Home > Uncategorized > Curb your enthusiasm: Macron is just the beginning of a new fight for France and Europe

Curb your enthusiasm: Macron is just the beginning of a new fight for France and Europe

from Mark Weisbrot

The media response to the French election reads like some people had too much cannabis. From the first paragraph of a front page news analysis of the New York Times: “It was globalization against nationalism. It was the future versus the past. Open versus closed.”

Let’s not get carried away. It’s great that Marine Le Pen, whose National Front party with deep racist roots that go back to French collaborators during the Nazi occupation, as well as French colonialism, was defeated by a large margin of the votes cast. There were no signs that she had any realistic chance of winning, but people were understandably nervous after the Brexit and Trump votes. On the other hand, her 34 percent of the vote was about twice that of her father in 2002, who ran against the conservative Jacques Chirac. And abstentions this time were higher than in any French election since 1969; together with blank or spoiled ballots, 34 percent of the electorate chose none of the above.

Most importantly, if the “global open future” of France and Europe is going to be like the recent past, then the National Front and similar movements are still going to have some growth potential. Because it is primarily the economic policies of Europe, including France, over most of the past decade, that have allowed the National Front to progress from a marginalized boil on the body politic to what is now treated as a legitimate, serious opposition party. 

And the President-elect, Emmanuel Macron, shows little sign that he is going to challenge these failed economic policies. His campaign program said he would cut 60 billion euros from government spending over the next five years. This isn’t that large — about 0.5 percent of GDP for this period — but the government would need to actually increase spending in the short run if it were going to do anything to bring down mass unemployment. Not to mention the investment needed to reduce greenhouse gas emissions, provide the education and training that displaced workers need, or reverse the deeply unpopular, and unnecessary, pension cuts that were made in the last seven years.

Sadly, most of the public economic debate keeps people from understanding these problems, their causes, and solutions. The conventional wisdom as reported in the media is that France has too much debt to do anything that would require more government spending or borrowing, since its net public debt is about 89 percent of GDP. This is still far above the limit imposed by the European Union’s Maastricht Treaty, which is set at 60 percent of GDP.  But aside from the fact the majority of European Union countries are well above the limit, the Maastricht rule is an arbitrary one.  What matters much more than the debt as a percent of GDP is the burden of the debt.  For a country that is not in trouble, like France, there isn’t a problem of rolling over bonds that come due. The relevant figure is therefore the interest burden on the debt, which for France is currently just 1.7 percent of GDP, which is quite modest.

The promoters of austerity argue that this interest burden will rise as interest rates go up, and therefore the debt-to-GDP ratio must be brought down as soon as possible. But if we can imagine the conditions under which French borrowing costs would be forced up (they are currently about zero in real terms), they would also be conditions in which the economy is growing faster and inflation is higher. So the debt could still be affordable.

Macron’s program and track record indicate that he buys into the current dogma of the European Union authorities (the European Commission, the European Central Bank, and the IMF) that France’s 10 percent unemployment is “structural,” rather than a result of weak demand. The solutions are therefore reforms that push down wages (laws weakening unions), increase labor supply (tighten eligibility for unemployment insurance and other social benefits), or worsen job security.

The 2015 Macron law, which made it easier for employers to dismiss workers, is a good example of how much these reforms are worth in terms of improving the economy or employment. The OECD looked at five sets of provisions in the law and estimated that these would lead to GDP ten years from now that is just 0.4 percent bigger than it would be without the law. In other words, France would have a GDP in August of 2025 that they would otherwise not have until December of 2025.

Macron’s deficit reduction and structural reforms are part of the problem, not the solution. They may worsen French income distribution and create more economic insecurity, but that will not resolve the real structural problems that have collapsed the centrist parties in France, whose basic program Macron will likely continue to implement.

