"Sweden: Image and Reality"

Lane Kenworthy has "surprises for the left" and "surprises for the right" about Sweden:

Sweden: Image and Reality

Comments

[hari]

I think he gets it right specially on the comparative analysis with US. Important factor is labour union strength and influence overtime in establishing remunerative salary scales by sector. Education and adult education and technical
schools are well developed for adaptation to the globalized world today. Childcare is fundamental to allow parents to share domestic work and leave during pregnancy, as well as kindergarden in every district.

The society is based on social democratic principles but still competing in a globalized market place.

[Barkley Rosser]

Looks accurate to me based on what I know.

[Goldilocksisableachblonde]

Is it likely that the preferred model for advanced economies to follow in coming years will be based on the systems of countries like Sweden , Denmark , Germany , or even post-WWII U.S.?

It seems likely to me , and from a long-term investment perspective , I'd bet on countries that move more quickly in that direction as a means of recovering from the current economic crisis , as well as betting that countries currently most like those above will weather this storm better than others.

On the other hand , I'd bet against those which adopt policies that dig themselves further into the Reagan/Bush/Thatcher rathole that created the mess we're in today.

[Bupa]

hari,

We've bumped heads on several posts recently. This time I can say I agree with the article and your comment.

Unfortunately, I don't think the Swedish model is replicable all over the world. Need high quality education, institutions of governance, low level of corruption, high sense of community. Might work soon in the Baltics but not the Balkans (at least not for a generation or so). Could work in the US but would require a 21st Century FDR following the equivalent of the Great Depression to put us on that course.

[Bruce Wilder]

Sophie Tucker was supposed to have said, "I've been rich and I've been poor: rich is better."

Maybe, we could adapt that to, "I've been to Sweden and I've been to America, and Sweden is better."

[Gene O'Grady]

Why is a "strong work ethos" a surprise for the left? Or what left is a surprise for?

Is the right that gave us Bush and Cheney, whose combined hard work basically consists of a couple years of union labor that Cheney did back in Wyoming after he flunked out of Yale, really the champion of a strong work ethic?

How many academics do less work that Condi Rice did as she made a career by who she could network with?

[HellKaiserRyo]

Sweden has been lying about its employment/unemployment:

according to wikipedia:

"However, as of August 2006, roughly 5% of working age Swedes were unemployed, over the government-established goal. However, some of the people who cannot find work are put away in so-called "labor market political activities" (or AMS-åtgärder) - activities whose only purpose is to reduce the headline unemployment number."

[BJ Feng]

"This may be too short a time period to fairly evaluate the possibility that inequality of longrun income is no greater in the United States than in other countries. Ideally we
would want to examine mobility across the entire working career of a cohort, which would amount to roughly 40 years. Given existing panel data sets, it is not possible to do that. It is, however, possible to examine a period of nearly 20 years, covering the 1980s and 1990s, for three countries: (West) Germany, Sweden, and the United States."

The timeframe in the study is very short, under 20 years. It also covers a period where Sweden was homogeneous, only during the past decade has immigration in Sweden reached levels comparable to the United States.

I think a huge factor is assimilation. Sweden is successful in great part due to the work ethic and high value placed on education. Although people don't need to work in order to enjoy a decent lifestyle thanks to the social benefits, people still do, and a large number of people are highly educated. Will the recent immigrants adopt those values? There are complaints that they're not doing so to the extent native Swedes want them to. We will soon see if these concerns are overblown or legitimate.

[Nicolas]

"A strong work ethos", "Embrace of globalization", "School choice", "Partially privatized pensions". I don't know who on the left is supposed to be upset about that? If it works, then why complain?

One point though, on the Sweden's heterogeneity. Institutions are very persistent over time. One could think that Swedish social democratic institutions were invented at a time of broad socio-political consensus when the population was not too heterogeneous.

In the US, on the contrary, historians think that redistributive institutions always had a harder time to develop because the white people in power knew that their money would mostly go to poor African American.

