Center for European Studies Working Paper Series #168 (2008)

Hawk and handsaws: What can France learn from the Nordic Model?1
by

Jean-Paul Fitoussi (OFCE/Sciences-po)

loi Laurent

Abstract In this paper, we try to point out some important weaknesses of the contemporary French social-economic model, focusing on relevant elements of comparison with Nordic countries. In doing so, we rely on the idea that large and small countries differ in terms of growth and governance strategies. Hence, while a look at the Nordic model can be a good way to reveal of some of Frances major problems, it is also an ambiguous template for reform. The paper starts by examining the question of growth strategy (macroeconomic management and structural reforms), then goes on to investigate governance strategy (trust, confidence, governance quality) and finally explores the issues of diversity and integration policy.

1Paper

prepared for the conference The Nordic Model: Solutions for Continental Europes Problems? Center for European Studies, Harvard University, May 9-10, 2008. Correspondence: eloi.laurent@sciences-po.fr

 La vie forte est au nord. L sest opr le grand mouvement des nations . Jules Michelet, Tableau de la France. I am but mad north-north-west, when the wind is southerly, and I know a hawk from a handsaw Hamlet, II, ii. Prologue: Northern is beautiful? What is the state and future of the French social-economic model? If the state of mind of the French people is of any relevance to answering this question, one can look back at the arguments exchanged during the presidential campaign of 2006-2007 to grasp it. Two conflicting visions of Frances future were then developed by the main candidates, Nicolas Sarkozy and Sgolne Royal. Yet, they resulted from two common diagnoses: first, the French model is deeply ill, and not merely going through a bad phase; second, France can usefully take a look at the world to find inspiration for reform, studying and importing best practices from more successful nations. The candidate of the right expressed a marked preference for the notorious AngloSaxon pattern, while the Nordic model was praised by the candidate of the left. Judging by the outcome of the election, it seems that the latter left a majority of French voters unconvinced. This could come as a surprise given the Nordic mania that has developed in France in recent years. Parliamentary reports, academic papers and press articles all seem to tell the same story: since France is so much attached to equality in a globalized world that has become a less hospitable place for it, the Nordic paradise, where openness, efficiency and equality coexist harmoniously, would be the French new frontier. But is it only a coincidence that there is no such thing as a large Nordic country? While Jules Michelet reminds us that the French Nordic obsession is nothing new, Shakespeare invites us to prudence when considering institutional copy and paste: it is always important to know hawks from herons. In this paper, we try to point out some important weaknesses of the contemporary French socioeconomic model, focusing on relevant elements of comparison with Nordic countries. In doing so, we rely on the idea that large and small countries differ in terms of growth and governance strategies. Hence, while a look at the Nordic model can be a good way to reveal some of Frances major problems, it is also an ambiguous template. The paper starts by examining the question of growth strategy (macroeconomic management and structural reforms), then goes on to investigate governance strategy (trust, confidence, governance quality), and finally explores the issues of diversity and integration policy. For every dimension we study and compare, we try as much as possible to distinguish among France, continental countries and Nordic nations, in order to set apart continental and French issues. We start by an exposition of our basic line of reasoning regarding the relation between country size and social-economic policy. A. Large and small states, a basic elementary framework The relation between country size and economic policy was an essential feature of economic theory until the end of the 1970s, before it gradually gave way to an a-geographic approach to macroeconomic performance of national models, often exclusively characterized by

their social compact. Actually, in the light of the last two decades of literature on economic policy, it seemed as if increasingly integrated nation-states have been implementing various combinations of macroeconomic and structural policies regardless of their size, but rather in accordance with or in contradiction to universal canons of good or bad economic and social policies. This minimization of the role played by country size in growth strategies can be related to the growing importance of globalization and regional integration, but also to the exclusive focus (in some academic corners) put on supply-side economics. Whatever the causes of this neglect, the issue of country size is hopefully again the object of theoretical and empirical attention. The most recent works (see Alesina & Spolaore, 2003 and Alesina, Spolaore & Warcziarg, 2005 for an overview of some models and results) attempt to determine endogenously national preferences using size as a causal factor. Country size itself is seen as resulting from a trade-off between citizens preferences for heterogeneity costs and economies of scale in the provision of public goods. However interesting with regard to the causes of the size of nations, this new literature somewhat overlooks the consequences of the size of nations. As such, it does not acknowledge the important progress made in the understanding of the Economic Consequences of the Size of Nations by the September 1957 International Economic Association (IEA) conference held at The Hague, the proceedings of which were published in 1960.1 To quote Robinson, in the Introduction of the 1960 volume, the economics and political economy of the size of nations is a subject that well deserves more attention. Among several interesting contributions, a paper by Kuznets (1960) stands out as being of particular importance. It offers an integrated framework to distinguish small and large countries political economy on measurable criteria: because of their smaller populations and hence possibly greater homogeneity and closer internal ties [small nations] may find it easier to make the social adjustments needed to take advantage of the potentialities of modern technology and economic growth. Laurent (2008) interprets Kuznetss framework to list four country sizebased policy criteria for developed countries, subdivided into two areas: growth strategy and governance strategy. Growth strategy: Openness: Large and small countries differ on the nature of economic policies that are best for their short-term economic growth. As a small country is more open to international trade and a large country more closed, the former will benefit more from supplyside and competitiveness policies, while the latter needs to stimulate its domestic market through Keynesian macroeconomic policies in order to grow; Adaptation: Because they are more open and more vulnerable to external shocks, small countries are forced to adapt to changing economic context faster and will better than large ones be able to implement structural changes in their economies;

Governance strategy: Cohesion: because of smaller population, small countries are more cohesive than large ones: trust among citizens and confidence in institutions is generally higher than in larger countries, as is governance quality due to a better accountability;

1See

Robinson (1960).
2

Integration: small countries tend to have less diverse and fragmented populations, which brings a contradictory outcome: while anti-immigration sentiment could be higher in theory in small countries less accustomed to diversity, public policies against discrimination and segregation, i.e., integration policy, could be more developed and effective in small countries than in large ones, because of the imperative of national cohesion.

Admittedly this framework is a bit simplistic, but it will well serve our purpose. We are using the taxonomy of size having the countries of Europe in mind. But if we were to consider the world, we would probably have to distinguish at least three types of countries: small, medium and large. Europe, being a collection of small and medium-sized countries, exhibits problems that would be different if it were characterized by any other combination of sizes (more on this below). This paper thus uses this simple framework first to investigate empirically the difference in growth and governance strategies between France and Nordic countries, and then to determine whether and how Nordic countries best practices can help the French model out of some of its major predicaments. Table 1 presents the very first elements needed to grasp the difference in terms of growth strategy between France and the Nordic countries. France, other like large continental countries, is less open regarding international trade (except for Germany, whose growth strategy will be discussed in detail infra). France is conversely more open than the two other large continental countries in terms of FDI flows and stock. These deviations from the expected can be understood using the concepts put forward by Delmas (1965) of structural openness and functional openness. A small country is structurally more open than a large one because it has limited domestic resources and uses the world market to overcome what Robinson (1960) has called the penalties of smallness. Yet, both large and small countries can develop a functional openness, i.e., a growth strategy in line or in contradiction with the advantage or disadvantage of size in certain contexts. Tax competition in the face of accelerating capital mobility is one obvious modality of functional openness for small countries.
Table 1: Structural and functional openness of Nordic and Continental countries. Population GDP (billion Trade to Corporate FDI stock (thousands) $US, current GDP (% of GDP) tax statutory prices and PPPs) (%) rate (%) 2006 2006 2007 2006 2007 Norway Sweden Denmark Finland Iceland France 4 651 9 074 5 435 5 266 297 61 203 242.6 316.7 191.5 172.4 10.9 1962.1 2631.6 1699.2 37.5 47.3 50.5 41.9 41.5 27.6 42.3 28.2 19.9 57.0 49.9 30.6 48.2 35.0 17.4 16.0 28 28 25 26 18 34.4 38.9 33

82 683 Germany 58 643 Italy Source: OECD and UNCTAD.