  1. patrick newman
    May 14, 2017 at 11:25 am

    It is member of the Euro Zone that forces conventional monetary Micawberism on the French (and other members of the Zone). Forces them to accept arbitary targets on debt and deficit which in turn begets destructive austerity. Public finance run by accountants not economists. Arguably France needs to run an investment programme as it is insufficient demand behind unemployment. The Uk is no model (it has about 80% of France’s productivity level). Lower unemployment brought about by involuntary part time and self employment, the gig economy, zero hour contracts and wisespread regressive changes to terms and conditions aided by very repressive trade union laws, especially in the public sector.

    • Luca Ravioli
      May 14, 2017 at 10:05 pm

      Whadda you got against accounting (over econmics)?

      The quotes in this article are the best part:
      “The second coming of double-entry bookkeeping”
      https://blogs.harvard.edu/vrm/2014/09/30/why-bookkeeping-is-actually-cool/

      “What a thing it is to see the order which prevails throughout his business! By means of this he can at any time needing to perplex himself in the details. What advantages does he derive from the system of bookkeeping by double-entry! It is among the finest inventions of the human mind.” (Goethe, 1824., Vol. I, Book 1, Chapter X. p. 28, translated by Thomas Carlyle).

      “The Principles of Book-keeping by theory which is mathematically by no means uninteresting: it is in fact like Euclid’s theory of ratios an absolutely perfect one, and it is only its extreme simplicity which prevents it from being as interesting as it would otherwise be. (Cayley, 1907).

      He who wants to know how to keep a ledger and its journal in due order must pay strict attention to what I shall say. To understand the procedure well, we will take the case of one who is just starting in business, and tell how he must proceed in keeping his accounts and he may find each thing in its place. For, if he does not put each thing in its own place, he will find himself in great trouble and confusion as to all his affairs, according to the familiar saying, Ubi non est ordo, ibi est confusio (Where there is no order, there is confusion). —-Luca Pacioli

      And the last part of the last quote is the state of economics with out the knowledge of double entery bookkeeping.

  2. robert locke
    May 14, 2017 at 3:16 pm

    Two things. One, for those who know French history, the Republic has always been problematic; doubts about it are as old as Republicanism itself (Bonapartism, Orleanism, Action francaise, etc.), it is not rooted in Vichy, Vichy itself is rooted in the Republican problematic. Two, the issue of French economic stagnation and retardation is also as old as Republicanism itself; these problems are rooted in an elitist educational system and frame of mind (chef de file psychology). Macron will have to struggle to overcome this elitism because his career is an expressionism of it, e.g., both Holland and Macron attended ENA.

  3. Craig
    May 14, 2017 at 4:12 pm

    The dominance of Finance was never in danger….from either party. A new financial/monetary paradigm is the only thing that will end such dominance and enable individual economic freedom and systemic free flowingness.

    Everybody is almost completely dominated/hypnotized by Finance and its monopolistic paradigms of Debt and Loan Only. Students, the younger generation, businessmen, and the general populace must be shown how the paradigm of monetary Gifting and its policies are in all of their interests, is the ethically right thing to do and what will finally enable stable prosperity for all. Focus on the current monetary paradigms and their philosophical opposites. Resolution of apparent opposites has always been the very process of Wisdom and the signature of both paradigm change and of human cognition itself.

    Leaving the paradigms of Debt and Loan Only is the only way to objectively assess them and begin the process of integrating the new paradigm of Gifting into the debt based monetary and pricing systems in rational ways.