[hari]

Recent immigration has caused social problems. However the central ethos of the governing political setup - now with a +35yr old Conservative PM - is not to dismantle the social democratic institutions but to privatize state institutions on basis of consensus. This is on-going and will most likely provide incentives to withdraw role of state in the business of employment generation and so on.

Don't forget there is a Nordic Council (since God knows when!) which may finally replicate what was once the Benelux Union based on a single currency after WWII. Denmark, Sweden, Norway and Iceland are not in the EMU (ie. Euro single currency market). Current hi fi credit crunch and its fallout may impact, sooner than later, Euro being adopted across the Nordic region for financial safety. At that juncture, I'd think Nordic Council may become a forum for further integration based on similarity of national index(es)including language (except Finland), customs and social system.

[Across the Pond]

One thing about Swedish heterogenity: While Sweden has been very homogenous for a long time, the recent decades of immigration hasn't really changed society as much as one could think.
Neither left nor right have gotten very defensive about need to actively preserve a Swedish way of life (something that cannot be said for the other nordic countries).
Sometimes I think there's something about the very un-emotional, logical consensus culture we have that are astonishingly good at stamping out diversity in opinion... Which extends to recent arrivals to some degree.
Pretty boring if you happen to like heterogenity for it's own sake, but usually frightfully efficient!

[Lafayette]

Interesting article. Sweden is often sited by the French Left as "THE way to run a country with solid foundations in social fairness".

And yet, one remark can be made regarding the article: One needs to look hard and long; but when found (here), ILO data of comparable employment rates show that, for the decade 1995/2005 (the latest available), the average unemployment rate in Sweden averaged 2.5% more than the US.

This does not mean that the "Swedish Model" is somehow out of whack. The historical Gini coefficient, since WW2, compared to the US shows clearly that Swedes are better off than Americans in terms of the fairness with which the economic pie generated is being shared. (See the comparative Gini coefficients here. Note the US trend line in Yellow and Sweden's in Light Blue.)

Still, for that fairness, they pay a price with a significant unemployment premium.

The trick then seems to be to have a high level of fairness (meaning low Gini coefficient) consonant with a low level of unemployment.

That bit of magic is not easy. (Maybe we can do it in the US with smoke and mirrors?)

[Lafayette]

Hari: Current hi fi credit crunch and its fallout may impact, sooner than later, Euro being adopted across the Nordic region for financial safety.

Interesting comment. Could you explain further?

One would think that being outside the Euro, given the recent surge in its appreciation, would be preferable for the countries mentioned. (Sweden and Denmark, at least ... I don't know about Norway, with their oil priced in dollars.)

[Barry]

Lafayette: "Still, for that fairness, they pay a price with a significant unemployment premium."

*Assuming that it's comparable* (since the US fudge the living h*ck out of unemployment stats), it's still preferable, since this comes with high quality public services and a good safety net. Somebody working part-time at Wal-Mart is employed, but ...

[Hanna]

Well, we have got our share of thatcherism here, too, with privatisation, deregulated markets, increasing income gaps and so on - although from a less unequal starting point than in other countries.

Nicholas:

"'Embrace of globalization', 'School choice', 'Partially privatized pensions'. I don't know who on the left is supposed to be upset about that?"

Because it makes the rich richer at poor people's expense. We had a financial crisis and a bank bailout in the 1990s similar to the one in the US right now, which some have attributed to the deregulation of capital flow, just as with the Asian crisis later that decade.

Productive and profitable industries have been shut down because their owners have found it even more profitable to move production elsewhere.

"School choice" has created segregated schools since poor parents have other things to worry about than finding good schools for their kids. "School choice" has also meant a surge in tax-funded confessional schools, including fundamentalist ones where kids can't even get away from their parents' religion while at school.

Partially privatized pensions forces all of us to invest some of our pension money in the stock market, where the richest reap the highest profits. It is also an expensive system, since private funds charge higher fees than in the public pension system.

These are poor examples to follow from an egalitarian perspective - whether they have increased or decreased Sweden's growth or employment level remains to be shown.

[Lafayette]

Barry: Assuming that it's comparable* (since the US fudge the living h*ck out of unemployment stats),

The stats are comparable, according to the ILO massaging that's been done.

