary Cassatt’s etchings, drawings and pastels.

Stamp shows picture of "The boating party" by Mary Cassatt, circa 1966. Photo credit: rook76 / Shutterstock.com

US stamp (ca. 1966) shows a picture of               “The boating party” by Mary Cassatt
Photo credit: rook76 / Shutterstock.com

Mary Cassatt (1844-1926) is a prime example of such cross-cultural ties. She was the only American among the leading Impressionist artists in France. She was an extraordinary artist who pioneered new approaches for etchings and pastels, for which she was awarded the French Chevalier de la Legion d’Honneur in 1904. This was an amazing achievement, particularly given that she was an immigrant working in a foreign culture in field that was at the time largely male-dominated.

Fulbright and Bismarck

The Fulbright program as founded after WWII at the initiative of US Senator J. William Fulbright with the objective of promoting mutual understanding. The program sponsors students and faculty wishing to study, research or teach abroad; it supports Americans going abroad as well as foreigners coming to the USA. In France, it is supported by both the US and French governments.

As an alumnus of the Fulbright Fellowship program (Germany, 1979-80), the chance to belong to the Fulbright alumni association in Paris gave me a ready-made social group and access to the flow of cross-cultural exchange here including the Cassatt exhibition. The Fulbright alumni association helps to renew the Fulbright experience in an ongoing fashion via cross cultural events. An annual reunion of alumni and celebration of those going or coming under the program is attended by hundreds of folks at the residence of the American ambassador in Paris. The depth of cross-cultural good will at the reunion events is evidence of the potential for such programs to bridge international divides.

Mona Bismarck (1897-1983) is an example of an American expatriate who left a legacy promoting cross-cultural understanding: the Mona Bismarck American Center for Arts and Culture. Bismarck grew up on a horse farm in Kentucky and was a wealthy American heiress. A socialite with extraordinary connections, she worked to promote friendship between France and the United States. After the death of her first husband, American industrialist Harrison Williams, she married Edward Bismarck, the grandson of former German Chancellor Otto von Bismarck. The Foundation and center that she established have carried on after her death to promote Franco-American friendship via exhibitions, events, educational programs and hosting non-profit associations. There is a steady stream of cross-cultural activity at the Center, which is located in a villa on the Seine with a stunning view of the Eiffel Tower.

Why it matters

Institutions such as the Fulbright Fellowship program and the Mona Bismarck American Center deliver substantive and qualitative programs that help to expand peoples’ horizons. Such cross-cultural exchange can be positively transformative for individuals, broadening their perspectives and range of experience. I think this cross-cultural exchange also helps society more broadly. The influence of institutions such the Fulbright Program and Mona Bismarck American Center is amplified in France and the United States in that they deliver benefits beyond the direct participants. Indirectly, the larger circle of professional contacts, friends and families of participants is also influenced. From anecdotal evidence and experience at French-American cultural events, it certainly appears that this outreach to the larger society helps to provide learning opportunities, combat prejudices and promote mutual understanding. And that is in all of our interests!

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(1) David McCullough (2011), The Greater Journey: Americans in Paris, Simon & Schuster.

(2) Stacy Schiff (2005), The Great Improvisation: Franklin, France, and the Birth of America.

Aachen – A Medieval Gem

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Aachen, Germany, is a wonderful small city near the border with Belgium and Netherlands. Charlemagne, king of the Franks made Aachen his capital in the 790s, in part because of the warm springs that are to be found there. His empire united the two halves of the Frankish people, both the Latin and Germanic oriented populations. Even today, the French and German peoples count Aachen as part of their heritage (though the French call it Aix-la-Chapelle).

However, even though Aachen is just a few hours drive from Paris, it has much different feel. Coming from Paris, the signs along the highway already shift from French to German a few kilometers before reaching the Belgian-German border. (There are a few German-speaking towns in Belgium.)

Once in Aachen, we are always struck by the restaurants, cafes, pubs and bakeries and the obvious gastronomic contrasts with those in our hometown in France. In Aachen, the food and drink are tuned to central European preferences and sensibilities. The beer offering shifts away from the sour and strong brews of Belgium (or sometimes watery beers of France) and towards the lighter but flavorful Pilsners and Koelsches. Goose and schnitzel turn up on the menus. Savory rolls of rye or whole wheat are to be had, along with kaiser rolls decked out with lox, onions and lettuce.

Aachen’s center has a comfortable feel with an extensive pedestrian zone that meanders among the old stones of the medieval city. It offers a balanced mix of museums and sites of historical interest, eating and drinking establishments, shops and parks.

The chapel from Charlemagne’s palace survives and forms the center of the current cathedral. It may be that one of the towers of city hall incorporates another part of the palace, but in any event the city hall is a splendid old structure in its own right. There are several of the original city gates still standing, as well as other interesting architectural features in some of the houses and shops. Together, these structures give Aachen an old and dark, but warm atmosphere.