Governance strategy of small countries has been investigated under the label democratic corporatism by Kaztenstein (1985), among others, according to whom cohesive small European states are distinguished by three traits: an ideology of social partnership expressed at
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the national level; a relatively centralized and concentrated system of interest groups; and voluntary and informal coordination of conflicting objectives through continuous political bargaining between interest groups, state bureaucracies, and political parties. There is of course a direct relation between growth and governance strategies, clearly expressed by Kuznets (1960): It is in the evolution of social institutions and organizations that facilitate long-term peaceful type of economic growth (the only type that can be long-term) that both the challenge and the promise of economic growth are particularly great for small nations. Without explicit reference, its contemporary influence is obvious in the most recent reflections about country size and economic performance: Country size may also matter, with small countries sometimes found to undertake more reform, as in Continental Europe over the past two decades. Reasons for this could comprise greater population homogeneity, which may ease decision making, and greater openness to trade, which increases competitive pressures and eases concerns that structural reform could lead to imbalances between aggregate demand and supply (Economic Policy Reforms, Going for Growth, OECD, 2007). B. Development, income and growth strategy We start by examining and analyzing the development and growth performance of France in comparison to that of the Nordic countries and then investigate the two sub-issues of growth strategy stated in the previous section: short-term and long-term growth strategy. 1) Development and growth performance The broadest available international measure of development is the Human Development Index calculated by the United Nations. It has many shortcomings but it is broadly used in view of its simplicity. Table 2 indicates that Frances HDI grew at a faster pace from 1975 to 1995 than in most Nordic countries, while it slowed significantly from 1995 to 2005. Overall, France ranks tenth among the 177 countries investigated, ahead of Finland and Denmark, and well ahead of Italy and Germany.
1975 Iceland Norway Sweden Finland Denmark France Italy Germany Source: United Nations. 0.868 0.87 0.872 0.846 0.875 0.856 0.845 Table 2. Human development dynamic 1975-2005. 1995 2005 HDI Ranking Growth rate Growth rate in 2005 1975-1995 1995-2005 0.923 0.938 0.935 0.918 0.916 0.925 0.91 0.913 0.968 0.968 0.956 0.952 0.949 0.952 0.941 0.935 1 2 6 11 14 10 20 22 6.0 7.2 6.7 7.8 4.5 7.5 7.1 4.6 3.1 2.2 3.6 3.5 2.8 3.3 2.4

Table 3 allows a closer look at the French performance in 2005: France ranks eleventh for life expectancy at birth and for combined primary, secondary and tertiary gross enrollment ratio, but only eighteenth for GDP per capita (PPP $U.S.). The explanation of the better rank of Sweden, Iceland and Norway is to be found in the GDP per capita index, while the major
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strengths of France are the education index and, to a lesser extent, life expectancy. From these very first observations, Frances problem seems not to be one of development, but of growth of income. What is more, France shares this problem with the two other large continental countries.
Table 3. Breakdown of HDI performance in 2005. Education Life expectancy GDP per capita Iceland Norway Sweden Finland Denmark France Italy Germany 0.978 0.991 0.978 0.993 0.993 0.982 0.958 0.953 0.941 0.913 0.925 0.898 0.881 0.919 0.922 0.902 0.985 1.000 0.965 0.964 0.973 0.954 0.944 0.949

Source: United Nations.

Two other measures help us to confirm this intuition. First is the dynamic of GDP per capita from 1970 to 2006 presented in Table 4. Frances expansion is faster from 1970 (ahead of two out of five Nordic countries) to 1980 (ahead of just one) and still, barely, to 1990 (ahead of none) than the EU 15 and OECD average. It holds well when compared to Nordic countries, even if it has been surpassed by all of them. But the pace is lost from 1990 on and, in 2006, France is roughly fifteen percentage points behind the least prosperous Nordic country, and an astounding fifty points short of the wealthiest, as are Italy and Germany. France and Germany started in 1970 ahead of the OECD and EU 15 average while they both lagged behind in 2006.
Table 4. Volume index of GDP per capita (OECD = 100 in 2000), at 2000 price levels and PPPs. 1970 1980 1990 2000 2006 Denmark 63,2 76,1 93 115,8 125,8 Finland 49,2 68,2 88,1 103,2 120,7 Iceland 51,1 84,4 99,1 115,6 134,7 Norway 57,7 86,5 106,8 145,1 159,4 Sweden 66,8 78,5 94,7 111,5 128,6 France Germany Italy EU15 total
OECD total Source: OECD.

53,6 53,5 50,4 51,6 52,6

72,5 70,6 69,9 67,4 67

87,1 87,7 88,2 83,6 83,4

101,5 104,2 102,8 101,1 100

107,9 110,1 104,9 109,2 109,1

An even better measure of income dynamic is OECDs GNI per capita (defined as GDP plus net receipts from abroad of wages and salaries and of property income), especially since Nordic countries are small countries. Chart 1 shows that France is very close to the Nordic countries from 1970 to 1990. In the beginning of the 1990s, France starts to fall behind. In 2006, France ranks last and the gap has widened, especially with Sweden, Denmark and Norway.

Chart 1. How can we make sense of this recent (mis)performance? Is there something in the Nordic countries growth strategy than can be learned by France? 2) Productivity, population and employment rates Actual economic growth is the sum of the rate of increase of labor productivity per hour and that of the number of hours worked. The latter depends on demographic, social (duration of the working week, rate of participation, etc.) and economic factors (the degree of slack in the labor market). Labor productivity:

Productivity is the natural figure to look at when a country falls behind in terms of income per capita. Yet, in the case of France, this indicator could be misleading. The Groningen database 2 ranks France only second to Norway in terms of GDP per hour (in 1990 GK $), with 35.33 against 37.93, but ahead of Sweden (30.74), Denmark (30.26), Finland (29.80) and Iceland (23.64).

2The

Conference Board and Groningen Growth and Development Centre, Total Economy Database, January 2008, http://www.conference-board.org/economics/

But if the level of French productivity indeed remains higher than four out of five Nordic countries, French productivity has been growing at a slower rate than that of most Nordic countries since the middle of the 1990s , with the exception of Denmark (Chart 2).