Somebody working part-time at Wal-Mart is employed, but ...

I get your point and its a good one. (Maybe this is one reason that WalMart opened and closed shop in Germany in fairly quick order. Because the Germans would not put up with such a company. WalMart certainly did not get the retail numbers they had hoped for.)

The US is FAR-FAR-FAR from having comprehensive Human Capital Investments (mind you, I must avoid the root-word "social" to Americans, since it is associated with a terminal disease ;^) that is even remotely comparative to Europe's.

But, there is damn little that can be done until Americans wake-up and elect a government (PotUS and Congress) that will do its bidding in the matter. If Europe has lower Gini-coefficients (meaning better/fairer distribution of the Economic Pie, does anyone really believe it was because BigBusiness lobbied for it?

I cannot, for the life of me, understand why American residents put up with such piss-poor public service expenditures, particularly in such key areas as Health Care and Education. Believe me, the same American, resident in Europe, takes to the Health Care here with great willingness.

What, pray tell, Blessed Logic regarding Public Services prevails in America that is found so throughly lacking credibility in Europe? That explanation REALLY 'N TRULY would be interesting, given that America was founded and initially populated by Europeans.

[anne]

Hanna:

Partially privatized pensions forces all of us to invest some of our pension money in the stock market, where the richest reap the highest profits. It is also an expensive system, since private funds charge higher fees than in the public pension system.

[Please explain.]

[nick gogerty]

I have lived in 7 countries have an undergrad anthropology degree and an MBA. I lived in Sweden and Denmark. The are great. If you want to see how they compare on health, social, economic metrics, compared to other countries. check out www.nationmaster.com

[Hanna]

Anne:

Well, in the stock market, those who can afford to access information about price fluctuations there make the most money per invested dollar. The time it takes from your decision to sell stocks until they're actually sold in the beginning of a stock market crash also depends on which investment deal you can afford. Information is skewedly distributed and so are stock trading conditions.

About fees, check out this article by Dan Josefsson.

[Peripheral Visionary]

Overlooked, as always, is the demographic trick that has been used to afford the generous social systems of Europe: dropping the birth rate down to below-replacement levels. When the birth rate is dropped, it empties out the population of children, which combined with an initially low population of elderly, reduces the number of dependents relative to the number of workers. That frees up resources that were originally spent investing in the next generation, allowing for more investment in government and social structures.

For a corporation, it is the equivalent of emptying out the R&D department and shifting everything to manufacturing and sales. Profits soar and there is extra money for higher salaries, but how long will it last?

And the question, for Europe, and especially for Sweden, is what happens when the current generation retires and there is no generation to replace them and pay the taxes that fund their retirements?

[Lafayette]

Laff: What, pray tell, Blessed Logic regarding Public Services prevails in America that is found so throughly lacking credibility in Europe? That explanation REALLY 'N TRULY would be interesting

How prescient of Mark Thoma, who evidently saw this question coming.

If you look through Lane Kenworthy's work at the University of Arizon, here, take note of the first paper listed: "Americans' Social Policy Preferences in the Era of Rising Inequality"

My question regarding prevailing beliefs in America is answered. Just look at the data charted at the end of the paper. You will find that ample evidence exists in SUPPORT of more Human Capital expenditures.

It now remains for a Clever Politician to articulate how that should be done, what are the benefits, and when should they become apparent. To my mind, that's a winner.

But, I do mean articulate. Not the populist electioneering that Dean employed a good many years ago. The facts are there in the data, showing that Americans are keenly interested in Public Services, particularly in Education.

Let's hope that presumption is exploited by the Dems. But, it will take more than hope for it to happen.

[Barry]

Posted by: Lafayette
"What, pray tell, Blessed Logic regarding Public Services prevails in America that is found so throughly lacking credibility in Europe? That explanation REALLY 'N TRULY would be interesting, given that America was founded and initially populated by Europeans."

I've seen studies cited a while back on some econoblogs which pinned it on race - a state by state analysis of welfare/social safety net levels found that % of nonwhite residents was the biggest driver. And that this dominated things like average state income.

