France vs. Greece: Culture, Trade & Political Economy

Introduction

The purpose of this brief is to discuss key issues in global trade, with a focus on France and Greece as potential markets. The analysis covers cultural differences and similarities using Hofstede's cultural dimensions, the political economy of each country, trade policy, and currency considerations relevant to a multinational firm operating in both markets.

Cultural Dimensions

Both France and Greece are Mediterranean countries in Europe, share membership in the EU, and have a common Western civilization heritage. Both score moderately high on power distance and uncertainty avoidance. However, France scores much higher on individualism, while Greece scores higher on masculinity. Hofstede does not provide a time horizon score for Greece; France is classified as a short-term time orientation society.

Hofstede identifies five dimensions for analyzing national cultures. Power distance "expresses the attitude of the culture towards the inequalities amongst us." A high power distance country is more accepting of such differences. The second dimension, individualism, reflects "the degree of interdependence a society maintains among its members." In a highly individualistic society, members define their self-image as "I" rather than "we." The third dimension is masculinity/femininity, where masculinity is associated with the desire for achievement and success, and femininity with caring for others and quality of life. The fourth dimension, uncertainty avoidance, reflects "the extent to which members of a culture feel threatened by ambiguous or unknown situations and have created beliefs and institutions that try to avoid these." The fifth dimension is long-term orientation, defined as "the extent to which a society shows a pragmatic future-oriented perspective rather than a conventional historical short-term point of view."

France and Greece both have relatively high power distances. These cultures are generally accepting of inequalities among people, and hierarchy is valued in both. Power in both countries tends to be centralized, and those who hold power are often inaccessible to lower-level managers. This stands in contrast to the American system; both French and Greek managers might expect to deal with their American equivalents in rank, rather than managers at different hierarchical levels.

France is a highly individualistic society, though not as individualistic as the United States. Greece, by contrast, is a collectivist society. In France, the individual's responsibilities lie mostly within his or her immediate group rather than society at large. In Greece, the extended family is the primary social unit, and this results in considerably more nepotism in Greek business culture.

France is a more feminine society, while Greece is more masculine. The French place particular emphasis on quality of life, and this manifests in their work habits. For Greeks, the status of the entire social unit — including the extended family — can be tied to the success of one individual. Greeks are more focused on achievement for its own sake, whereas for the French, achievement tends to be a means to an end.

Both nations score highly on uncertainty avoidance, with Greece ranking highest of all nations on this dimension. Such societies rely heavily on rules, laws, and procedures to reduce uncertainty in daily life. Greeks can be very demonstrative when they fear that things are going to go wrong — which is essentially any time uncertainty arises. France responds to its distrust of uncertainty through education, planning, and preparation.

No score is provided for Greece on the time horizon dimension. For France, the country has a short-term time orientation. Managers can therefore be expected to be results-oriented over the short run, and the culture is oriented toward immediate gratification, particularly given its emphasis on quality of life.

Political economy refers to the economic system under which a country operates. There are three broad systems: command economies, free market economies, and mixed economies. In practice, no pure free market economies exist — only varying degrees of free market influence. Likewise, very few pure command economies remain; most countries operate some mixture of the two. Hong Kong approximates a free market economy, while North Korea represents a near-pure command economy, with Cuba approaching that extreme as well.

France and Greece both operate mixed economies with a relatively high level of state intervention. This intervention takes the form of state ownership of key enterprises and state subsidies for critical industries, particularly in France. The levels of state intervention in both economies are generally higher than in most other Western democracies, though lower than in the majority of countries worldwide.

Political Economy

France ranks 62nd on the Heritage Foundation's Index of Economic Freedom (2012) — considerably lower than would be expected of a Western democracy and more in line with developing economies such as Thailand. Greece scores much lower, at 117th, owing to a high level of state involvement in major businesses. While there is more freedom for small enterprises, SMEs in Greece face stifling bureaucracy. Greece is the least economically free member of the EU by a wide margin and has one of the lowest levels of economic freedom in Europe (Heritage Foundation, 2013).

Free trade is trade free from boundaries — typically understood as tariffs, duties, and other formal trade barriers. For a country, an absolute advantage exists when it produces a good or service better than any other country; leveraging this advantage creates export opportunities. Comparative advantage exists where a country is comparatively, though not absolutely, more efficient at producing something. Countries can often expand their trade by focusing on goods and services in which they hold a comparative advantage. Trade policy is the set of rules, laws, and guidelines that govern commerce between nations.

Both France and Greece are members of the EU, which maintains a customs union among its members. Under this arrangement, there are no barriers to the movement of goods, capital, or people between France and Greece. With respect to trade outside the EU, the bloc seeks to promote free trade through the reduction of external barriers, and both countries have ceded trade policy authority to the EU, allowing all member states to set trade rules collectively.

Regional economic integration occurs when nations in a given region negotiate agreements to facilitate trade among themselves. The European Union is the primary such arrangement governing trade between France and Greece. Both nations share a common monetary policy under the Eurozone and are also signatories to the World Trade Organization (WTO). These common policies mean that there are few, if any, barriers to trade between the two countries.

Conclusion

OANDA. (2013). USD/EUR. Retrieved April 8, 2013, from http://www.oanda.com/currency/converter/