Chart 2. Population

Turning to demographic factors, it seems that here France is in a much better position: it is, at least in Europe, a model for fertility rate, as it has resisted much better than all Nordic states the wave of decline in fertility rates observed in the EU. France is actually the most dynamic EU country in terms of fertility rate in 2005 (Table 5), which was not the case in 1960, but fertility rates started to increase in 1990 in France. The relative dynamic in France and Nordic countries from 1990 is almost exactly the opposite of that of income per capita.
1960/1964 2.58 2.68 2.30 2.83 Table 5. Total (period) fertility rates. 1970/1974 1980/1984 1990/1994 1.97 1.44 1.73 1.64 1.68 1.82 1.90 1.64 2.04 2.36 1.88 1.72 1.72 1.50 2000/2003 1.75 1.74 1.62 1.89 1.50 2004/2005 1.78 1.80 1.75 1.90 1.55

Denmark Finland Sweden France

EU-15 2.67 2.23 Source: European Commission.

Employment rates.

When one looks at employment rates in France and at their evolution over time, it seems easier to explain the previous observations. First of all, France has the lowest (by far) total em7

ployment rate when compared to the Nordic countries (Table 6), to Germany and the OECD average. Only Italy is doing worse.
Table 6. Total employment rates in 2006. Denmark 76.9 Finland Iceland Norway Sweden France Germany Italy
OECD

68.9 85.3 75.5 74.5 62.3 67.2 58.4 66.1

total Source: OECD.

Yet the French employment problem is heavily concentrated (Table 7): it concerns the two extreme age groups, young and old workers, while the employment rate of the bulk of the labor force in 2006 was close to that of Nordic countries, higher than Germany and Italy, higher than the OECD and EU 15 average, and has increased from 1970 to 2006. For young and old French workers, data show the opposite dynamic.
Table 7. Total employment rates, 1970-2006. 1970 1990 2006 age group age group age group age group age group age group age group age group age group 15-24 25-54 55-64 15-24 25-54 55-64 15-24 25-54 55-64 Denmark Finland Norway Sweden Iceland France Italy Germany
OECD

.. 57.8 .. 61.5 .. 52.1 39.3 70.0 53.1 50.9

.. 80.7 .. 78.9 .. 72.6 59.2 71.4 69.1 65.0

.. 56.8 .. 63.7 .. 55.5 28.6 49.6 53.9 46.6

65.0 52.2 53.4 66.1 .. 29.5 29.8 56.4 48.8 45.2

84.0 87.9 82.2 91.6 .. 77.4 68.2 73.6 75.8 73.4

53.6 42.8 61.5 69.5 .. 35.6 32.6 36.8 48.0 38.5

63.7 40.6 53.1 44.0 72.9 25.3 25.5 43.9 43.3 40.2

85.5 82.5 84.4 84.7 89.1 80.0 73.3 78.8 76.5 78.6

60.9 54.5 67.4 69.8 84.9 40.5 32.5 48.5 53.0 45.6

EU15 Source: OECD.

From these elements, it seems that France, confronted with declining economic growth, has opted for a model of exclusion from the labor market of young and old workers, leaving only the very productive employed. This evolution points to a key pattern of the French model since the 1990s and a major difference, not only with the Nordic countries, but also with Germany: France has developed a Malthusian productivity, increasing its level by leaving workers with low productivity out of the labor force. This combination of a high level of productivity but low employment rates of some less productive categories of the population was actually the argument put forward by Lindert
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(2004) to explain why the welfare state was essentially a free lunch. In the case of France, this process is not a free lunch: declining employment rates (and rising unemployment) for certain categories of the population have reduced the overall income per capita. Table 8 confirms that the French problem is not, to put it in the words of Paul Krugman, one of inspiration but of perspiration (not of productivity but employment rates and number of hours worked). This latter factor accounted for virtually the entire income gap between France and the U.S. in 2006, which is not the case for any other country surveyed. Table 9 shows in addition that the perspiration problem of France lies more on the side of employment rates than on the side of persons in employment working shorter hours (which are quite comparable to Norway, Sweden or Denmark).
Table 8. Breakdown of GDP per capita in its components in 2006. Gap in GDP per capita Gap in GDP per hour Gap in hours with respect to the worked with respect worked per capita U.S. (in % points) to the US (in % with respect to the points) U.S. (in % points) Iceland -18 -29 15 Norway Sweden Denmark Finland France Germany Italy
OECD

18 -20 -20 -25 -29 -27 -34 -30 -29

41 -11 -15 -18 -1 -7 -24 -25 -14

-16 -10 -5 -8 -28 -22 -13 -7 -18

Euro area Source: OECD .

For the French model, the level of productivity is hence a strength by default, due to lower employment rates, and, to a lesser extent, shorter hours worked. The major French problem and difference with the Nordic countries is thus employment rates. But this problem cant be summed up by the proverbial structural rigidities in the labor market, as it is more broadly related to real GDP growth, itself related to macroeconomic management copiloted with fellow member states of the euro area (see Fitoussi, 2006). On this matter, Nordic countries profitable lessons are limited.
Table 9. Average hours actually worked (Hours per year per person in employment). 1970 1879 1982 2158 1835 1730 2012 1980 1646 1849 1864 1580 1517 1842 1990 1518 1769 1839 1503 1561 1702 2000 1554 1750 1885 1455 1625 1591 2006 1584 1721 1794 1407 1583 1564

Denmark Finland Iceland Norway Sweden France

Germany Italy EU15 total OECD total Source: OECD.

.. 2145 1876 1969

.. 1950 1773 1893

.. 1902 1723 1862

1473 1861 1655 1812

1436 1800 1625 1777

3) Real GDP growth and macroeconomic management France is not only a large country, while Nordic countries are small; it is a large country that belongs to the euro area and, as such, it has been engaged in a process of monetary unification since the early 1990s. French real GDP growth follows almost exactly euro area economic growth from 1971 to 2007 (which is made at 75 percent by the large continental countries), see Table 10.
Table 10. Real GDP growth rate, 1971-2007. 1971-1979 1980-1989 1990-1999 2000-2007 2.6 1.9 2.4 2.0 3.6 6.5 4.7 2.0 3.5 3.5 3.8 3.5 3.2 3.1 2.3 2.5 2.3 2.9 1.6 2.2 3.7 1.6 1.9 2.2 2.6 3.3 3.9 2.4 3.0 1.9 2.0 2.5

Denmark Finland Iceland Norway Sweden France Euro area

total Source: OECD.