[hari]

@ Lafayette -

Norway (like Swiss) have a separate deal in great detail on the single-market and EMU. Only difference, in my view, they're not members of the club.

Sweden may be resorting to reserves in Euro, me thinks. They're already discussing how to avoid another referendum on Euro; but do it another way (may be)....(don't ask me what other way!). I suspect it has to do with their *safety net* facilitation principally under ECB umbrella.

When we did the Maastricht Treaty, I recall the discussions were centred around the political economy of 21 cent. - not only national macropolicy concerns per se. The risk/reward was surely part of the give and take before introduction of Euro/ECB almost decade ago. It was principally UK that objected and didn't believe Euro would fly! The decision was fundamentally political. The Nordic countries are now coming around to accept that initial decision - even Denmark which opted out is trying to find a solution.

Global Oil price (inflation) is, in fact, cushioned by rising Euro/Dollar spot price. Norway's SWF is moving into Euro zone, I am told.

[hari]

Martin Feldstein is dealing with Euro/Dollar spot price of oil...and US deficit...on another thread.

[teme]

"And the question, for Europe, and especially for Sweden, is what happens when the current generation retires and there is no generation to replace them and pay the taxes that fund their retirements?"

Sweden actually has relatively healthy demographics, fertily rates near replacement rate and net migration...

[Paul G. Brown]

Why is 'strong work ethic' a surprise for 'the left'?

I always thought that it was a conservative argument to assert (Hayek) that high levels of welfare and income taxes reduced the desire to work?

I always thought it was the progressive argument that collective goals provided at least as much motivation as individual goals, so the conservative 'work ethic' argument was misguided.

[Holly W.]

Echoing others, I was shocked to see that Sweden's strong work ethos is supposed to be a shock, especially to "the left."

Isn't it a tenet of the left the idea that most people want to work and contribute to their own and society's well-being? Earning a living and providing for one's family are great sources of pride for most folks I know, whatever their political leanings.

The argument tends to be over the amount of reward deserved for working at various jobs, not whether people should work or not.

[Lafayette]

PGB: Why is 'strong work ethic' a surprise for 'the left'?

You've evidently never been to France.

They introduced the 35 hour work week, down from 39.6 about ten years ago, to (supposedly) "create employment". Just the opposite happened -- it torpedoed employment creation.

The Idiot Left in France foolishly thought that work was a defined quantum. Thereby, reducing the work-week would automatically provoke an increase in the numbers employed. Yeah, right ...

In fact, this could have happened. Maybe. But, something got in their way. That something is called China. Not a small "something", you might think.

The French Left, typically bereft of any notion of competition, as does most of France up till recently, did not figure on Chinese imports displacing un- and semi-skilled labor. Jobs started dislocating in droves to the near-East (Poland, the Czech Republic, Romania, etc.) and to the Far East.

A "strong work ethic" is the willingness to work. For as long as I have been in France, more than a few decades, I've never seen anyone genuinely dedicates wholly to their work. The workplace is not the central nucleus of French society. It is just a necessity in order to obtain sufficient funds to do what one really likes to do.

Having said that, I've come to the conclusion that they may in fact be right. Whilst Americans bear down on their jobs, sacrificing "quality time" with their families, to obtain more money than they really know how to spend (except upon the latest gadgetry), the French do spend their quality-time in family.

French women are highly fertile. One might ask why. No woman, I think, would want to have a large family if she did not think that such was a great benefit to all concerned, including her husband. She presumes that her effort will be worth it -- not just for herself, but everyone.

The family is the base nucleus of French society. To the point that everything beyond that nucleus is terra incognita. One ventures forth carefully, always sure that the family is there to return to in case of need.

Not quite the American Atomic Family, I should think.

[Farrar]

I'd interpret the French work ethic or lack of it a bit differently than Laff, altho he seems to have more direct experience with French industry than I do.

Bear in mind the numerous studies that show French workers being highly productive when they're on the job. It's just that they work fewer hours than many others, and perhaps as Laff notes, rightly so.

The difference between the French and some others, such as the Swedes, seems to be the long (even before Marxism) and often violent (read Zola) history of class conflict in France, which is still in the mindset of most French workers.

