Throughout the last few months’ allegations of fraudulent billing and political pay-offs by Alcatel-Alsthom SA, French commentators have frequently declared that the cases of corruption in France cannot be compared with the Italian problem. As more charges of financial fraud fuelled by incestuous industrial-political relationships float to the surface, however, the assertion rings increasingly hollow. The evidence – Alcatel, Credit Lyonnais, and now Bouygues Telecom SA – that corrupt industrial-political collusion in France is systemic rather than episodic seems to mount daily, blurring differences between the two countries. Whatever their various nuances, the fundamental discovery of both the Mani Pulite – Clean Hands – investigation by the Milan judges and the separate investigations conducted by individual French magistrates is the same: the established system condoned and even encouraged industrial fraud to achieve political ends.

Corruption

In Italy, political bosses claimed party contributions from a wide range of Italian industrial companies as the price of government largesse in the form of state contracts. Alcatel and others have been alleged to have made party pay-offs in France as well, while the balance of French corruption takes the form of government-sanctioned overbilling of companies it controls. The idea, said former French minister of industry Dominique Strauss-Kahn on Europe One radio Monday night, was to wink at overbilling, such as that from Alcatel CIT to France Telecom, because it was a way of channelling funds to government-favoured industrial projects. With extraordinary candour, M Strauss-Kahn said France regularly used such funding mechanisms to help high-tech industries in competitive markets. Incidentally, phony billing mechanisms circumvent anti-subsidy regulations enforced by the European Commission. Strauss-Kahn’s comments reinforce the notion that individual investigations of French corporate financial corruption only ignore the greater, more intractable problem of a long-cherished tradition of cozy government-industrial collusion. Says Yves Meny, professor of political science and expert on corruption of the elite class in France, None of the corruption scandals have yet called into question the institutional system or what I like to call a type of ‘incestuous osmosis’ between the political elite, the public administrative elite and the industrial elite. The system resists because the political, economic and administrative interests to preserve it are deeply entrenched. Everything is controlled by the happy few and all of these directors and presidents are part of the same elite, they went to the same schools, and they are not really responsible [to anyone], Meny said. The elitist nature of those schools, the grandes ecoles, cannot be disputed: French universities handle about 1.5m students a year while the grandes ecoles educate only several thousand. While they are still largely focussed on their original objective of training for public administration, over the last 15 years, more and more of their graduates that become government functioonaries are leaving for private industry at younger and younger ages. Thus, the French system is more and more characterised by a coming and going between public administration, politics and industry, Meny remarks.

By Marsha Johnston

He notes, for example, that Prime Minister Edouard Balladur was a consultant for Alcatel while he was a Parliamentary deputy, between 1988 and 1893, earning about $20,000 per month on the side. Balladur was also at one time manager of an Alcatel-owned company. Meny said a study by one of his colleagues of the top executives of the 100 largest French companies found that 50% of them were former government functionaries. It is a sort of small, old boy network of extremely competent, brilliant people, but it is very national and has great difficulty in adapting itself to the internationalisation of the world economy, Meny said. The political scientist, who is teaching at the

European Institute for Political Studies in Florence, notes that although French industry has changed from a bunch of government-owned companies to privatised companies, they remain profoundly nationalistic, even if they operate in international markets. These companies, which include the lion’s share of France’s largest, attempt to conserve their national champion status by restricting the foreign investment in their equity, for example, he said. In France, one third of a company’s total capital will be controlled by 15 or 20 large shareholders and the rest distributed among thousands of small shareholders who have nothing to say about the strategy of the company. Those 15 or 20 principal shareholders are always shareholders in each others’ companies, Meny explained. If you look at Elf’s capital structure, for example, you’ll find Renault, Matra, etc and if you then look at Renault, you’ll find Matra, Elf, etc. They are there to keep out undesirable foreigners who might take control of the company and try to direct its strategy, he said.

Like Napoleon

Admittedly, Alcatel is something of an exception in that it counts two foreigners among its major shareholders – ITT Corp and Fiat SpA. So far, however, any objections from ITT chief executive and board member Rand Araskog to Pierre Suard’s continued presence as Alcatel’s chief executive have not produced his dismissal. In France, as Meny notes, boards of directors are there to demonstrate solidarity with the chief executive and don’t dare take over his post. Suard is said to be completely characteristic the type of manager who comes from the grandes ecoles – extremely autocratic and with strong sympathies for the right-wing RPR. He is said to have run Alcatel like Napoleon: it was only some time after the company’s troubles began that Suard ins tituted a more democratic system, with a management board composed of officers from various divisions. His links to M Balladur are evident, since it was Balladur, as Minister of the Economy, who put Suard in as head of Compagnie Generale d’Electricite SA (later Alcatel) in 1986, before it was privatised in 1987. It was during Suard’s tenure also that Balladur was paid as an Alcatel consultant. Says Meny, Of course nobody poses the question because it’s not considered polite, but one could ask oneself what was the nature of the relationship [between Suard and Balladur]? The established system certainly helped Alcatel get to the top echelons of the telecommunications equipment market, but the pressures on that system from the globalisation of the world economy may make Alcatel a test case for the arcane French system’s continued viability.