April 19, 2013

Lessons From France

From: The Washington Post

Overload of Regulatory do’s and don’ts stifiling France’s growth, critics say

By Edward Cody

ALBARET-SAINTE-MARIE, FRANCE — Although he is rich with 25 years of experience as mayor of this little town in the wooded hills of central France, Michel Therond gets advice from the bureaucrats in Paris almost every time he opens the mail.

One day’s delivery brings a directive stipulating that the sidewalks must be widened to permit two wheelchairs to cross paths without bumping. Another says the school cafeteria must be made accessible by elevator. Trees must be trimmed of branches six feet up their trunks, the orders go, and only government-certified technicians can change a light bulb on city property.

“We are being strangled,” Therond complained, sifting through a pile of rules and regulations on his desk that he largely ignores — and many of which he does not even understand.

(Read: Seven peculiar rules imposed on the French)

France and its southern European neighbors, such as Italy and Greece, are increasingly being buried in such norms, rules and directives. In the past two decades, the number of legal do’s and don’ts has become so great that businessmen and economists warn that it is smothering growth just as the continent tries to dig out of its worst slump in a generation.

Comparisons are difficult, but among other advanced economies, the United States, Britain and the Scandinavian countries, which have more hands-off traditions of government, generally suffer less from such excessive regulation, according to assessments by the Organization for Economic Cooperation and Development (OECD).

The regulations almost always flow from a desire to meet recent and broadly accepted social goals, such as environmental protection, accident prevention or access for the disabled. But as lawmakers pass more legislation and bureaucrats scribble more implementation orders, specialists say, the result looks like a vast straitjacket holding back economic activity at a time when Europe needs it most.

A report prepared for the French government last month estimated that the country is squirming under 400,000 norms and rules, ranging from orders to school cooks on the amount of boiled egg a kindergartner can eat at lunch — half an egg — to precise requirements on how far mailboxes can stick out from the wall. The directives have cost little towns in France, such as Albaret-Sainte-Marie, more than $2.5 billion over the past four years, the report estimated.

Applied to business with equal bureaucratic fastidiousness, such rules and regulations prove even more expensive in the private sector. They cost the 27 European Union countries an average 3.7 percent of their gross domestic product a year, more than $10 billion in the case of France, and hold back an incalculable amount of new investment, according to the OECD.

“The country is in danger of paralysis,” warned Alain Lambert, head of the French government’s Consultative Commission on Evaluation of Norms.

Therond said the problem has grown acute because France increasingly has a mind-set in which all risks must be eliminated, what is called “the principle of precaution.” “But you just can’t do that,” he objected.

Lambert agreed. “We must temper the principle of precaution to restore to French people their right to risk,” he said on delivering his report.

Pledges of change

Christophe Brunel, who runs the Hotel du Rocher Blanc across the road from City Hall here, said new regulations for wheelchair access, sanitation and fire prevention that come into effect in 2015 would cost him about $1.5 million to carry out, more than the century-­old hotel is worth. The rules, he said, would require him to enlarge corridors and stairways, put in elevators, change doors, update rooms and remodel the kitchen, destroying the charm — and the budget.

“Eighty percent of small independent hotels in France cannot meet these requirements,” he said, suggesting that airport-style chain hotels will be the only lodgings left if such norms are applied.

Reacting to expressions of concern, President Francois Hollande promised last week that his government would carry out a “simplification shock” to reduce the overload of rules and regulations. His prime minister, Jean-Marc Ayrault, called in ministers, formed a committee and pledged a purge. But most French people only smiled, recalling that similar promises have come from all of Hollande’s predecessors since Charles de Gaulle.

A big part of the problem is public demand. After revelations last month that some meat labeled beef in prepared dishes was actually horsemeat, for instance, Hollande’s government was called on the carpet for inadequate regulation of the wholesale meat market. The consumer protection minister, Benoit Hamon, responded with promises of more regulations and tighter inspections.

Another source of overregulation is the “mille-feuille” of government, the layers that start with municipalities, then cantons, and on to inter-communal bodies, departments, regions, parliamentary representation and ministries. Each level plays a role in imposing norms, sometimes contradictory. But with various government bodies providing 23 percent of the jobs in France, talk of reducing the overlap is largely ignored.

The OECD has recommended that just abolishing departments would produce substantial savings. But in addition to boosting unemployment, such a move would rob the central government of its major channel for exercising authority throughout the country since Napoleon’s time, anathema in a highly centralized system.

“We have a territory that is layered like lasagna,” said Maurice Leroy, a rightist legislator who has joined the call for abolishing departments, “which is not an Italian specialty but a French specialty.”

Bureaucratic layers

Towns and villages such as Albaret-Sainte-Marie were encouraged in recent legislation to form inter-communal committees to pool resources on such matters as water purification or recreational facilities. Despite the logic, all the new law did was add another bureaucratic layer, according to Herve Boulhol, who heads the OECD’s French desk.

Therond said the most outrageous directive to hit his desk recently was a March 28 explanation from the departmental prefecture, 20 pages replete with color-coordinated graphics, of how the area’s inter-communal towns and villages are to organize local elections scheduled for next year. The prescriptions are so detailed and arcane, he protested, that he would have to be a constitutional lawyer to understand what the prefecture was driving at.

“Look at this,” he said, fingering the thick sheaf of papers. “I defy you to understand what they mean. Nobody could possibly understand it.”

The directive joined a pile of papers filed away without action by the City Hall secretary, Alain Chastang.

Perhaps more seriously, recently revised rules for building permits have imposed so many additional requirements that construction has been slowed to a trickle since the beginning of the year just as authorities are trying desperately to find jobs for the unemployed, Therond said.

The town’s activities center, for instance, is in need of renovation. But Therond is unable to fix it up because it is on a slope and wheelchair access — with the grade level minutely regulated — would be impossible without a ramp stretching out into neighboring property.

The second-floor cafeteria for Albaret-Sainte-Marie’s 70 students will have to be moved to the ground floor, he said, because the cost of an elevator would be prohibitive for a community of 600 residents with an operating budget of just over $500,000.

Another regulation that brings a rueful smile to Therond’s face has to do with water.

The community, high in the Massif Central hills, is blessed with natural spring water. But inspectors found recently that the town’s main spring had absorbed too much salt from anti-snow treatment on a nearby highway.

No problem, Therond said, we’ll just dig another spring. But wait, the bureaucrats said, experts have to test the new spring for a year before it can be used.

Result: The salty spring water still flows into residents’ homes, and Therond has taken to drinking bottled mineral water to prevent hypertension.

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