Aachen has become a traditional destination for my family just prior to Christmas. Each December (through 23 Dec), there is a sprawling Christmas market along the pedestrian zones. The city is decorated with holiday lights and greenery. There is a festive atmosphere with convivial crowds of happy people patronizing stands selling hot mulled wine, stollen, cookies, bratwurst and potato pancakes, as well as all sorts of holiday gifts. Many stands offer handmade and artisanal products. There are brass bands and piped in Christmas music in the city squares, as well as choral presentations at the cathedral and other churches. The weather is often lousy, but the Christmas decorations brighten everything, regardless. It is wunderbar!

Recommendations:

Nobis: fine bakery; eat in (self-serve) or carry out; great for lunch (nice sandwiches), or coffee & cakes, special cookies, gingerbread, and other baked treats.

Rose am Dom: nice restaurant in an old inn (14th century) serving hearty, quality meals. In season, they serve game such as duck, goose, wild boar and venison as well as wild mushroom soup.

Aachener Dom (cathedral): a wonderful architectural gem built to house relics of the Virgin Mary. The heart of the structure is Charlemagne’s octagonal palace chapel, with an amazing, newly restored interior with elements from various periods. Take the docent tour, which offers interesting history and explanations, as well as a chance to see the throne of the Frankish kings possibly dating back to Charlemagne’s time.

Cathedral treasury museum: this is also worth a visit! It contains many interesting artifacts and relics including a marvelous reliquary with part of Charlemagne’s arm (bones).

City hall: Tourists can visit this medieval structure and see the great hall and several other fine rooms. Be sure to check out the city council chamber, which includes portraits of Napoleon and Josephine (gifts from the Napoleon to the city).

Aquis Grana Hotel This hotel is very centrally located, near the cathedral and Nobis, and offers a fine breakfast. Park your car in the city garage across the street and leave it there during your stay. Aachen is a city to explore on foot.

US Exports and Jobs

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How many workers does it take to produce each USD 1 billion of exports?

Here is a positive story concerning US exports and jobs: a new report from the US Dept of Commerce shows exports expanding while also having a positive relationship to certain labour market indicators. (The assessment uses an employment requirements analysis to document the labor intensity of US exports.)

According to the report, US manufacturing has steadily become more productive with respect to exports. Producing US 1 billion in merchandise exports now requires far fewer workers than in 1993:

1993: 14050 workers per USD 1 billion exports
2010: 6115 workers per USD 1 billion exports

This rising productivity contributes toward making US manufacturing more competitive internationally. Thus, it is perhaps not surprising that US exports of goods are rising. And, they are doing so at such a pace that they are supporting an expanding number of jobs. Export-supported employment has varied quite a bit from year to year, but from endpoint to endpoint of the Department of Commerce study some 500,000 jobs were added:

1993: 6.1 million export supported jobs
2010: 6.6 million export supported jobs

Agricultural employment is also benefitting from exports. More and more jobs in the sector are supported by exports. In 2010, some 23.3% of jobs in agriculture were linked to exports. In 1993 it was just 15.3%. The service sector is also showing increased reliance on exports.

While export-supported employment levels have fluctuated, the indicators for export growth and labor productivity improvement are exhibiting clear, positive long-term trends. This is good news for the US economy.

All-in-all, the Commerce report provides a useful contribution to shedding some light on these US export and labour market developments. For an encore, it would be great to have a corresponding report on imports. (It is interesting to note that rising US imports of key inputs are contributing to part of the manufacturing productivity gains discussed above.)

What are the implications?

The US economy is demonstrating a growing integration with the rest of the world. More of our output is going to foreign markets. The country continues to make products sought by customers around the world. We still have our trade mojo.

But, this does not mean we can take it for granted. More investment is needed in education and skills, infrastructure, better regulation, and other factors to promote a dynamic, innovative and competitive economy. The global economy is more open and competitive than ever and presents challenges as well as opportunities. Past success is no guarantee of future performance.

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Rasmussen, Chris, and Martin Johnson (2012), Jobs Supported by Exports, 1993-2011, Office of Competition and Economic Analysis, US Department of Commerce, October
Link to the paper

CFR blog post on it

French capitalism is not dead!

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French capitalism

Despite the kerfuffle over the new French government’s proposal to increase the top personal income tax rate to 75% and to nearly double the tax on dividends and other “unearned” income to 60%, France’s hard pressed capitalists persist. French capitalism is not dead!

France is home to many global brands from Michelin to Moet et Chandon, from L’Oreal to Total, among others. France’s multinational firms contribute substantially to the French economy, while operating in a tough regulatory and social environment. They succeed where many other firms in France fail. For example, unlike some neighboring countries like Germany, France has relatively few medium-sized firms.

