Hollande’s programme marks return of the Ancien Régime
Seeing the dewy-eyed kids at the post-election celebrations in Paris, I couldn’t help thinking how crazy it all was. The youngsters were plainly convinced they had a president to take their country forward into the new dawn - after all, he campaigned under the slogan “Le changement, c’est maintenant”. In reality, Francois Hollande’s programme is unambiguously regressive, with its stop-the-world-we-want-to-get-off determination to go in the opposite direction to every other country, its refusal to countenance any erosion of the country’s ruinously expensive welfare state and its complacent confidence that there is nothing to stop France carrying on as before. What better place to greet the return of the Ancien Régime than the Place de la Bastille?
Of course, the new President promises that he is going to balance the budget in 2017 with the familiar prayer of tax-and-spend governments the world over: “Oh Lord, make me solvent! – but not yet…” Now, even allowing for the fact that France’s deficit is only 5 percent of GDP, it still means he is going to keep on borrowing until the national debt is more or less as large as GDP. (Remember: a balanced budget means no need for more loans, so the national debt is constant. To start paying off its debts, a country needs a surplus, something France has not managed for more than forty years).
Then, of course, the biggest question of all: how on earth is this fiscal miracle of a balanced budget going to be achieved, given the raft of spending commitments which so delighted Socialist voters? It’s rather like listening to someone promising to lose weight while he tucks into a large plate of chips.
However things work out, you can be sure that the burden of paying for France’s public sector will not be borne entirely by today’s taxpayers, given that France is already one of the most heavily taxed countries in the Western world and that a 75 percent tax on the super-rich will probably raise very little revenue (at least for France – it may end up raising tax revenue for Britain, of course, if the rich move to London).
More likely, France will push its borrowing to the limit, so that, unless it actually defaults a la grecque, the debt will have to be repaid by the next generation or two, in other words by the very same youngsters who cheered themselves hoarse in the Place de la Bastille on Sunday evening.
How will they pay if they don’t have jobs? That’s what they really want – or so we are told.
Yet, although France’s youth unemployment rate is over 20 percent, everything suggests Hollande is determined to stand by the usual Socialist commitment to protect those in work at the expense of those out of work. In fact, his proposals are very likely to raise France’s labour costs even further, doing yet more damage to the country’s international competitiveness and causing more, not less unemployment.
Of course, when questioned about these anomalies, the answer is always the same: growth. The new administration is going to get the economy growing.
Now, whenever a politician promises growth, it’s time to switch off. Did you ever hear a party promise lower growth? All my life I’ve been listening to British politicians promising faster growth, and yet this country has never been able to grow by more than two or three percent for any sustained period. The truth is that economists do not really know what drives growth, why for example France and Japan and Germany grew so fast in the thirty years up to 1990, or why their growth is so sluggish today. There are no policy levers a politician can pull so as to increase a country’s growth rate. After all, if a government could really decide the country’s growth rate, what rate would it aim for? Five percent? Seven percent? Hell, no, why stop there? Why not 10 percent or 20 percent, or….?
What little we know about growth is that, other things being equal, competitive markets – especially labour markets – create the best possible environment for growth. But, again, nothing in the Hollande programme suggests he has any intention of going down that route, quite the opposite in fact.
That’s why we’ve learnt one thing from the jeunesse dorée cheering the new Government in Paris this week. The warm-hearted welcome they gave to a regime whose priority is clearly the old and the employed is proof that there is still one place on Earth where turkeys vote for Christmas.
Image — France’s newly-elected President Francois Hollande waves from a balcony at his campaign headquarters in Paris May 7, 2012, the day after his election. REUTERS/Jean-Paul Pelissier