Unfortunately this attitude is usually confirmed and even exacerbated by the attitudes and behavior the the French managerial class.

I can't cite any studies on this. It's just my cumulative observation over 30 years as a card carrying member of the French Socialist Party and former member of the CGT

[Nordic Mousse]

"ILO data of comparable employment rates show that, for the decade 1995/2005 (the latest available), the average unemployment rate in Sweden averaged 2.5% more than the US"

Indeed, but for SE and FI one must consider the USSR collapse, which was still having a massive effect on our economies. It is very difficult to recover from something like that

[Nordic Mousse]

"It is just a necessity in order to obtain sufficient funds to do what one really likes to do. Having said that, I've come to the conclusion that they may in fact be right"

Of course they're right, Laff. How could they not be?

[anne]

Nordic Mousse, an interesting point that I would never have considered. The weakness of the Russia was important.

[Lafayette]

Farrar: The difference between the French and some others, such as the Swedes, seems to be the long (even before Marxism) and often violent (read Zola) history of class conflict in France, which is still in the mindset of most French workers.

Ah, yes, what would France be without Class Conflict? People would stop reading Zola, for sure. Nostalgia will no longer be what it use to be.

If France wants to remain entrapped in its history, then that is up to the French to decide. There is rarely a debate that arises without some genuflecting to an historical precedent.

This anchors the French in the past, when they are obliged to live in the future. It also justifies their reactionary attitude to change, when change is the only recourse to an industry ossified by immobility and state interference.

Unfortunately this attitude is usually confirmed and even exacerbated by the attitudes and behavior the French managerial class.

True enough, I can agree. But, that conflictual attitude must end. That is, the continual bickering between "US" and "THEM". What a great waste of time and breath.

All personnel in a corporation must be allowed to benefit from its profits. The only way that can be achieved is by personnel becoming owners of equity shares in the company. In addition -- not in lieu of compensation. There is no shame in profit making, especially when it goes into your own pocket.

French industry, in my experience, is far too heavily hierarchical. The consequence of which is people unwilling to take risk in order to avoid blame. Blame can get you shown the door in very quick fashion. Losing your job today is tantamount to condemning yourself to lifetime mediocrity, especially if one is over a certain age.

Most French actually think their government is responsible for their well-being; because somehow, miraculously, they think, the state can do what it wants with the economy. Meaning they haven't the slightest notion of how an economy actually functions.

It has been amusing to see various governments, of the Right and the Left, proposing this or that to get over the "French malaise". One must suppose that the French are quite incapable of coping without some sort of government guidance or direction.

May I suggest that they be given the chance to do so? By having attributed to them as much individual responsibility as possible. They might even surprise themselves by showing more individual initiative.

And, they will learn that to fail means that one learns by mistakes and tries again and again till one succeeds. There is no shame in failure. And by succeeding, most importantly, they become masters of their own destiny.

[german_reader]

Yeah, Sweden! One of the great punching balls for the free market illusionists from the wonderful U.S. of A.. They can't be successful. They are "socialists", even more than most other "socialist" countries from good old Europe.

You might have read a lot about hidden unemployment, the unsustainable nature of their "socialist" welfare state, stagnant populations or the homogeneous nature of Scandinavian countries, which make comparisons to the soooo heterogeneous United States imposible. At least in regard to Sweden none of this true or in the worst case not more than in the U.S..

Here is a nice paper from the Washington based Center for Economic and Policy research, which compares hidden unemployment in Sweden and the U.S.:

http://www.cepr.net/documents/publications/sweden_unemployment_2007_06.pdf

Their main findings:

"This report finds the U.S. unemployment rate would be 13 percent using a methodology frequently cited in critiques of Sweden’s “real” unemployment rate. The McKinsey Global Institute's calculations of Sweden’s "de-facto" unemployment rate as 17 percent — more than three times the official rate (2004) — has been cited in news publications such as the Financial Times and The Economist.

