Business A La Carte

Beset with a sick economy, France's Socialist government has begun waving the flag of entrepreneurism: decentralizing economic command posts, abandoning unprofitable industries, stimulating private investment, cutting taxes. But it will take more than a new set of policies to change a culture that has long discouraged people from setting out to build companies on their own. Just ask Pierre Costa-Marini.

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Pierre Costa-Marini doesn't think of himself as an especially courageous man. True, he did finally break away to set up an ambitious business venture of his own, and, true, this was a brave thing to do in France. Nevertheless, he recalls that he spent most of his career in the safe confines of a government-supported corporation, convinced that in the nation that gave us the word "entrepreneur," there was little hope of becoming one.

"I always wanted to build something from scratch, but the very thought of it made people around me uncomfortable," Costa-Marini recalled recently. He was sitting in a spartan office in a bleak suburb of Paris called Courbevoie. "This country just isn't friendly to the entrepreneur. You risk nothing here, or everything. There is little middle ground."

Yet even when he was working at Bull, now France's largest state-owned computer company, Costa-Marini's restless imagination set him apart from the staid, gray corps of his fellow executives. By 1968, it became clear that there was a growing market for computer services. Bull set up a new time-sharing division, and Costa-Marini was put in charge of it. Six years later, the division was reaping more than 25% pretax profits on some $25 million in annual sales.

In the United States, a success like that would probably have earned its author rapid promotion -- especially if the overall performance of the company was as lamentable as Bull's. In France, however, where Bull is the government's prize entry in the international computer show ring, Costa-Marini's bosses responded with something very like envy. He saw his managers recruited away to more attractive employment within the company and his salespeople restricted in scope.

The memory still galls him: "They sent me a list of people I should call," he remembers, "on the ground that they might be customers for Bull computers. It was like giving us a telephone directory and telling us to make sure not to call on the best customers."

By 1974, Bull's pettifoggery at last drove Costa-Marini to act. He left the company, and set up his own independently managed time-sharing division within a subsidiary of the then publicly owned (that is, not state-owned) Compagnie Generale d'Electricite. At the time the division was established, he and CGE agreed that once the venture became profitable, it would become an independent spin-off. By 1978, the new operation was clearly bound for success -- whereupon CGE was unwilling to comply with the original terms of the agreement. Costa-Marini threatened to sue, and the CGE subsidiary, rather than risk an embarrassing court battle, let him go. He took with him five employees and four customers. "I made a little blackmail on them," he said, "but they were probably happy to get rid of us."

The outcome of Costa-Marini's "little blackmail" was a company called Line Data. Today, six years later, having grown at an annual rate of 50%, Line Data now has 43 full-time employees and more than 40 customers (including such major banks as Barclays Bank, Chemical Bank, and Bank of America). Last year it posted sales of some $3 million.

Such entrepreneurial triumphs as Line Data's are extremely rare in France today. Much of the problem has to do with the fact that the independent-minded French businessperson usually operates within rather small horizons. "Attitudes are totally different there," observes Jean Deleage, a former French government civil servant and now a respected venture capitalist in San Francisco "The small businessman just wants to live well on his business with his family. He doesn't want to be diluted, only to pass on the business to his children."

Government policy has done nothing to change this cultural drift. On the contrary, while leaving individual Frenchmen to pursue their petites affaires, French governments have pursued centralization and cartelization, grandes affaires, which would redound to the greater glory of the nation.

It has mattered little whether the government in Paris was monarchical or republican, left, right, or center: The French state has almost always taken a very visible hand in fostering economic development. This is the policy known as dirigisme, and its principal lever has been finance. Since World War II, the proportion of bank assets under government control has risen from 40% to more than 80%. In the 1950s and '60s, the chief beneficiaries of this largesse were smokestack industries, such as steel and automobiles.

More recently, the emphasis has shifted to such high-technology fields as nuclear power, aerospace, and rail transportation. Conservative governments, from Charles de Gaulle's to Georges Pompidou's to Valery Giscard d'Estaing's, have been especially bemused by bigness. "Europeans were impressed with the IBMs, GMs, and ESSOs of America," one high-ranking civil servant recalls. "You drew the conclusions that you needed giants" to compete in world markets. Tax measures encouraged larger companies to acquire small companies. As the civil servant put it, "If no giant existed, we created one."

The results have been mixed. The steel industry is still suffering from overcapacity and inefficiency; Renault has gone through some hard times. On the other hand, the French nuclear-power and rail-transport industries are among the best in the world. Francois Mitterrand's Socialists saw these successes as a buttress to traditional socialist policies when they took power in 1981. Virtually all the remaining private banks were nationalized, and the state increased its share of direct control over industrial output from 18% to nearly one-third.

Whatever the merits of this policy in nuclear power and aerospace, which require long-term capital investments, it has proved utterly disastrous in the tumultuous marketplace of computer technology, in which the state now controls 70% of the French companies in the industry. France, a nation that once bowed to none in engineering and mathematics, is an infant in the field of microelectronics. In 1982, it was obliged to import 85% of its semiconductor circuits, and in 1983 its negative balance of trade in the field of electronics came to $1.5 billion.

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