Weekend Question 4: Why Do Entrepreneurs Leave France?

Answer: With government harassment and regulation, the better question would be “Why do any stay?”

______________________________________

I obviously can’t say for sure, but it appears that Eric Schine of Biz Weak either set out to write a favorable article on France’s attempted embrace of entrepreneurs, or was perhaps encouraged to do so by government officials or superiors.

To his credit, Schine did an evenhanded piece (requires subscription) that gives credit to the government for some streamlining and image improvement, but points out how “the heavy hand of the state” drives small-business startups mad (bolds are mine):

France’s government wants the world to know something. According to official figures, French citizens created a record 322,000 companies in 2005 — and they’re setting a similar pace this year. Is France, which invented the word “entrepreneur” but has been famously hostile to the breed, finally helping small-business people thrive?

Yes and no. The state has been trying to sweep away many of the outdated laws and regulations that have made life complicated for small-business owners. But French entrepreneurs continue to face cultural, bureaucratic, and financial hurdles. Even the government acknowledges that most businesses created each year are tiny, with scant prospects for growth. Says Philippe Bloch, co-founder and former chief of Columbus Café, a chain of espresso bars in and around Paris: “You have to be crazy to be an entrepreneur in France.”

….. Caught in a sort of no-man’s-land between the powerful state and the heroic worker is the small businessman. It’s not always a pleasant place to be. “In France, a self-made man is viewed as a sort of scoundrel or gangster,” says Francis Holder, the 66-year-old founder and CEO of Holder Group, an industrial baker that supplies McDonald’s Corp. in France and operates a chain of more than 300 boulangeries in Europe, Asia, and the U.S.

….. (Renaud) Dutreil is Minister of Small & Midsize Enterprise. Before his arrival in 2002, the ministry was a backwater. But Dutreil, 46, is quite unlike his predecessors. He remembers the humiliation he felt as a teen when his father’s tannery went bankrupt. And he has set out with a passion unheard of in France to help small businesses.

Dutreil’s achievements so far will seem banal to an American. For example, he ditched a law that had made it illegal to run a business from home. He also led the charge to cut taxes, ease financing requirements, and lighten bankruptcy penalties. And to help boost animal spirits in a nation where fear of failure is endemic, Dutreil has twice crisscrossed France in a special train to meet with entrepreneurs. He says the reforms have helped cut the jobless rate from 11% to 9%.

A couple of years ago, Columbus Café founder Bloch ran afoul of the Inspection du Travail and found himself in criminal court. An inspector had noticed that one of Bloch’s managers had worked 10 hours longer than the state-mandated 35 per week. The fact that she was filling in for no-shows didn’t matter. Bloch, now 47, was found guilty of “obstructing the duties of an inspector” and slapped with a suspended fine of 2,000 euros (just over $2,500 at today’s exchange rate). “I was sitting between two guys, one charged with killing three people, and [one] charged with raping his secretary in the parking lot,” he recalls. “I said to myself, ‘What the f— am I doing here?”‘

….. Then there’s the massive 2,732-page Code du Travail. The laws are so complex that even small companies spend thousands of hours a year ensuring that they are in compliance. Augustin Paluel-Marmont, 30, runs Michel et Augustin, a maker of cookies and breakfast snacks that’s loosely modeled on Ben & Jerry’s Homemade Inc. Despite having just seven office staffers, he employs a full-time head of human resources who spends his days running around Paris trying to locate official forms and then filling them in. Says Paluel-Marmont: “Your first hire must be a human resources manager, or you’re dead in the water.”

Schine’s piece goes on to say that small companies are dealt with too dismissively by larger ones (a problem not unique to France), and that the attempts at improving the small business climate have not done much to stanch the flow of French entrepreneurs who leave to set up shop in other countries. Until something is done about “The Two Travails,” I don’t see how that will change.