Small investors in France

French Stock Exchange, Paris

Palais de Brongniart – French Stock Exchange, Paris
(Photo credit: ©ErickN, Shutterstock)

Similarly, France is home to a sizable number of individual investors. Something like 15% of the French population owns stock (compared to about 21% in the US). During the 1990s, there was an uptick in individual ownership of stocks associated with a series of privatizations of state holdings of firms like EADS (parent of Airbus) and Gas de France. Some shares were offered to residents of France at advantageous prices and some shares were reserved for employees of the enterprises. But, many other folks acquire shares via their employers, directly on the markets, or via investment clubs.

Actionaria

The large number of individuals holding stock was evident last weekend at the annual stock exchange exposition for small investors (Actionaria). This is a kind of trade show for companies listed on the French stock exchange to meet with shareholders, potential shareholders, journalists, job seekers and others. All sorts of people are there, from young job candidates, to seniors with retirement accounts, executives, small-investor club members and alternative lifestyle folks. But, the average age tends toward those with some grey hair. I guess I’m one of them. Most folks (including me) have just a modest amount of stock.

It is a festive atmosphere as folks wander about from booth to booth, talking with representatives from the various firms, gathering information, watching various demonstrations and video clips, collecting swag, and looking at sample products.This year, in view of the proposed tax reforms in France, there was also an atmosphere of solidarity.

I had an invitation from Michelin (as a shareholder) and a check list of other CAC 40 firms (French stock market index of the largest firms) that I wanted to contact: Vinci about construction markets, L’ Oreal about cosmetics, Societe Generale about banking, Air LIquide about industrial gases, GDF Suez about natural gas and Total about oil exploration. In speaking with various company representatives, one interesting common denominator was their enthusiasm about growth prospects elsewhere (not so much in France). Several enthused about the potential of emerging markets in Brazil, China, India, and South Africa, among other places. Some emphasized exciting technologies such as hydrogen powered cars, enhanced solar energy, on-line financial services or electric bicycles.

An interesting contrast with the US comes in the reporting requirements under the French regulatory regime. Shareholders generally have less say in the businesses and receive less detailed information than their US counterparts. They get the headline figures, but far less in terms of specifics. In some way this frees management to focus on long-term results (as evidenced by the evolution of the share price), but there are tradeoffs in terms of accountability and responsiveness to owners. Another contrast is in the social dimension of the enterprises. In France, there is much more discussion of the charitable and social works undertaken by the firms. And, there is much more personal outreach to shareholders via events, including out in the various regions of France.

Michelin shareholder meeting

My initial motivation in going was to attend a Michelin shareholder meeting. I’ve never been to such a meeting and was curious. Perhaps 500 investors turned up. The chief financial officer gave a rundown of the latest performance data and a senior executive handling innovation spoke about product development, but the star of the session was Jean-Dominique Senard, the president. He came across at first as a bit unassuming and affable, responding to wide-ranging questions and comments, which were non-technical and generally positive. But, he is clearly a master of his business and relations with the outside world. The President is clearly focused on the longer term and the positioning of the firm some 5 years out, rather than on quarter to quarter results. These are good things for long-term investors to see and hear.

The mood of the Michelin session was helped by the fact that the stock has beat the market average during the period since the global financial crisis. Michelin has also worked to improve its generally weak margins through innovation in tire structure (optimizing various parameters such as noise, energy efficiency, wet traction and dry traction among many others), increased focus on high-margin specialty products (like giant tires for mining vehicles), and investing in a big way in dynamic markets such as Brazil, China, India and the US.

There are also some interesting side projects such as a collapsible electric bike.  A few decades ago, much of Michelin’s rubber production was nationalized during the revolutions in South East Asia, so the company buys most of its rubber on international markets (it still produces some natural rubber on plantations in Brazil). In light of this, there is emphasis on development of synthetic rubber as an alternative (already something like a quarter of a tire’s composition is synthetic rubber, while old-fashioned rubber accounts for some 40%). One very cool innovation is the development of a wheel with all of the suspension, gearing and steering integrated inside. This saves on space in the car’s frame and can improve the overall efficiency.

The biggest reaction of shareholders at the Michelin meeting came when some in the audience asked what could be done about tax policies in France. The announced policies are perceived as penalizing investors and enterprises, despite some announced initiatives to improve competitiveness. The company officials sought to be somewhat diplomatic, but did note that the business environment had become more challenging. They noted that the government had indicated that it was concerned about competitiveness and sought to reduce labor and other costs, but this was far from yielding concrete results so far. There was a big round of applause to the expressions of concern.

Here’s to excellence!

I was grateful for the invitation to participate in the Actionaria exposition. It offered a unique window into an aspect of French life that one does not encounter in day-to-day life. I felt very welcome. It is great to see world-class businesses, to learn of innovation, and to hear of strategic orientations for French business. France is capable of business excellence and it is the interest of consumers and investors world-wide for this to continue!