The End of Paris

Greetings from Paris… undoubtedly the world’s most beautiful city.

The city itself is practically a monument to the extraordinary feats of man. I can’t imagine a better place to soak up the history, the arts, and architectural achievements. I’ve walked long distances in Paris in every direction over the last few days, and the extraordinary buildings never end. The English language doesn’t have words strong enough to express the impressiveness of it all.

Unfortunately, France as a country is worse off than I thought (and I already thought it was bad). It’s destined to decline… faster than anyone can imagine…

First unemployment will rise… then economic growth will disappear. Riots and civil unrest are sure to follow. While Paris seems positively peaceful right now, it won’t stay this way. It can’t.

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I have no timetable for this “prediction.” But the track appears inevitable right now…

“We can’t fire anyone in France,” my U.S. attorney told me here this week. He was talking to a French attorney about it recently:

U.S. attorney: “Well, what if we just declare bankruptcy in France?
French attorney: “Then you’re still responsible for paying your employees.”
U.S. attorney: “Really? Well what if we simply leave the country?”
French attorney: “Then it becomes a criminal matter.”

Right now I don’t have an Internet connection, so I don’t have the facts in front of me.

But the anecdotal evidence is clear… nobody in their right mind would start a business in France right now.

The entire city of Paris is booked up. It is Fashion Week here or something like that, and your editor is severely out of place. We found a Westin for tonight – which will run over $600 for one night. For that, you get a room that is 10 feet wide, with no view. I have to go to the lobby for a wireless Internet connection, which costs me $15 PER HOUR. So I’m writing to you right now without the benefit of the Internet. Apparently, the $600 only covers the room…

The 35-hour workweek is still in place in France. This was intended to alleviate the country's soaring unemployment. The idea was if fewer people worked 50-hour weeks, there’d be more work to do, so more people would get hired. It didn’t work. It scared foreign companies away. France’s best university graduates headed to London.

French workers get six weeks of vacation a year… three years maternity leave (which, I am told, is paid… employers have to keep the position open until the employee returns to work). And among other things, employers reimburse the costs of getting to work.

To enforce the 35-hour workweek, the “employment police” in France come around after 6pm and make sure nobody is working. If they are, their boss can get in serious trouble with the law.

But the biggest problem is that it is nearly impossible, people tell me, to fire someone. This is a major problem. It causes serious distortions in the labor market. It causes companies to NOT want to hire people. And it de-motivates employees, as they feel no threat of job loss.

Service at restaurants, for example, has been abysmal. Twice, we’ve sat in restaurants for an hour, and – with the exception of some French bread being thrown on our tables – we received no service whatsoever in that hour. With service like that, it’s easy to see how lunches can run 2-3 hours, and dinners 3-4 hours in France.

My goal in today’s letter, believe it or not, is not to put down France. My job is simply to report the truth to you, as I see it.

The truth is, Paris is exceptional. It is a monument to the extraordinary feats of humankind. And it is a place you absolutely must visit in your lifetime. There is nowhere like it.

The truth also is, France is in decline. If France were a patient, a doctor would say, “you will die, unless you drastically change your ways.” At this point, the patient is not quite sick enough to listen to the doctor yet. But after spending nearly a week here, I believe France will continue to deteriorate, and will likely face some serious social unrest in the not-too-distant future, before there’s any hope for change.

Regards from beautiful Paris, Steve

P.S. Next week we’ll be back on investing topics… I promise.