CNBC Business | Self-help required

Self-help required

France is accelerating its start-up culture but not fast enough says Sarah Wachter.

TRICKY BUSINESS Protesters like Jose Bove highlight the French ambivalence towards capitalism A well-known saying in France is that 'being self-employed is a luxury'. It has long been assumed that only the elite can afford to pay the high taxes and social charges involved in going it alone. As a result, according to the Global Entrepreneurship Monitor, France ranks near the bottom in the proportion of its population in the early phases of starting a business.

Nothing is more important to jolt France out of its economic rut than creating a larger pool of entrepreneurs. Acknowledging this, the French government has in recent years made great strides in creating incentives to start a business. The Dutreil initiative (named for the former Minister of Small and Medium-Sized Enterprises) eliminated the start-up capital requirement to a symbolic one euro and launched the Gazelle programme, granting a multi-year holiday on payroll taxes to fast-growing start-ups. Recently, France passed a law giving a tax break to wealthy individuals who invest in small, non-listed companies.

More changes are underway. President Nicholas Sarkozy promised to lift innovation in France during his election campaign and has set a target of 2,000 more companies with 500-plus workers, so these small businesses become bigger engines of job creation and economic growth. He also created a commission to study adopting a law akin to the US Small Business Act on government procurement from small firms and he set up the Attali commission to explore other measures. Even so, Sarkozy must still make further cuts to taxes and social charges on small businesses, to make it more profitable and less expensive to hire workers.

But the real reason the movement to strike out on one's own is growing so slowly in France may be largely due to cultural baggage. For starters, the French are ambivalent about capitalism. An industry ministry spokesman once told me: 'One week, a business magazine waxes enthusiastic about the market and the next week anti-capitalist demonstrator Jose Bove is featured on the front cover.' France needs a homegrown business magazine to champion its successful entrepreneurs.

TAX DODGE Sarkozy pledged to encourage French entrepreneurs, but needs to cut taxes France is also a risk-averse society with low tolerance for failure, a fact that hardly engenders an entrepreneurial culture. A consultant who studies the cultural differences between France and America noted the following differences in playground behaviour between the two countries. In France, when a child falls off a swing and scrapes his knee and runs to mother, she says, 'Don't ever do that again. Stick close to me.' When the same thing happens in America, the child is told: 'Dry your tears, brush yourself off and get back on that swing.'

At the same time, many French parents are still clinging to an outdated dream for their children – to pass the tough examination that leads to lifetime employment as a civil servant.

A frank, frequent dialogue of government leaders with the French people is needed to explain why a dynamic entrepreneurial culture is the underpinning of a modern economy in an era of globalisation.

France is adapting, albeit too slowly. More young people are entering business schools – and recent graduates formed a solid base of support for Sarkozy. In the end, the best incentive to build an entrepreneurial culture in France will come from the prod of necessity, not the cocoon of luxury.