Using McKinsey’s approach and unofficial definitions of the “unemployed,” CEPR’s report calculated that the U.S. unemployment rate for the same year would be 13.8 percent (more than double the official rate of 5.5 percent). If the U.S. prison and jail populations are also included, something that McKinsey did not do in their original study of Sweden, the U.S. unemployment rate would rise to 15.2 percent.

A better approach for making international unemployment comparisons is to use the OECD's standardized unemployment rates. For the first quarter of 2007, the OECD measure puts the U.S. unemployment rate at 4.5 percent and Sweden’s at 6.7 percent. "

All Scandinavian countries have much lower public debt levels than the United States. All have positive foreign accounts. Denmark and Norway have significantly higher employment rates, Sweden and Finland ( o.k. only partially Scandinavian ) very similar employment rates. Sweden has a fertility rate of 2.0 children per woman. That's very close to the replacement rate ( 2.1 ). The Swedish population is growing. On top of this Sweden has one of the lowest infant mortality rates in the World ( 3.1 per 1000 live births ). Much better than the U.S..

The share of foreign born population is close to 13%, nearly identical to the U.S.. If you count only legal immigrants it's significantly higher than in the U.S.. I think one fact, most Americans are not aware, when they talk about their country, is that the U.S. has so many illegals ( around 12 million ), because it has so few legal immigrants. The share of legal immigrants in the U.S. is only around 9% of the population. That's below many other rich nations. Countries such as the U.K., France, Germany, the Netherlands, Austria, Canada, Australia, Belgium, Switzerland and ( bingo! ) Sweden. America is great in cultivating its collective myths. Too sad that many of these myths are simply not true.

[cm]

Lafayette: As for Wal-Mart, it appears the wisdom in Germany is that it could not compete on superior logistics and being the big dog. Another, probably comparatively marginal, factor was that they had issues with catering to local customer preferences, rooted in suspected arrogance (US centrism) and failure to do the necessary level of local market research.

In the US, Wal-Mart established itself as the big player at a time and in a place when its competitors did not have top-of-the-line logistics. Against several European "Wal-Marts", it's difficult to attain a similar position.

Wal-Marts position is perhaps one that is more easily defended than attained.

[Lafayette]

cm: failure to do the necessary level of local market research.

Possible, yes. But I wonder if there was not something else afoot.

The "discount market" in Germany (Lidl, Aldi, etc.) has reached significant proportions, far higher than elsewhere in Europe - twice that of France. (Some where around 40%).

I think WalMart said, "Well, we can do that" -- and they can easily meet discount prices with massive purchasing and logistics. So, if they had the right prices, "local market research" should not be that important.

(Besides, the goods are same wherever. Lidl sells with dominant German language packaging in France (the important part is in French, but miniscule). It does not prevent Lidl from being well implanted throughout France. And, this surprises the hell out of me -- given France's willingness to go orbital about using the French language in retailing.)

So, I am retained by the reasoning that the German consumer sentiment, perhaps regarding the Iraq war, was a principal part of the refusal to shop at WalMart.

I certainly would like to think so. Lead-head may have thought America would be unscathed by invading Iraq. Afterall, dimwit would have said, "Hey! Who gives a damn about a tin pot dictatorship in the Middle East?"

It would be nice to think that anti-American sentiment in business would show through as a result.

[Farrar]

Laff
"If France wants to remain entrapped in its history, then that is up to the French to decide. There is rarely a debate that arises without some genuflecting to an historical precedent."

Borrowing Anne's technique -
If the USA wants to remain entrapped in its history, then that is up to the Americans to decide. There is rarely a debate that arises without some genuflecting to an historical precedent.

What's to be done? Cultural Revolutions à la Mao Tse Tung?

[anne]

German Reader:

Yeah, Sweden! One of the great punching balls for the free market illusionists from the wonderful U.S. of A.. They can't be successful. They are "socialists", even more than most other "socialist" countries from good old Europe.

You might have read a lot about hidden unemployment, the unsustainable nature of their "socialist" welfare state, stagnant populations or the homogeneous nature of Scandinavian countries, which make comparisons to the soooo heterogeneous United States impossible. At least in regard to Sweden none of this true or in the worst case not more than in the U.S..

