Friday, October 27, 2006

France in Freefall? A French Margaret Thatcher?

Le Grand Charles de Gaulle once asked how one can govern a country that has 500 different kinds of cheese. Or three hundred different ways to cook eggs?The Economist does not answer that question, but does pose a number of questions on why and how the UK went from its '70s doldrums [I remember walking through a brown-out London in the mid-seventies when Ted Heath was PM and the TUC were on strike] making only three-quarters the GDP of France to its current position of a 5% percapita advantage over the hapless French. That's a lot of ground to make up.

Could it be the liberalization that the feckless crone-Prez Chiraq claims is worse than Communism? Do Sarkozy [my bet] or Royal have it in them to risk barricades in Paris to jettison parts of the massive bureaucracy smothering French economic life? [Chiraq certainly didn't, although he talked a good game.] Here's a snippet:
....the planned society relies crucially on an intelligent and efficient state, and over the years the French version has become untenable: too many bureaucrats, supported by too many taxes, impose too many rules in too many overlapping organisations. Despite all this effort, there is little sign that the public sector in France is any more efficient than in other rich countries. French public spending accounts for 54% of GDP, compared with an OECD average of 41% (see chart 1). One in four French workers is employed by the public sector. Public debt amounts to 66% of GDP, compared with 42% in Britain, and over the past ten years has grown faster in France than in any other EU-15 country. The baby-boom generation is leaving behind a poisoned legacy: as the title of a recent book puts it, "Our Children Will Hate Us."

Too top down
Moreover, in such a hierarchical system people too often expect solutions to be provided from the top. For example, whereas Google was devised by two graduate students at Stanford University, a rival search engine with the unpronounceable name "Quaero" was ordered by the French government from, among others, two big French companies, Thomson and France Telecom. CNN was founded by Ted Turner, an American entrepreneur in Atlanta; a new French challenger to the cable television network, France 24, which is due to start broadcasting shortly, was invented by Mr Chirac and is financed with government money.

The problems have been building up for some time. Thirty years ago, Alain Peyrefitte predicted that the mal fran?ais—essentially, a bureaucratic mentality—would stifle creativity and innovation and entrench resistance to change. Another critic wrote in 1994 of a "France suffering from a more profound sickness" than anybody then imagined: a "heavy and inert" state machinery that, if unreformed, would "block the evolution of society." The prescient author? Mr Chirac.

Even so, politicians have consistently failed to explain to the citizens why the country cannot afford to go on as before. This is the third source of French electoral dissatisfaction. Instead of making the case for change, successive politicians have preferred to blame, and thus to discredit, outside forces—usually Europe, America or globalisation. "The French political class has constructed a wall of lies against the globalised world," comments Nicolas Baverez, author of "France in Freefall." No wonder there is no consensus for reform.

Yet this survey will argue that French decline is not inevitable, any more than British decline was inevitable in the 1970s. There is nothing that necessarily predisposes the French to conservatism or resistance to change. Just because political leaders in the past have failed to push through bold reforms—Mr Chirac himself, in 1986-88; Alain Jupp?, a former prime minister, in 1995—does not mean that the country is unreformable. The unruly French do not make the task easy, but winning them over is a question of political leadership—the courage to level with voters and tell them why things need to change.

Anyone who has lived in France has learned to love [and hate] the place at the same time, though some express unqualified love, or others hate. I can remember when Vice Consul of Lyon, the U. of North Carolina students in an exchange program with the Universite of Lyon would ask me why the French hate Americans so much. I would explain that the Lyonnais were not your typical French [the Parisians hate the US more, the conservative countryside actually likes the US] and that the French hate everyone else even more than Americans, including other Frenchmen! Oh well! The Economist believes that change is possible and that the French, if their strait-jacket social model is loosened somewhat, retain the human capital to excel again:
Change need not mean trampling on values that the French cherish. Some of those who defend the status quo argue that France is a civilised country that has simply chosen different priorities. Like a misunderstood teenager, it wants to do things its own way. It still believes in solidarity and social cohesion, in small farmers and local markets. It does not want to abandon its poor to the streets and its shopkeepers to Wal-Mart.

Yet economic efficiency and social justice need not be incompatible. The Netherlands, Ireland, Finland, Sweden, Denmark and Canada have all revived once-flagging economies without destroying their welfare system or way of life. France's long dole queues and troubled banlieues are proof that, by keeping things the way they are, the French model is failing to deliver on its promise. France has 3.7m people living in poverty (defined as having a household income of less than half the median income); 2.5m living on the minimum wage; and over 2.4m unemployed.

Politicians will have to explain that tightening welfare rules need not rip a hole in the safety-net; that subjecting hypermarkets to more competition need not drive the boulanger or patissier from the high street; that removing pharmacists' monopoly on non-prescription drugs need not deprive every village of its green cross. They will also have to persuade voters that the prize is worth having. According to the IMF, more competition in French markets for both goods and services, combined with labour-market reform, could in the long run boost GDP by more than 10%.

Elections are coming up next year, and Chiraq is sure to be defeated if he doesn't take his horrific poll numbers seriously and gracefully retire. It would be a precedent if this delusional opportunist made a graceful move to quell the critics.
The two presidential front-runners—S?gol?ne Royal on the left and Nicolas Sarkozy, currently the interior minister, on the right—are both in their early 50s, and both claim to offer a break with the past. But is this new generation as reform-minded as it sounds? And how can it build a consensus for change in a country that seems so resistant to being nudged out of its comfort zone?

Britain needed a Thatcher to jolt the UK out of an outmoded social model that no longer functioned as planned. Will Sarkozy be the Thatcher that France requires?

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