OECD

Fitoussi (1995, 2002) has argued that the rules chosen for European monetary integration have been very costly in terms of growth and unemployment. European monetary unification indeed came at a high price for the future euro areas member states, as restrictive monetary policy increased markedly the regional critical gap and unemployment rate (see Chart 3). Laurent and Le Cacheux (2006) have gathered empirical evidence that monetary unification was systematically biased in favor of the small states of the euro area, given the rules of the European economic constitution. The fact that the single market and economic policy constraints give small countries the advantage of trade while not allowing large countries to compensate for their handicap by active macroeconomic policies may explain part of the divergence in their performance in the recent period (and the overall disappointing record of the euro area). Here, a major difference between France and Germany has appeared in recent years. While France has relied on the stimulation of its domestic market to grow, which is at odds with euro area rules, Germany has adopted since the mid-1990s, but especially since 2000, a smallcountry growth strategy. The countrys trade openness is actually higher in 2006 than that of Norway, Iceland and Finland (Chart 4). Laurent and Le Cacheux (2007) noted that if the German competitiveness effort has been a huge success in terms of net exports growth, it is still hardly compatible with the fact that Germany is a large country. It appears that the shrinking of Germany has, so far, been a counterproductive small country growth strategy.

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So why did Germany choose it in the first place? One can argue that in the face of globalization, all countries have become small and that Germany simply decided to acknowledge this fact. But Germany is first and foremost part of European integration. As such, it is subject to the incentives system devised by the European economic constitution, whereby large countries are encouraged to behave like small ones, competing through real social disinflation rather than nominal exchange-rate policy, adopting competitiveness policies focused on labor cost reduction. Since large continental countries are precisely not small, the results are neither good for them nor, even worse, for the euro area. These policies have triggered strategic reactions from the other large countries, which in turn engage in the social race to the bottom. Some elements of this worst-case scenario for euro area social models have already appeared (see Laurent, 2006), measurable for instance by the intensity of tax competition in the EU compared to the rest of the world (Chart 5).

Chart 3.

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Chart 4.

Chart 5 If France wants to increase income per capita, the solution is thus not to follow Germany in trying to metamorphose into a small country. The euro area as a whole is fundamentally a big
12

closed economy: its degree of openness is close to that of the U.S. This means that it should allow for reactive macroeconomic policies at the regional and national levels in order to make the most of its domestic market if it wants to stimulate its economic growth, like many large and middle countries in the developed world (like the U.S. and the UK). Otherwise, in applying economic rules made for small economies while it is indeed a large economy, it runs the risk of structurally jeopardizing growth, pitting its largest economies against one another, and turning monetary union into a zero, or even a negative-sum game. 3) Structural reform and long-term growth Because they are more open and more vulnerable to external shocks, small countries are forced to adapt to changing economic contexts more quickly, and will, better than large ones, be able to implement structural changes in their economies. In the current economic context, this should mean that Nordic countries are more able than France to invest in the knowledge economy and sustainable development. Here, contrary to macroeconomic management, they can be an example. In a nutshell the mechanism is the following: structural adjustment in a small country has a high rate of return because, by increasing competitiveness, it acts on the major component of its demand, i.e., exports. The sacrifice it implies in term of restricting internal demand is thus short-lived, which gives to the government more room to maneuver to implement the most profitable investment policies. In a medium-sized country such is not the case, as the sacrifice in terms of internal demand may be long-lasting before bearing its fruits, since the increase in competitiveness concerns a small fraction of total demand. This means that, in a small economy, a supply-side policy is after all a demand policy in such a way that these countries do not need the instruments of a demand policy. In a mediumsized economy, this is not the case and the government has to pursue a two-handed policy using different instruments. This brings us back to the flaws of European economic rules, blocking access to these instruments absent a demand policy at the European level. It is no wonder then if it does not constrain small economies but big ones. The rules of the Stability and Growth Pact, which do not discriminate between government investment and consumption, and which France is obligated to follow, are typically not well adapted to pursue a long-term growth policy (see Fitoussi, Laurent and Le Cacheux, 2007, for a critical presentation and reform options). Knowledge economy.

France, like the two other large continental economies, is not investing as much as it should in the knowledge economy. As shown in Table 11, the overall investment in knowledge in France, Germany and Italy is lower than the OECD average and much lower than in the Nordic countries. The evolution since 1997 is negative. The breakdown into three major components allows us to identify R&D as the major problem of France. Public R&D is not so much at fault as private R&D (Table 12). In this chapter, France has to take its inspiration from the Nordic countries.

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Table 11. Investment in Knowledge, 2004, in % of GDP.

R&D

Software 1.36 1.31 1.54 1.16 0.57 0.64 1.08

Higher Education 1.16 1.11 0.93 0.95 0.68 0.73 1.42

Investment in Knowledge 5.10 5.92 6.44 4.31 2.38 3.90 4.91

Change in investment in knowledge to GDP ratio (1997-2004) 1.29 0.72 0.86 0.49 0.38 0.43 0.69

Denmark Finland Sweden France Italy Germany

OECD

2.58 3.49 3.98 2.20 1.14 2.54 2.41

Source: OECD . Table 12. Private and public R&D, 2003, in % of GDP Private R&D Public R&D Total R&D Norway 1.0 0.74 1.74 Denmark 1.75 0.78 2.53 Iceland 1.67 1.27 2.94 Finland 2.46 1.01 3.47 Sweden 2.95 1.02 3.97 France 1.36 0.79 2.15

Sustainable development.

The performance of France in terms of climate change is flattering, the country being ahead of its Kyoto target, which is not the case with Norway and Iceland. But France has not made a genuine effort to reorient its energy mix towards renewable sources, with the share of renewable energy actually falling from 1990 to 2005 (Table 13). Even Finland, which also relies on nuclear energy, has developed renewable energies in its energy mix. On both counts, France should take note of the Nordic countries long-term growth policies. But how can large countries be inspired by small countries ability to foster change if they cannot implement it in practice because they lack the corresponding institutions and governance? We now thus turn to these issues.
Table 13. Climate change and renewable energy performance. Share of renewable Share of renewable energies energies in primary in primary energy emissions consumption 2005 growth 1990-2005 Kyoto target energy consumption 1990 -7.8 -21.0 6.7 16.2 -7.4 4.0 24.9 29.8 -2.6 0.0 19.2 23.2 8.8 1.0 53.2 40.4 10.5 10.0 64.9 73.0
GHG

Denmark Sweden Finland Norway Iceland France Germany Italy

-1.9 -18.7 12.1

0.0 -21.0 -6.1

14

7.0 1.6 4.2

6.0 4.8 6.5

Spain

52.3

15.0 -8.0

7.0 4.9 4.4

6.1 6.7 6.7

EU-15 -2.0 EU-27 -11.0 Source: European Environmental Agency.

B. Trust, confidence and governance strategy If the question is merely one of public and social spending, France is now out-nordicing almost all Nordic countries. Public social spending in France is in fact higher than in all Nordic countries except Sweden (Chart 6). What is more, France has increased its total spending from 1990 to 2007 to reach 53 percent of GDP (Chart 7), whereas Nordic countries have either stabilized or decreased theirs. But of course the quantity of public and social spending does not guarantee policy success, it is the quality of the expenditures that matters. In this respect, a lively debate has developed in France about the Nordic model of generalized trust, confidence in institutions and governance quality. This new literature points at the development of distrust in France as a potential blocker of social policy efficiency and turns to Nordic countries for inspiration. Danish flexisecurity in particular is praised by the increasingly influential proposition of professional paths securization. We now explore this debate and start by asking ourselves whether France can be seen as distrustful or not.

