The Electric Commentary

Tuesday, June 07, 2005

France v. Dynamism

From the Washington Post:

It's not exactly haute culture , but these days this is a vital topic here in France, where the unemployment rate has been stuck between 9 and 10 percent for a quarter of a century and where not a single enterprise founded here in the past 40 years has managed to break into the ranks of the 25 biggest French companies. By comparison, 19 of today's 25 largest U.S. companies didn't exist four decades ago. That's why France is looking to the United States for lessons. (Emphasis added)

The United States is one of the most innovative countries in the world, and this is largely true because we allow failure. In a more open economy failing industries are eliminated, and resources find their way into new ventures, which is why you see a great deal of turnover in the list of largest US companies. European countries in general tend to protect local industries (and labor). This causes resources to become trapped in a certain industry, whether it runs efficiently or not. It is a recipe for stagnation.

Thank to MDS for the pointer. Read the whole thing


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