Monday, May 07, 2012

France After Sarkozy: What Can Hollande Do?

Nicholas Sarkozy came to power five years ago heralded as France's New Man who would yoke France to global capitalism by separating it from its social model.  He jogged and he paddled New Hampshire canoes without his shirt.   I thought then that it would turn out badly, and it has.  The new Socialist president François Hollande faces a mess when he steps out of his democratically little car.

Sarkozy was a classic wedge politician, campaigning against France's supposedly grasping unruly immigrants and its allegedly violent racial minorities in 2007 as he had while minister of the interior under Chirac. Sarkozy brought one of America's most repulsive and ineffective ideas into French politics, which is that solidarity damages the economy and retards society's wealth creators, who should rule by natural right.  The practical effects in France have been a minor-key echo of their destructive impact in the U.S.. Sarkozy presided over the piecemeal degradation of two of the cornerstones of French society, its strict, high-quality public schools and its affordable, high-quality health care system. 

Sarkozy had two positive issues. The first was what in this recent campaign he called "la France forte" on the international scene, which he accomplished by abandoning France's Gaullist independence from American foreign policy and by leading the bombing campaign in Libya.  The second was tax cuts for France's wealthy, embodied in his early campaign to hold total taxes to 50% of overall earnings - the famous "bouclier fiscal."  These goals presumed that the world needed more military intervention and political bullying in conflict zones, and that France's main economic problem was that its rich weren't rich enough.  Both problems were patently fake. Five years later, "Merkozy" austerity has maintained Sarkozy's goal of upward redistribution while the recovery falters, France's exports continue to slip, its deficit grows bigger than ever, it has the same low proportion of the small and medium-sized companies that support the healthier economy of Germany, and it remains ruled by a mediocre business aristocracy whose big multinational firms created a net negative number of jobs during Sarkozy's mandate.  But these outcomes were programmed into Sarkozy's politics, whose goal was to consolidate the control of France's neocolonial elites over major economic sectors through both a weakening of socialist domestic authority and the strengthening of France's geopolitical influence not only in francophone Africa but in the emerging economies that increasingly overshadow medium-sized countries like France.

François Hollande systematically rejected Sarkozy's wedge politics, which set up a dangerous, Islamic underclass against wealth-giving elites unjustly burdened with taxes.  Hollande's acceptance speech, given in the provincial city of Tulle where he was mayor and then president of the regional council, stressed reunification and the reorientation of policy around justice and the advancement of the younger generations that are facing the worst prospects for a normal entry into society in recent memory.  He offered a good summary of the challenges he needs to start facing as of today:
Les défis qui nous attendent sont nombreux : le redressement de notre production, la réduction du déficit, la préservation du modèle social, l'égalité entre nos territoires, la priorité éducative, l'école de la République qui sera mon engagement, la transition écologique, la réorientation de l'Europe pour l'emploi pour la croissance pour l'avenir.
The country needs to redevelop the economy, strengthen schools, and protect a social model that supports human development while reducing the deficit and transitioning to a new economy.  This means squaring a circle whose shape appears to be the same to the neo-socialist or semi-socialist party that Hollande helped build as it is to the center-right opposition.

Hollande rejects austerity on both the national and European level, and will undo some of Sarkozy's stupider economies, like the continuous reduction of France's already underpaid teaching force in a nation where educational attainment has slipped to barely the OECD average, and is well below average in science, a traditional strength in France. But Hollande's modest victory, not quite 52% of the vote, means that he will have equally modest support even for a limited neo-Keynesian politics that would combine much bigger short-run deficits for public investment with tax increases on the wealthy (see #15 and #17 of Hollande's "60 Commitments" and on big corporations that create no jobs.   He also inherits from Sarkozy an economy that on the global scale is in decline.

Unfortunately, my comments on Sarkozy's economy of 2007 are still relevant:
The false yet pervasive axiom is that business gives life and public services drain it away. Sarkozy's victory in the [2007] presidential elections will have the ironic effect of showing its limitations. The reason is simple. France is not large or dominant enough economically for it to muscle its way through the inefficiencies of conservative economics as the US has done. American conservatives from Reagan on could indulge in their completely one-sided notion of development - all business, no society - only under special circumstances. The country was already wealthy, had a huge internal market, dominates the global economic system, and had military and financial power clout to win every bargain into which it enters. American financial and political leaders could conceal declining wages, benefits, and quality of life for the economic majority with massive foreign borrowing to fund domestic deficits, similar foreign subsidies to keep interest rates low, and cheap money policies that allowed rising stock and housing prices to create temporary wealth effects for the middle classes that, in the long haul, have done poorly. The Right was also helped by its incessant attacks on both people of color (as degenerate and lazy) and on blue-collar workers (as inflexible and obsolete), for these destroyed the political standing of much of the economic majority, leaving a clear field for conservatives.

None of these options are available to France. It is a medium-sized country with a second-tier economy that has no chance of competing with the US, China, or India through deregulation. No politically imaginable amount of flexibilization will make it like the US, to say nothing of countries where manufacturing workers earn 50 euros a month or less and have no health and safety protections. 
Hollande can change none of this with a kinder, gentler version of austerity.  He will be tempted toward gentler austerity by the powers that be in Europe and by the narrowness of his victory.  But the narrowness resulted from the narrowness of the practical differences between his program and Sarkozy's: the absence of a vivid socialist program meant that twice as many people could vote for Sarkozy as actually approve of his job performance, out of a sense of an insufficient alternative. To overcome the narrowness of his mandate, Hollande will need to do what Western countries can't do anymore - govern like a socialist.

Socialist governance must start by explaining how strong economies depend on strong societies, where a strong society is built on mass benefit and equitable returns for labor, not the crazy skew we have now. He could break out "justice et jeunesse" like this:
  • A massive reinvestment in education, research, and, universities.  Hollande would set a goal for his administration, like getting French students above 510 in all OCED categories, analyzing what this will take, and then funding that, up to say 30% annual budget increases in the first couple of years.  The relation between great educational levels and economic health is well-established, and Hollande needs to build on his proposal for 60,000 new teaching posts (#36) and do something effective and big.
  • Transformation of banking into a utility.  Hollande already called for putting banks at the service of the economy but his concrete measures are weak (#7-8)  He needs to make France a leader in implementing a "Tobin tax" on financial transactions, defining speculative activities that public funds will not support and fully defunding these, insisting on proportional public representation on boards of subsidized banks, and converting bank direction to public partnerships in which stakeholders have direct input into bank decision-making.  Technical changes would evolve from there.  Bank-dominated and financialized economies are not competitive with those that spend more of their money on social development and investment in production (see for example Michael Hudson's talk at the Institute for New Economic Thinking conference in Berlin in April 2012).
  • Explicit racial egalitarianism. Like nearly all societies, France is actively underdeveloping its racial and religious minority populations via second-rate education, housing, health services, you name it.  This policy is in more open contradiction with French republican values of equality and solidarity, but the passivity of the Left has allowed the Right to have a free hand with racial wedge politics. Stratified public services prevents the social integration that maintains mutual suspicion.  The white majority is more inclined to defund public services that are perceived to be mostly for racial others (a mild version of Reagan's war on "welfare queens" always pictured as Black).  The African, Asian, and North African minority withdraw from a state that seems more about harassment and stigmatization than about support and development.  Hollande should set as a goal equality of outcome for all racial and religious groups, and give his administration five years to make major progress - say reducing educational outcomes by 50%. 
There were lots of great pictures of election night, but my personal favorite is of my brother who, having voted as French for the first time, was invited to count ballots in his precinct in Paris's 18th arrondisement.  Vive la république!

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