  4. May 16, 2017 at 7:17 am

    Austerity is an economic policy with a clear political agenda. In other words, austerity is an attack on the bottom 90% of the wealth distribution to impede efforts to stop transfers of wealth upwards. In the US, Kansas in 2012 implemented tax policies based on Arthur Laffer’s infamous curve. The theory is simple – reduce tax rates by massive amounts, the reduced tax burden will lead to more economic activity which will lead to more tax revenue with the lowered rates. It all balances. This really is “voodoo” something. The results in Kansas prove the theory is inaccurate. Kansans were told the government is broke and that “governments must live within their mean.” The response of one reporter to these claims sums up the situation — total and utter bull shit. Meanwhile, Laffer’s response to the failure,
    “It sucks. Look at it. This doesn’t have beaches, it doesn’t have palm trees. It doesn’t really have a low tax, what is it now, 4.9%, something like that. Take a look at my state, Tennessee. We have the lowest tax burden of any state in the nation, we have the highest growth in employment as a percentage of population of any state in the nation in the last 12 months, we have a budget surplus of $2 bn. Two billion dollars in this little crappy state!”
    What Laffer fails to mention about his crappy little state of Tennessee is its high unemployment, high poverty rate, some of the worst public services in the nation, and a cost of living index highest among Southern states. In quality of life only four states rank lower than Tennessee – Louisiana, Oklahoma, Missouri, and Arkansas. If Tennessee is a Laffer state, it tells a frightening story about Laffer and his policies.

    I’ve amazed by statements like those from George Osborne, Britain’s former Chancellor of the Exchequer. He labels reductions in government spending “absolutely necessary” because the government has “run out of money.” These “cuts,” per Osborne take us “back from the brink” of economic ruin. This is horseshit. There is an enormous pool of earnings and wealth that could be taxed to deal with such short falls. That pool is the members of the top 10% of the distribution of wealth and income. Laffer proposes just the opposite. The taxes these members of our society pay will, per Laffer be reduced. Reduced, it seems almost without end. Warren Buffett sees a real problem in the US but it’s not corporate taxes. “If you go back to 1960 or thereabouts, corporate taxes were about 4 percent of G.D.P.” And now, they’re about 2 percent of G.D.P. By contrast while tax rates have fallen as a share of gross domestic product, health care costs have ballooned. About 50 years ago health care was 5 percent of G.D.P., and now it’s about 17 percent.” He went to say the AHCA does nothing to address this problem. Buffett asserts that “The tax system is not crippling our business around the world.” But health care costs are. And not much is being done to fix this problem.

    So, the next time you hear someone say we need to “tighten our belts” because governments can’t afford unemployment insurance, educational assistance, social security, or Medicare/Medicaid slap that person, hard. They say such paranoid hysteria can be brought under control with a slap. Try it. We’ll find out.

    • robert locke
      May 17, 2017 at 7:46 am

      “There is an enormous pool of earnings and wealth that could be taxed to deal with such short falls. That pool is the members of the top 10% of the distribution of wealth and income.””

      Your statement pinpoints the issue; it is not debt but who decides how income is distributed and to whom that brings about the credit=debt problem. Yet the focus on decision making mechanisms involved in the distribution of income is ignored in the economists’ discussion. It seems an obvious point, so why is it not discussed? If one gives the top .01% of the income stream the power to decide who gets the money and how, it shouldn’t surprise that they will invent the institutions, the politics, the mechanisms, and the economics to give the money to themselves. And the remedy is simply to redirect decision making about the distribution of emoluments to people in the bottom 90%.

      • May 17, 2017 at 7:57 pm

        Robert, yes indeed. How the divisions among us are created is the main issue. It’s the root of all the other issues. Rich/Poor, conservative/liberal, business/labor are just some of these that should interest economists. But don’t seem to. These struggles are the bread and butter of historians’ work. Sociology and anthropology spend thousands of pages on them. Yet economists seem to not know they exist. Or choose to ignore them. Which is it? And why?

  5. May 17, 2017 at 5:42 pm

    Yes, Mark, as President of an influential country a financial speculator like Macron doesn’t look any more promising than a businessman like Trump: possibly worse when his ” program and track record indicate that he buys into the current dogma of the European Union authorities (the European Commission, the European Central Bank, and the IMF)”, i.e. will play to the royal box rather than the audience. I don’t suppose the 2015 Macron law was mad an issue of by his electoral opponents?

