Why France doesn't work - critique of French political economics

National Review, Oct 28, 1996 by John Laughland

Whenever there are major protest movements in France, memories of May 1968 resurface. Last December saw massive industrial unrest, and the entire civil service is due to strike on October 17. But any comparison with 1968 unfortunately overestimates the capacity of France -- as of Europe in general -- to undertake radical change in the near future. More probable than a revolution is something far more prosaic: a slump.

To be sure, France is a revolutionary country, and the street is home to more genuine political activity than the political institutions of the state. It is also a well-established cliche --propagated with equal vigor by people on the Left, the Center -Right, and the extreme Right -- to denounce ''the establishment'' and to demand a ''fundamental rupture'' with the existing system.

Such calls are certainly justified. Like the political systems of most other Continental countries, France's is corrupt and sclerotic. A clutch of well-known public figures -- cabinet ministers, senior parliamentarians, mayors, and leading industrialists -- are currently either in prison or the subject of very serious judicial investigation. And other scandals -- such as the revelation, made over three years ago, that Francois Mitterrand tapped the telephones of senior politicians, journalists, and judges -- grind on remorselessly.

These problems are in turn caused by the corporatist structures of French politics. Being in hock to the competing claims of trade unions, trade associations, political parties, the civil service, and the health and Social Security establishments, European governments have essentially the same aim as that of the old Habsburg Empire; to achieve the lowest possible level of mutual dissatisfaction. But a government's inability to rise above such squabbles and act in the name of the common good is severely deleterious of the rule of law, and of any notion of individual responsibility before it.

Unfortunately, because the ordinary Continental European looks to his government for protection -- if he is frustrated with it, that is because it cannot provide protection -- the governments are themselves encouraged to behave in these semi-feudal ways, which are incompatible with the rule of law. Yet the rule of law, being the sine qua non for the free market, provides the only real cure for corruption and economic stagnation alike. Similarly, those who idly call for fundamental change do not generally understand the link between justice in general and the free market in particular. Therefore, by attacking the latter, they show themselves in fact to be in profound agreement with the very system they claim to reject.

To see the fundamental agreement across the political divide, it is important to grasp a great paradox: the process of economic integration in Europe, and especially the proposal of monetary union -- both of which are absolutely central to French policy, and which are often defended with the language of the free market --are not intended to facilitate free trade or to encourage liberalization at all. They are intended instead to create a unified economic ''space'' which, as French and German politicians tirelessly repeat, will enable ''the European model'' to be preserved against the encroachments of ''Anglo-Saxon values.'' Horst Kohler, the chief German negotiator of Maastricht and now a senior banker, told German bankers meeting on the fringe of the International Monetary Fund summit in Washington, D.C., last month that they should stick to ''the German way'' in the face of the globalizing economy, and reject ''Anglo-Saxon standards like shareholder value, transparent balances, and short-termism.''

It is this policy which is suffocating the French economy. During the 1995 presidential election, Jacques Chirac made employment the centerpiece of his campaign. Once elected, he declared that all his policies would be directed to the single aim of fighting unemployment. But from August to September 1995, unemployment among French youth rose by 5.1 per cent; it rose by 1.3 per cent in August 1996 alone. General unemployment now stands at 12.6 per cent, a full percentage point higher than at the same time last year. These figures are the worst since 1993, when the economy was in recession. The government's prediction of an ''economic springtime'' at the beginning of 1996 wore increasingly thin as the year went on until it, like the meteorological spring and summer themselves, simply failed to materialize. Various prominent economists and politicians are thus now comparing France's present situation to that of the United States in the 1930s.

This principal cause of economic stagnation -- French alignment to German monetary policy -- is defended in the name of the single European market and the fight against inflation. But if this were the real aim, Germany is obviously not the only country in the world one might choose to emulate. The U.S., after all, has had low inflation for years, coupled with a dynamic growth, low unemployment, and low indebtedness of which Europeans can only dream.