[Precisely; and I had never given enough attention to the growth limitation on the Nordic countries of an especially weak Russia.]

[cm]

Lafayette: While it is probably fair that there was a certain anti-big-"American"-business aspect to the Wal-Mart reporting, I believe it was a rather marginal factor in their business failure. Even in Germany, money trumps ideology in most cases.

One other thing that Wal-Mart probably didn't have in Germany was the same level of clout with officials that we can reasonably assume it has in the US, and which is probably a factor in its success. Also it couldn't (immediately?) benefit from the "no way around Wal-Mart" factor.

[reason]

cm...
As someone who had relatives working for Walmart Germany, perhaps I should be able to help with this. But I don't think I know the answer. I do know that Walmart tried to import the US business model as it was, and struggled. Part of the problem was no doubt an inability to contain labour costs to the extent they could in the US. The physical environment in Germany, I'm sure also worked against them - German cities as just that much more walkable than American ones. The restrictions on trading hours may also have counted against them.

[Lafayette]

cm: One other thing that Wal-Mart probably didn't have in Germany was the same level of clout with officials that we can reasonably assume it has in the US

reason: I do know that Walmart tried to import the US business model as it was, and struggled. Part of the problem was no doubt an inability to contain labour costs to the extent they could in the US.

Let's try comparing opposites, that is, WalMart's implant failure in Germany and Lidl's (a German retailer) implantation in France. That is, comparing WalMart's failure with Lidl's success. (Both are family run businesses, btw, and both have resulted in two of the world's largest fortunes as noted by Forbes.)

Some characteristics of Lidl:
*Lidl competes, like WalMart, with lower-priced products with a mix of branded and unbranded products (95% unbranded, 5% branded) of a supermarket (food) variety. *To distinguish itself from others (such as Aldi from Germany but also in France, as well as the two discounters that were defensive plays by the two major supermarket chains), Lidl introduced cheap household gadgets.
*Lidl has small outlets, limited number of products (meaning only the essentials and normally only one unbranded product per category. Household appliances and apparel offerings are set out once a week and change weekly. (A significant number my Chinese household gadgets are defective after about a year.)
*Sales are promoted by sales advertising campaigns in national newspapers (typically whole inserts), principally the Sunday newspapers, which have the largest distribution.

WalMart is not located in France. They had decided to start with Germany and the UK. In Europe, their expansion strategy ended there.

WalMart concentrates its outlets in American-like shopping malls; which, in Europe, are arranged around the large, populated cities. Lidl does not really compete there, situating its much smaller outlets in the smaller communities, where it's major competitors are the supermarkets (with branded products) and other discounters.

WalMart can succeed, it does so in the UK. If it does not succeed, the problem MUST of a country-specific nature. And, I don't think cheap labor costs is the ONLY aspect. Lidl reduces overall costs by having staff both man the checkouts and stock the shelves. It can run a small store with, at most, three people at any given time -- all working at near minimum wage, except for the store manager.

One specific attribute of Lidl is to also rotate special other-country products - having specials on Italian foods one week, Greek another week. The national French discount chains remain wedded to local French producers and well-established other-country European-wide branded products.

The key is that branded products sell on brand name only. It is often very difficult to distinguish between branded and unbranded products, since they are often manufactured by the same suppliers. So, for instance, Nestle's will produce both branded and unbranded versions of, say, "fitness" breakfast cereals.

As for the household gadgets; like WalMart, they are almost exclusively sourced in the Far East. European produced vacuum cleaners, for instance, trade at a price premium of almost 100%. Once household brand-names in France have shed all manufacturing locally, and now sources from China, maintaining only sales, marketing and after-sales services of its branded products.

[Lafayette]

Nota Bene:

I cannot possibly refrain from reiterating the response of the French Left to the outsourcing phenomenon causing massive unemployment at the un- and semi-skilled manufacturing level.

If it gets back in power, it promises to simply pass a law forbidding national companies from shutting down manufacturing in France and sourcing from abroad. Which shows how terminally ignorant the Left can be about how economies function.

Having said that, the Left still represents about half voter sentiment in France.

Comments on this comment (highly) welcome ...