Chart 6

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Chart 7 1) The paradox of French pessimism: fertility and the future The first form of trust we look at is confidence in the future or optimism about the future. As noted in Fitoussi and Laurent (2007), there is a paradox here between subjective French pessimism, recurrently expressed and highlighted for instance in the Eurobarometer surveys, and an objective booming fertility rate, which can be interpreted as a sign of confidence in the future. In the EU, France has both the highest fertility rate and the most pessimistic public opinion about the future. Here again, France is clearly at odds with Nordic countries, where optimism in the future and fertility are both high (Chart 8). Admittedly, French fertility dynamism can be related to the generosity of family policy in France. But how can it coexist with such pessimism about the future? One possible explanation is that the French malaise is a public or social malaise rather than a private one. French institutions and/or social relations would be feeding negative subjective sentiments. While the correlation between private happiness and public or social optimism is typically very high, France appears to be too socially pessimistic for its level of private happiness, as illustrated in Table 14. This observation brings us to the question of generalized trust and confidence in institutions.

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Chart 8.

Germany Denmark Finland Norway Sweden France

Table 14. Happiness and pessimism, 2006. How happy For most people in country life are you ? is getting worse (% very happy) (% agree) 47.6 70.0 80.3 15.6 74.5 22.3 69.4 13.3 68.0 29.1 48.4 84.4 51.6

Total 51.7 Source: European Social Survey.

2) Frances crisis of confidence? Generalized trust and confidence in institutions A new literature tries to explore the connection between Frances dysfunctional social model and trust and confidence in institutions among the French people. Using inter alia 19802000 World Values Survey data, Algan and Cahuc (2007) go so far as to argue that the deficit in trust among French accounts for 66 percent of the income gap with Sweden and that French GDP would be increased by 5 percent or 1500 euros per person if French trusted their fellow citizens like the Swedish do. The interesting point of this literature is the shift from the typical OECD Job Study perspective that attributes most of French evils to structural rigidities in the labor market. The idea here is to investigate whether dysfunctions, inter alia in the labor market, and more generally in the French social model, derive primarily from a lack of generalized trust and confidence.

17

Generalized trust

Algan and Cahuc (2007) argue that the spiral of defiance is what prevents France from implementing a social-democracy of the Scandinavian type. The trust deficit among the French, which authors relate to un-civic attitudes, blocks cooperation abilities and social dialogue, so that the State is forced to intervene in social relations, harming social partners legitimacy, which further increases defiance among workers, firms and the State. On possible remedies out of this predicament, Cahuc and Algan (2006) warn that: civic attitudes cannot be systematically changed quickly just by changing institutions civic attitudes impose real constraints on the choice of labour market institutions. From this point of view, it is unlikely that countries with weak public-spiritedness can implement the Danish Model without specific action aimed at changing the values of their citizens. The French should thus find ways to amend their civic attitudes in order to benefit from a more efficient and egalitarian social model like Nordic countries. Lets first take a look at generalized trust in France (without here, for lack of space, discussing this notion theoretically and empirically) according to the latest available wave of the World Values Survey. Table 15 reports that France seems indeed to be an exception in this respect, not only compared with Nordic countries but also to Italy and Germany.
Table 15. Generalized trust. (Percentage of people responding most people can be trusted to the question: Generally speaking, would you say that most people can be trusted or that you cant be too careful in dealing with people?) Denmark 64 Finland Norway Sweden France Italy Germany 57 65 64 21 32 33

Source: OECD, Data from the 1999-2004 wave of the World Values Survey.

A closer look at the evolution of generalized trust in France since the 1980s in the light of the European values survey data reveals that generalized trust was actually higher in France in the 1980s than it is now, while the French social model was closer to its original features than it is now. In every other country in the table, trust has increased (Table 16).
Table 16. Generalized trust. (response to same question as above) 1981 1990 1999/2000 Sweden 56.7 66.1 66.3 Norway 60.9 65.1 Iceland 39.8 43.6 41.1 Denmark 52.7 57.7 66.5 Finland 62.7 57.4 France 24.8 22.8 21.3 32.6 37.5 Italy 26.8 35.3 W. Germany/Germany 37.9 Source: European Values Survey.

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Confidence in institutions

But Cahuc and Algan (2007) insist that trust should also be considered under the angle of confidence in public institutions such as the legal system, the Parliament, trade unions. The French, they argue, have exceptionally lower confidence in their institutions than other countries, most of all the Nordic ones. Table 17 shows a more nuanced picture for trust in Parliament and the civil sector, with France actually topping Finland, Germany and Italy.
Table 17. Share of respondents reporting high levels of trust in different entities in the early 2000s. Trust in Trust in the Parliament civil sector Denmark Finland Iceland Norway Sweden France 0.49 0.44 0.72 0.69 0.51 0.41 0.55 0.41 0.56 0.51 0.49 0.46

Germany 0.36 0.39 Italy 0.34 0.33 Source: OECD, Data from the 1999-2004 wave of the World Values Survey.

But the real problem highlighted by Cahuc and Algan (2007) is the higher level of people in France declaring no trust in institutions at all. Tables 18 and 19 (reporting percentages of lack of trust) show that in this respect France was indeed in 2000 the least trustful of all countries surveyed for all dimensions studied, except for confidence in the social security system, in which Italians put even less confidence than the French. The important point here is that the French pattern seems to be different from Germany but quite close to Italy. Yet, again, some observations are puzzling. For instance, French seem to trust trade unions more in 2000 than in 1990, while trust in all other institutions has declined over this period. Note also that the social security system (arguably a large part of the French social model) appears to be the most trusted of all French institutions in 1990 and 2000.
Table 18. Lack of confidence in institutions, 1990. Percentage of people responding none at all to the question: How much trust do you have ? in the legal in in the social system Parliament in trade unions in civil service security system Sweden Norway Iceland Denmark Finland France Italy W. Germany 7.7 2.5 4.0 1.6 3.1 10.8 21.9 4.0 11.1 5.1 8.2 9.6 15.1 17.3 22.6 7.0 14.8 6.6 7.5 13.7 12.5 28.7 21.9 16.6 8.5 6.7 7.5 5.3 11.9 15.5 28.4 10.2 12.3 8.9 4.5 3.5 2.3 7.1 20.6 3.6

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Table 19. Lack of confidence in institutions, 1999/2000. Percentage of people responding none at all to the question: How much trust do you have ? in the justice in in trade in civil in the social security system Parliament unions service system Sweden 4.7 6.1 9.7 5.4 5.3 Iceland 3.9 2.8 6.2 3.5 7.2 Denmark 2.3 6.7 8.4 4.3 2.8 Finland 3.5 9.4 6.9 8.3 3.8 France 19.5 23.6 16.8 16.0 25.4 24.0 13.1 17.7 15.2 11.7 9.8 18.8 8.8 Italy 19.1 Germany 6.9 Source: EuropeanValues Survey.

