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How Europe is underestimating the economy of its artisanal heritage

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This week, the European Commission proposed a system of intellectual property protection for regional industries and artisanal products, inspired by the success of the similar protected geographical “beacon” used for wines, spirits and agricultural products.

It will – or at least could – cover products such as Murano glass, Donegal tweed, Limoges porcelain, Solingen cutlery and Boleslawiec pottery. The proposal aims to strengthen the fight against counterfeit products and to provide specific support to SMEs.

But, for others, it is already too late.

In 2017, Poterie Renault fired up its kilns for the last time, having struggled to make ends meet as a business in recent years. Its closure is a contemporary story, just one drop in a larger wave of small business closures. It also illustrates how Europe is not realizing the economic potential of its heritage.

At the head of the company at the time of its liquidation, there were not the founders of the company, nor their sons and daughters, but the fifth generation of Renaults to run a pottery business in Argent-sur-Sauldre , a town of 2,000 inhabitants in the Loire region of France. valley.

Following the company’s compulsory liquidation, Poterie Renault’s stock – of timeless soup bowls and water pitchers and more obscure cider bowls and snail plates, all in varying shades of the brown salt glaze of the maker’s mark – was picked up by wealthy-oriented American retailers. urban consumers.

I caused this sale because I myself was one of these customers, a city dweller seeking to repopulate a kitchen with meaningful products.

This raises the question of whether Poterie Renault would not have run out of money, or found a more willing sixth generation, if it had tapped into this lucrative market sooner.

In French regional markets, these pottery products may not have generated much premium, but it is clear that they did among the customers of retailers who bought the stock.

More importantly, it illustrates how Europe is struggling to fully convert its heritage into economic value.

Today, many companies are valued by investors for their ability to turn know-how and intellectual property into revenue and operating profits.

Heritage, which allows manufacturers to command higher prices than the same products produced in a factory recently built in a distant country, should be considered as a subset of this “intangible capital”.

Like parmesan and Rioja wine

Europe has sought to capitalize on this heritage through designations of origin that protect parmesan and Rioja wine, among other products.

In turn, these designations strengthen producer organizations that help their members. However, these protections do not exist for all European heritage products — for good reason. It may not be wise to create a specific designation to protect earthenware from the Loire Valley, as they may not exist in sufficient mass to do so.

Still, something has to be done. Saving heritage businesses, in the worst case, or increasing their value, in the best case, requires tailor-made support.

Creditworthy companies should be supported with financing and technical assistance. Europe has no shortage of support programs for small businesses. However, these programs are not designed to respect the unique opportunities (connection to premium markets) and challenges (multigenerational family businesses) of legacy businesses.

The enlargement of the European Agricultural Fund for Rural Development, which currently only finances tourism projects, could be a way forward.

Insolvent companies can be acquired through special funds with the aim of restructuring them and reselling them to other companies while respecting their history.

These funds could be managed as public corporations or by private fund managers responsible for managing them in the public interest.

This would avoid a liquidation: the fate of Poterie Renault and the worst outcome since it is a heritage capital that will be lost forever, exhausting at the same time the economic potential of Europe.

Governments can use their budgetary and fiscal levers to encourage these programs. It is not without historical parallels.

England’s large rural estates, run as diversified businesses with farming, ranching and forestry interests, struggled with inheritances and other taxes introduced as the post-war welfare state took hold. shape.

The National Trust was created to take ownership of entire states and manage them in the public interest, generating a credit for heirs that could be used to offset the tax bill.

Although the model has rightfully drawn criticism for diverting resources from the treasury, it has been remarkably successful in keeping these areas intact.

Reallocated to legacy businesses, a legacy program would not be intended to own and operate those businesses indefinitely. Rather, it would be a temporary home for them in the public interest.

Without the liquidity and other measures introduced as a result of Covid-19, the bankruptcy rates of European small and medium-sized companies would have been 9% higher.

With some of these support measures phasing out and central banks already applying the monetary brakes, many business owners will be wondering if they should continue their activities. Giving them an extra reason to do so is in everyone’s interest.