    Patrick, would you see a problem in part time and self-employment if it were not forced on folk by failure to provide an income? I see the problem of people becoming demoralised by losing or failing to acquire the confidence that comes from exercising your skills and being encouraged by others working with you. Given independent livelihoods, could not employers solve that problem by adopting a policy of shadowing skilled workers and rewarding good work?

    Luca, yes. What I don’t understand is why the accountants tell the directors what to do, instead of the directors studying the accounts for themselves. Directors just reading the bottom line? Idleness?

    Robert (1). Elitism, yes; though I can’t say I see the French as economically or intellectually retarded; why want more when they can celebrate having enough? I see those surrounded by wealth as more inclined to temptation by vanity and arrogance.

    Craig. A new financial/monetary paradigm, yes! But the other side of gifting is responsibility for giving back, meaning a new educational/employment paradigm too. So give credit and rewards rather than enforce indebtedness and toil. To achieve that we need to switch to the “credit card” paradigm.

    Ken, yes! All this austerity business is bull-shit (or horse-shit in the case of Osborne, who may look elegant but is intellectually a bit fragile). If I’m reading you aright, Laffer is on the nail: the problem isn’t taxation but control of exorbitant prices, particularly in the health industry. Here in Britain a case has come to light of a company buying up the British manufacturing rights of vital diabetes drug (so high usage) which is post-patent so available for pennies in Turkey, where here the price had gone up 400% in a couple of years and is now costing users around £1000 per year. I don’t know about giving austerity hysterics a slap, I’d like to give monstrous monopolists like that a bloody good punch!

    So Robert (2), yes! Is it not directors and CEOs who write they own pay cheques who largely decide where the 95% of the money goes, so whether investment is in people, prestige projects or simply more bloody-minded money-making? Again I go back to the credit card system, in which we make our own decisions about how much we need to spend. Of course I am lucky, for I already have a Citizen’s Income in the form of an adequate pension to write down reasonable expenditure.

    • Craig
      May 17, 2017 at 7:54 pm

      Dave,
      Yes. What we’ll need is a cooperative effort by the helping professions, the clergy and the government to make people more aware of the rewarding multitude of positive and constructive self chosen purposes, in addition to employment, that are available to them….when they would have the leisure time and purchasing power to enjoy them.

      The Conscious-Wisdom culture will not only be physically abundant it will be much more ethical, rational and self aware in the highest and best sense….these being some of the component characteristics of Wisdom. The fact is that without enabling and encouraging a Conscious-Wisdom culture…we’re asking for the idiocies, anomie and purposelessness of a Brave New World, especially with technological innovation and AI just beginning to disrupt economies. Politicians, economists, religionists and pundits of every sort are famously short sighted, habituated to old paradigms and consequently (unconsciously) erudite dunces. Raising consciousness, particularly of the aspects of the concept behind every worthwhile progressive step humanity has ever taken as well as every paradigm change….is essential.

      Our motto needs to be:

      Elevation and Transformation of Thinking First! Integration of Rational, Ethical and Educational disciplines….right along with it!

      • robert locke
        May 18, 2017 at 9:03 am

        Considering that man is an evil bastard, we cannot rely on a Conscious-Wisdom culture to bring about a fair distribution of money. It has to be institutionalized some way. Dave suggests a credit card system. Others suggest some system of checks and balances operating in civil society that prevents any self-interest group from taking over decision-making in the distribution of income. My own suggestion is the creation within firms of compensation committees that represent stakeholders (stockholders, employees, customers) in the determination within the firm of compensation matters.

      • May 18, 2017 at 9:14 am

        Robert, the credit card side of my model provides for basic income as needed. What you are suggesting comes into my model as deciding on prizes for good work.

    • May 17, 2017 at 8:00 pm

      It’s really a nice deal when you can protect your “class,” your friends, and those who support and love you, while protected all the while by economic theories that reveal the truth that you and them deserve all you receive, and more.

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