From these first observations, two related questions emerge: is the French social model really to blame for the lack of trust among citizens? Is the poor quality of institutions in France to blame for the French lack of confidence in them? Lets start with the second question: are French right about the quality of their institutions and governance? Do they exhibit significantly less quality than in other countries, the Nordic ones to start with? Indicators of governance quality

Kaufmann, Kraay, and Mastruzzi have built a dataset of indicators widely used in the field of development policy, but that can prove useful here as well, although one would expect rich western democratic countries not to differ much in terms of governance quality. Actually, they do, and French institutions seem of lesser quality, not only than institutions in the Nordic countries but also in Germany, while Italy is in all dimensions studies the least well ranked (Table 20). According to the data, the lack of confidence in institutions would find a logical explanation, and reforms thus would be needed in this department to improve confidence. But the lower level of confidence in institutions could also be explained by disappointed high expectations.
Table 20. Governance score (-2,5 to +2,5). Political Voice and Government stability accountability effectiveness 0.82 1.72 2.29 1.47 1.60 1.21 1.13 0.46 0.83 1.63 1.47 1.64 1.55 1.40 1.48 2.08 2.13 2.10 2.00 1.20 1.52 Regulatory Rule of Quality law 1.81 2.03 1.70 1.62 1.34 1.44 1.06 1.39 1.95 2.03 2.02 1.86 1.31 1.77 Control of corruption 2.39 2.57 2.46 2.13 2.24 1.44 1.78

Denmark Finland Iceland Norway Sweden France Germany

0.28 1.14 0.38 0.84 0.37 0.31 Italy Source: Kaufmann D., A. Kraay, and M. Mastruzzi 2007: Governance Matters VI: Governance Indicators for 1996-2006.

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What determines generalized trust?

The question of the determinants of generalized trust remains. Should we attribute it, as suggested by Algan and Cahuc (2007), to poor civic attitudes reinforced by an omnipresent State? Does it depend on confidence in institutions, in which case solving the confidence crisis in institutions would increase generalized trust? Does it depend on a cultural mind-frame unrelated to the institutional context or, better, of which the institutional context would be a consequence and not a cause? Table 19, even if it does not present rigorous econometric tests, allows measuring the relative importance of subjective, economic, institutional and civic variables in the determination of trust. The importance of civic variables appears doubtful (a result in line with the literature), as in the determination of the most significant determinant of generalized trust (Tables 21 & 22).
Table 21. Determinants of generalized trust, 2004. Coefficient Significance 0.40 0 0.22 0 0.03 0.0005 0.08 0.09 0.06 0.04 0.03 0.04 0.02 -0.02 -0 0.19 9884 0.411 0 0.0193 0 0 0.0005 0.0983 0.2905 0.3673 0.7912

Most people try to take advantage of you, or try to be fair Most of the time people helpful or mostly looking out for themselves How happy are you How satisfied with present state of economy in country Any period of unemployment and work seeking within last 5 years Trust in country's parliament How satisfied with the way democracy works in country Trust in the legal system Citizens should not cheat on taxes You should always obey law even if it means missing good opportunities Occasionally alright to ignore law and do what you want Falsely claim government benefit: social security or other, last 5 years Intercept Valid N Adjusted R Squared

Table 22. Determinants of subjective trust, 2004. Dependent variable: Most people try to take advantage of you, or try to be fair Coefficient Significance How happy are you 0.2 0 How satisfied with present state of economy in country Any period of unemployment and work seeking within last 5 years Trust in the legal system How satisfied with the way democracy works in country Trust in country's parliament Falsely claim government benefit: social security or other, last 5 years Citizens should not cheat on taxes You should always obey law even if it means missing good opportunities Occasionally all right to ignore law and do what you want 0.12 0.16 0.10 0.07 0.05 -0.04 0.03 0.02 0 0 0.0003 0 0 0 0.0523 0.2777 0.4575 0.9419

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Intercept Valid N Adjusted R Squared

2.03 9911 0.161

Source: European Social Survey.

What kind of lessons should France take from the Nordic countries on the chapter of generalized trust and confidence in institutions? From our very limited observations, improving institutions democratic quality and the state of the economy could prove useful. The role of equality policies should also not be overlooked. Rothstein and Uslaner (2005) indeed argue that: low levels of trust and social capital that plague many countries are caused by too little government action to reduce inequality. They insist that: the policies most effective in reducing inequalities are universal social policies. These policies stem from our sense of generalized trust and, in turn, help to create a more trusting society. As shown in Table 23, France is less egalitarian in this respect than all Nordic countries except Norway.
Table 23. Income inequality indicators. Gini Index (2006) Income quintile share ratio (2006) Denmark 24 3.4 Finland 26 Sweden 24 3.5 Iceland 26 3.7 Norway 30 4.6 France Italy Germany Source : Eurostat. 27 32 27 4.0 5.5 4.1

This argument is all the more important in the current French context that contemporary evolution of income inequality in France in the recent period seems to have been overlooked, as documented empirically by Landais (2007), whose findings are summarized in Table 24.
Table 24. Income evolution in France, 1998-2005. P 99,99-100 +42.6% P 99,9-100 +32.0% P 99-100 +19.4% P 95-100 +11.3% P 90-100 +8.7% P 0-90 +4.6% Median income + 4.9% Source: Landais (2007).

3) Frances crisis of confidence? The role of trade unions and job satisfaction A final issue touching on the matter of trust in general regards the role played by trade unions in the French social model and the general level of social relations quality that results from it, with job satisfaction as an indicator of this quality. Phillipon (2007), also taking Nordic countries as a reference, argues that France is burdened with poor workplace relations due to the absence of strong trade unions and resulting in low job satisfaction. Table 25 illustrates some of Phillipons arguments.

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Table 25. Workplace relations and job satisfaction. Workplace relations quality Job satisfaction Finland 5.42 65.0 Denmark 5.97 72.5 Sweden 5.92 56.9 Norway 5.72 France 3.33 47.2 Germany 5.25 60.3 Italy 4.22 53.6 Source : Philippon (2007), p. 14, data from Global Competitiveness Report and World Value Survey.

While workplace relations quality seems to be markedly low in France, its relation to the weakness of trade unions must be considered cautiously. Trade union density has not changed much for the last fifteen years in France and was always much lower than that of Nordic countries. What is more, Italys union density is higher than Germanys with workplace relations quality higher in Germany (Chart 9). What is true, however, is that trade unions seem to be the least trusted institutions in France (see supra Table 19).

Chart 9. On the consequences side, a closer look at the dynamic of job satisfaction through the European values survey also seems to bring some qualifications. Philippons data can be reconstituted by adding the highest three levels of job satisfaction, but a different picture appears while considering the lowest three or levels 6 and 7 of satisfaction (fairly high), where France is the highest ranked of all countries surveyed (Table 26). The evolution of job satisfaction through time is also puzzling, with satisfaction in France increasing in the last two decades, while it has decreased, for instance, in Sweden (Table 27).

