ANALYSIS:Nicolas Sarkozy wanted to dismantle the French economic model. Now it's being lauded, writes LARA MARLOWE
ON A recent cover of the Economistmagazine, under the title "Europe's new pecking order", a jubilant French president looks down from his plinth at the German chancellor and her "Modell Deutschland", while the British prime minister and his "Anglo-Saxon model" barely peep out from a manhole.
Staffers at the Élysée Palace were so delighted with the cover that they requested a PDF version so they could print posters. Even left-wing Frenchmen gloated at this vindication of le modèle français.
Before the world economic crisis, France was a black sheep in the EU and the Organisation for Economic Co-operation and Development – all anti-competition, bloated public sector, rigid employment regulations and high taxation. That perception has changed now. This month, the secretary general of the OECD praised France for “resisting the crisis better than other G7 countries”. One has only to fly from Dublin to Paris to see how less severe the crisis is here.
“In a grave economic crisis, our vices become virtues,” explains Nicolas Baverez, a prominent economist of the liberal school. “Fifty-five per cent of the French economy is generated by public spending, so when economic activity collapses, that continues. Thirty-four per cent of our economy consists of government assistance and social programmes. That’s why consumption is holding up well in France.”
Bernard Maris, an equally prominent economist who is a left-wing Keynesian, agrees: “The big advantage of France is inertia. It’s a disadvantage in times of growth, but protects us in recession. Most of the money made in France stays in France. It’s recycled, like water.”
Nicolas Sarkozy was elected with a mandate to dismantle the French economic model, but didn’t have time to achieve this before the crisis struck. Now he holds the French model aloft as an example for Europe and the world.“One day he’s a liberal. The next day he’s an interventionist,” Maris says of Sarkozy. “He’s totally practical, which is rare among politicians. He’s a strategist, not a chameleon. Like a general who is overwhelmed on one flank, he knows how to redeploy his army. It’s not a weakness.”
Though some economic liberals reproached Sarkozy for postponing or watering down economic reforms, Baverez says the French president had no choice: “Thank goodness he changed. Do you expect us to complain that he’s not acting like Hoover, who transformed the October 1929 stock market crash into global deflation, by raising interest rates and trying to balance the budget?”
Six years ago, Baverez wrote a best-selling demolition job on the French economic model titled France is Falling. But these days, British economist John Maynard Keynes (1883-1946), the father of state intervention, is king. The conservative newspaper Le Figaroeven declared Keynes Man of the Year.
Baverez has devised an intellectual pirouette to stay in sync with the times. “I think Keynes is a liberal,” he says, a heresy to the ears of Keynesians. “World economies spend 85 per cent of the time in growth, and 15 per cent in recession,” Baverez explains. “For less than 5 per cent of the time, there’s a risk that world trade and demand will collapse. Keynes defined this situation when markets no longer function and the state must intervene.”
In this “Keynesian situation”, Baverez says, Keynesian remedies are necessary. “But if France wants to continue with Keynesian policies when the crisis is over, we’re going to make the same errors we made in the 1970s, and we’re in for another 20 years of stunted growth and mass unemployment.”
Since the crisis started, US magazines Timeand Newsweekhave also praised the French model. Time joked that through imitation the US was becoming "the United States of France . . . Only with worse food". With the crisis, said an opinion piece in Newsweek, "the French habit to readily intervene in market processes has become a more widely accepted norm".
They’re all wrong, says Baverez. “They’re confusing exceptional circumstances with laws of economics. We’re in that less than 5 per cent situation when our vices become virtues. But at midnight, when the recovery starts, like Cinderella, we’ll lose our carriage and glass slippers. We’ll find ourselves in rags, and there will be no more French model. We can frame that Economist cover, but that’s it. I don’t think there’ll be any more like it.”
Nonsense, says Jean-Paul Fitoussi, professor of economics at Sciences Po and the president of influential economic think tank OFCE. Fitoussi dismisses Baverez and his ilk as mere “essayists” and insists that nothing in past experience indicates that France will recover more slowly than her European neighbours.
Pre-crisis, Keynesians were out of fashion, and liberals such as Baverez had the wind in their sails. Now there’s new buoyancy in Keynesian discourse. “You cannot go backwards in matters of scientific progress,” says Fitoussi. “And yet, that is what happened at the end of the 1970s, when world leaders returned to what Keynes called neo-classical theory: the idea the state had no role in the economy, that laissez-faire was better, the importance of flexibility and the lowest possible taxation.”
Though France’s liberal and Keynesian economists concur in giving high marks to Sarkozy for his handling of the crisis, they’re already drawing up the battle lines on future policies regarding government debt, and especially the labour market. “One trembles to think what would have happened if salaries were flexible everywhere,” says Fitoussi. “Demand would have collapsed. Businesses would have shut down.”
France has a two-tier labour market, with civil servants enjoying job security, while for part-time and temporary workers, “the crisis is absolutely savage”, says Baverez. A freer labour market “is a way of better sharing risks”.
Deregulating the French labour market would be “catastrophic” says Maris. “France spends €100 billion annually on nervous illnesses – stress, depression”, much of it work-related, he explains. “Work is already stressful. People are very poorly paid, and life isn’t a lot of fun. But a liberal is a liberal. They believe in competition and the law of the jungle, and they’re going to keep trying . It’s a vision based on greed and selfishness that is 200 years old. I think there’s another vision of humanity.”
Lara Marlowe is Paris Correspondent for
The Irish Times