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Table 26. Job satisfaction Percentage of respondents to the question, How satisfied are you with your job? France dissatisfied 2 3 4 5 6 7 8 9 satisfied 8 + 9 + 10 1.8 1.1 1.5 3.5 10.7 10.8 22.4 26,4 13.2 8.4 48 Germany 0.9 0.5 1.0 1.8 5.1 9.3 19.9 30.2 17.4 13.9 61.5 2.4 Italy 2.0 1.3 2.3 3.5 6.8 11.2 19.2 25.6 13.0 15.1 53.7 5.6 Denmark 0.8 0.9 1.1 1,4 5.3 6.7 11.2 25.6 25.3 21.6 72.5 2.8 Sweden 0.6 2.3 2.3 3.2 7.5 10.0 17.6 30.6 17.8 8.1 56.5 5.2 Finland 0.2 0.9 2.0 1.6 4,7 7.6 19.1 35.8 20.1 8.1 64.0 3.1 Iceland 0.5 0.3 0.9 2.1 4.0 7.8 17.9 30.8 21.4 14.4 66.6 1.7

1+2+3 4.4 Source: European values survey.

Table 27. Job satisfaction through time in France and Sweden. Percentage of respondents to the question, How satisfied are you with your job? France 1981 France 1999 Sweden 1981 Sweden 1999 dissatisfied 2 3 4 5 6 7 8 9 satisfied 2.7 2.5 3.7 3.4 14.4 13.4 17.7 21.6 11.0 9.5 1.8 1.1 1.5 3.5 10.7 10.8 22.4 26.4 13.2 8.4 48.0 0.3 1.4 2.6 1.8 5.6 6.2 12.2 27.0 22.2 20.7 69.9 0.6 2.3 2.3 3.2 7.5 10.0 17.6 30.6 17.8 8.1 56.5

8 + 9 + 10 42.1 Source: European values survey.

3. Diversity and Integration In the final part of this paper, we try to shed some light on the question of integration policy, i.e., policies against discriminations and segregation. Logic would want diversity and fragmentation to be higher in large countries than in small ones, in France than in Nordic countries. We start by reviewing empirical evidence of this intuition.

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1) Diversity and fragmentation Diversity

Table 28 shows that diversity, captured by the ratio of the foreign-born population to the total population, appears to be higher in France in 2005 than in Denmark or Finland, but lower than in Norway, and much lower than in Sweden. Yet the foreign population is higher in 2005 in France than in all Nordic countries. While the data for Germany confirm the link between country size and diversity, figures for Italy contradict it.
Table 28. Foreign-born and foreign populations, as a percentage of the total population. Foreign-born population Foreign population 1995 2000 2005 1995 2000 2005 Denmark Finland Norway Sweden France Germany Italy Source: OECD . 4.8 2.0 5.5 10.5 .. 11.5 .. 5.8 2.6 6.8 11.3 7.3 12.5 2.5 6.5 3.4 8.2 12.4 8.1 12.9 .. 4.2 1.3 3.8 6.0 .. 8.8 1.7 4.8 1,8 4.0 5.4 5.6 8.9 2.4 5.0 2.2 4.8 5.3 5.8 8.8 4.6

Fragmentation

Table 29 yields mixed results with regards to fragmentation. According to ethnic and religion indexes, France (and Germany and Italy) are more fragmented than Nordic countries (except Finland, for the ethnic criterion). But the language index is higher in Finland and Sweden? Overall, still, continental countries (and France among them) appear more fragmented than Nordic ones.
Table 29. Fragmentation indexes. Ethnic Language Religion Denmark Finland Iceland Norway Sweden France Germany 0.08 0.13 0.08 0.06 0.06 0.10 0.17 0.10 0.14 0.08 0.07 0.20 0.12 0.16 0.23 0.25 0.19 0.20 0.23 0.40 0.66

Italy 0.11 0.11 0.30 Source: Alberto Alesina, Arnaud Devleeschauwer, William Easterly, Sergio Kurlat and Romain Wacziarg, Fractionalization, Journal of Economic Growth 8,2 (June 2003): 155-194.

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2) Discrimination and segregation With diversity and fragmentation higher in France and continental countries, one would expect attitudes towards immigration to be more positive. The reverse is actually true, with antiimmigrant sentiments much higher in Germany and France than in Nordic countries. The more immigrants, it seems, the more anti-immigrant feelings are exacerbated where one could expect (hope) that the importance of immigrant populations would reduce xenophobia (Table 30).
Table 30. Attitudes towards immigration, 2004. Immigrants make country a Allow no immigrants of worse place to live* different race/religion ethnic group from majority Finland Sweden Norway Iceland Denmark France Germany Source: European social survey. 7.6 7.2 13.1 2.5 9.8 19.8 17.1 10.7 3.5 6.6 8.5 10.3 15.0 15.5

Discrimination of course is also objective, as migrants are offered or not the conditions of their social integration. In this respect also, most Nordic countries appear overall to be more hospitable to immigrants than France and Germany, while Italy ranks higher (Table 31). France would certainly be well-inspired to invest more in migrants welfare-enhancing public policies, even if the recent creation of the HALDE is a step forward (that accounts for Frances rank according to the anti-discrimination indicator).
Table 31. Migrant integration index, 2005. Labor Access to market Family Long-term Political nationaAntiaccess reunion residence participation lity discrimination Overall 88 67 65 64 60 55 53 44 100 70 85 70 64 50 50 40 92 68 79 66 59 45 61 36 76 65 67 72 61 48 53 67 93 81 55 86 60 52 66 55 71 44 33 39 48 54 38 33 94 75 69 54 66 81 50 33

Rank (out of 32) 1 5 7 8 11 14 21 Sweden Finland Italy Norway EU-15 France Germany Denmark

Gap between top 3 Nordic and France 18 30 30 23 35 -3 -7 Source: Jan Niessen, Thomas Huddleston and Laura Citron, Migrant Integration Policy Index, Brussels, British Council and Migration Policy Group, September 2007. The Migrant Integration Policy. Index may be downloaded from www.integrationindex.eu

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Segregation

Since Sweden is presented as the best practice country for migrants integration in the Migrant Integration Policy Index, we will finally compare Sweden with France on the chapter of segregation. Fitoussi, Laurent and Maurice (2004) have highlighted the fact that, in contemporary France, socio-spatial polarization bears witness to a long period of persistent unemployment and generates a dynamic of urban divergence. This has found a particularly clear expression in the creation and expansion of the French ZUS (zones urbaines sensibles sensitive urban areas). Furthermore, the authors formulated the hypothesis that urban segregation had a multiplier effect on the hysteresis observed in the labor market, the key drivers of this spatial hysteresis being the establishment of a physical and social distance from employment and the development of pronounced discrimination in the labor market. This dynamic of divergence grows steadily in time and space within a genuine system of urban segregation, whereby social inequalities in sensitive urban areas are perpetuated over time due to difficulties in education and training systems, while their geographical extension is caused by unequal access to housing, collective facilities and inequalities in local public finances. The latest available figures (Table 32) largely confirm this conclusion, even if they show that, from 2002 to 2006, unemployment actually decreased more in the ZUS than in the rest of France, perhaps showing positive impact from the implementation of urban policies reforms (from 1990 to 1999, unemployment increased more in the ZUS than in the rest of France). What is more, the double penalty resulting from staying in a ZUS and being an immigrant is as strong as ever. Chart 10 illustrates how the ZUS aggravate French social trends.
Table 32. ZUS and the rest of France.
ZUS

Rest of France 89.1 80.9 2.9 5.0 -9.4 10.7 25.1 22.2 10.5 9.7 8.5 21.5 12266.5 14329.5 1.3 10.4 26.0

Success at the Baccalaurat S exam (June 2006) Success at the Brevet exam (2004-2005) Percentage of pupils lagging behind in 6me grade (2005) Percentage of pupils lagging behind in 3me grade (2005) Reduction in unemployment from 2002 to 2006 in Category 1 Inactivity rate of 25-49 years old (2005) Inactivity rate overall (2005) Unemployment rate for 15-24 years old (2005) Unemployment overall (2005) Unemployment rate among non-immigrants (2005) Unemployment rate among immigrants from EU (2005) Unemployment rate among non-EU immigrants (2005) Income at the 1st decile in euros (2002) Income at the 5th decile in euros (2002) Interdecile gap (D9/D1) in 2002 Low-income population perceiving a social allocation (2003-2004) Population declaring itself in bad health condition (2002-2003) Source : Observatoire des Zones Urbaines Sensibles.

84.4 68.3 5.8 9.3 -14.0 21.0 34.3 44.9 22.1 19.7 9.6 31.7 6115 9048.5 2.0 28.6 32.0

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Chart 10. But Sweden, with a very different approach to integration policy, also has a problem of segregation. As noted in Andersonn (2007), it is something of a paradox that, since the country declared itself multicultural in 1975, integration into the labour market has become much more problematic, immigrants political participation has dropped, and increasing proportions of especially newly arrived immigrants have concentrated in immigrant-dense neighbourhoods. Furthermore, segregation increases the risk of racism and discrimination. The multicultural model seems more out of reach now than it was at the time of its breakthrough 30 years ago, adds the author. sa (2006) also remarks that during the 1990s, the residential segregation of immigrants increased in many Swedish cities. Biterman and Franzn (2007) provide empirical evidence of segregation in large Swedish cities. Table 33 and 34 reproduce some of their results.
Table 33. Segregation in Sweden. Living in Greater Greater Stockholm region Gteberg 1 830 600 769 900 82 85 Greater Malm 528 300 83 Whole Country 8 940 800 88

Total population Of which born in Sweden (%)

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Table 34. Segregation in Sweden. Economic development Economically integrated slightly impoverished 90 Poor Very poor Total 14 1 367

Well-off Predominantly Swedishborn population Ethnic development Ethnically integrated, elements of visible minorities 10 Predominantly minorities Almost exclusively visible minorities

262

32 10

34 25 1

1 8 13

77 43 14

Total 272 132 74 23 501 Source : Danuta Biterman, Eva Franzn (2007), Table 6:3. Distribution of urban neighbourhoods in Greater Stockholm, Greater Gteborg and Greater Malm by ethnic and economic types of development. How should the French model of integration take into account the Nordic experience? Resolute progress should be made in anti-discrimination policies, since discrimination exacerbates still further the phenomenon of urban segregation impacting, in particular, access to housing, work and training. It affects not only foreigners, but also French citizens of, or assumed to be of, foreign origin. But should France embrace multiculturalism of the Swedish type? The French model of integration is certainly in crisis, but it is possible that multiculturalism is simultaneously in crisis in Sweden. As noted by Lamont and Laurent (2006),3 in France, the frustration and resentment expressed by French minorities is largely caused by the contradiction between a fantasized equality and real-life discrimination. Yet, the French republican model is not to be altogether thrown overboard. The French model of integration has been neglecting the social conditions necessary to its success for too long. It now has to apparently contradict itself to be renewed, by acknowledging that where the initial conditions of access to society have deteriorated too far, greater equality must take over from strict legal neutrality. Epilogue: May 1968, models and systems It is usually when a social system is entering a severe crisis that it becomes a model for others. If this is so, Nordic countries should be worried about all the international attention they are getting. France itself was a model for the rest of the world in the late 1960s. How can the Nordic model be helpful in solving some of the major problems France is facing? We have tried to show in this paper that taking country size differences into account is a
3France

shows its true colors The Boston Globe, June 3, 2006, reprinted as Identity: France shows its true colors, in The International Herald Tribune, June 6, 2006.
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first step in the right direction. The next one may be to realize that there is not so much a Nordic model as a Nordic method,4 which allows implementing peacefully efficient reforms. While France can not import ready to wear institutional features, it should try to understand Nordic countries customized reform design. The fortieth anniversary of May 1968, the most important postwar civil event of French history, which started by way of youth revolt in universities but did not lead to a betterment of youth welfare or universities, now both a major weakness of the French model, is a good reminder that reform rhetoric often trumps reform action in France. France has the lowest figures for youth labor market integration not only compared to all Nordic countries, but also to continental ones (Table 35), this table being only of course the tip of the iceberg of the youths predicament in France.5
Table 35. Youth (15-24 years old) in the labor market 2006. Unemployment Employment/population Labor force rates ratios participation rates 8.4 72.9 79.5 8.6 53.1 58.1 21.3 44.0 56.0 18.8 40.6 50.1 7.6 63.7 69.0 23.9 13.5 21.6 25.3 43.9 25.5 33.2 50.7 32.5

Iceland Norway Sweden Finland Denmark France

Germany Italy Source: OECD.

French universities should not as well be a motive of national pride, as illustrated by Table 36.
Table 36. Top universities in 2007. Ranking Top 100 Top 200 Top 300 overall Sweden 7 4 4 9 Denmark 12 1 3 4 Norway 13 1 1 2 Finland 14 1 1 1 France 6 4 7 12 Germany 4 6 14 22 Source: Institute of Higher Education, Shanghai Jiao Tong University. Top 400 10 4 3 3 18 36 Top 500 11 4 4 5 23 41

There is much to learn from Nordic countries in those two respects. But the major limit of the Nordic template ultimately lies in the fact that a models coherence is idiosyncratic. France
4Grejbine

and Laurent (2008) make this point about Sweden. 5For an analysis of French youth social itinerary since the 1960s, see Chauvel, Louis, 1998 [2e d. 2002], Le destin des gnrations : structure sociale et cohortes en France au XXe sicle (Paris: Presses universitaires de France); for a contemporary comparison between French and Danish youth, see C. Van de Velde, Devenir adulte. Sociologie compare de la jeunesse en Europe (Paris : PUF), Le Lien social , 2006.

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chose to preserve solidarity in the face of globalization, as the importance (and quality) of its public services and social protection shows. Yet, this commitment only applies for a part of the French population. Furthermore, a high level of solidarity can only be sustained in terms of public finance if income per capita grows rapidly and France can only increase its income per capita by expanding the scope of its exceptional but partly artificial productivity. Given Frances size, this implies both an ambitious industrial and research policy and a reactive macroeconomic management so that employment rates grow for all categories of workers. The scale of these policies is now European. In this regard, social and tax competition among European countries should not be viewed as a sustainable growth strategy, but as a dangerous illusion: a quick fix that risks jeopardizing decades of European integration.

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