Gardens of the Chateau de Chenonceau, December 2001 (Tan)
DISCUSSION OF FRENCH ("CONTINENTAL") ECONOMIC MODEL
Take a look at assigned readings today from the Economist magazine.
Who is the author? Is he or she credible?
Economist is a pro-free market British publication. Generally takes the stance that the government should get out of the way (taxes, regulations) to allow the market to deliver its benefits to the people.
What is the author's argument?
France can and must reform the state role in the economy to free the economy (the French people) to create more jobs and to compete globally.
Do you agree with the author's argument? Why or why not?
Is the argument biased or balanced?
Has an agenda but appears to present the material fairly.
Are there any terms you don't understand? ASK QUESTIONS. RESEARCH. IT'S TIME TO BECOME YOUR OWN BEST PROFESSOR!!
Identify three concepts or facts that you learned from the piece that were new to you.
Can you tie these concepts/ideas to other things you've studied in Political Science, or other disciplines?
Discussion Questions for Today:
1) What is France's economy like (What is the continental economic model)?
2) How can we contrast that to the Anglo-Saxon (US/UK) model?
3) Why is there a sense that France is in decline?
4) What does France's economy do well?
5) What types of reforms are needed?
6) What is France's President Nicolas Sarkozy presently doing? How has the current global financial crisis changed the outlook on the French v. Anglo-Saxon economies (Dr. Tan will answer.)
The Questions Answered:
1) What is France's economy like (What is the continental economic model?)
Market is flawed. Use state to direct, regulate, own in order to derive outcomes you want (dirigiste, Google-Quaero/European, France 24 http://www.france24.com/fr/). 43% told a 2010 poll that capitalism was fatally flawed. Compare that to 13% of Americans. Sarkozy has declared laissez-faire capitalism "finished."
Provide welfare to assure relative equality in society (unemployment 50-75% of prior income for up to three years!)
Taxes relatively high, government large share of the economy (54%, OECD average 41%). Updated 2010 figure: 56%
Strong social protections/job security (hard to fire employees but two tiers, those with and those without the protections, automation to avoid having to hire any workers at all-Pfizer/Viagra). Unemployment seemingly unshakable at 8-10%, higher for young people. Recent string of boss-nappings to protest/prevent factory shutdowns.
Short work week, long vacations (shut down in August)
Unions strong, collective agreements to protect those in certain sectors (temporary workers and others don't enjoy the protections)
Protect French companies (prevent takeovers by Europeans/Americans, others). Save Danone, wanted to save Arcelor.
Growth relatively sluggish but some certainty for firms and workers
Big state sector, lots of public sector employees
Influence of Marxist/socialist notions of importance of state role. Free-market capitalism in general disfavor
2) How can we contrast that to the Anglo-Saxon (United States/United Kingdom) Model?
Free market in command, government better out of the way (keep regulations down, taxes low) (not quite as "free" as we believe, but difference with nations like France is striking).
Allow openness to competition to give consumers better choices and lower prices, engage with the world economy.
Force companies to compete.
Get higher growth rates and lower unemployment, but at the cost of greater uncertainty for firms and workers.
3) Why is there a sense that France is in decline?
Bestsellers like the Mélancolie Française. Government unable to get European Union Constitution approved in May 2005.
2005 Revolt in the banlieues (suburbs)--burning of cars, rioting.
Protest in the streets over small workplace reform, allow easier firing of young workers (to 26)--government gives up.
Sluggish growth in comparison to other European countries.
Economy size overtaken by Britain (depends on which measures used).
Globalization a threat to the "Model" (consensus) the French had built/established. Cannot continue to grow and stay isolated from other economies. Firms will leave, jobs will leave, economy will stall.
4) What does France's economy do well?
TGV (Train à Grande Vitesse) lines expanding, carrying the advanced train to neighboring countries.
Intl. firms are competitive where not cosseted by French state (Air France, Carrefour [second-largest retailer in the world after Wal*mart], Renault, AXA, Danone, Loreal, LVMH). France's Sodexo is chief caterer to the US Marines.
Life for many very good. Short work hours, long vacations, time and money for life's good things.
5) What types of reforms are needed?
Some, like Le Pen, think immigration the problem, country's great values being challenged. Multiculturalism destroying country's fabric, crime rampant.
French have to reform their mindset to allow reform--too bureaucratic in mentality, not entrepreneurial, don't want to work hard (beware cultural arguments!).
French culturally resistant to change (beware cultural arguments!).
Reform education. According to Economist, need to stop teaching Marxist economics and brainwashing nation.
Economist advocates freeing up the economy through lower taxes and less regulation. Don't have to adopt the Anglo-Saxon model completely (examples of Netherlands, Ireland) but allow firms, workers to innovate and compete.
6) What is France's President Nicolas Sarkozy presently doing? (sidetracked as "President Bling Bling" for a while) How has the economic crisis changed the picture of the French v. Anglo-Saxon model?
French President Nicolas Sarkozy and his wife, model-singer Carla Bruni (photo from the Telegraph)
See Bruni sing "Raphael" on YouTube at http://www.youtube.com/watch?v=dACf2-N32Kg&feature=related
Sarkozy steps
Raised expectations that major reforms are on the table. Talked of decline and need for major "rupture" with the past.
But widespread popular support for a major change to the French model is not there (strikes by railworkers, teachers, utility workers, civil servants, university students to oppose Sarkozy's proposals; public opinion polls do show, though, that the public realizes that some reform is needed).
Did attempt to reform especially generous pensions of some public sector workers (and stood up to a strike). Some could retire at 55.
Gave universities more autonomy (only one of 82 universities makes world top 50 rankings) so they can become centers of excellence (didn't change anyone goes anywhere and no tuition). As of 2010, 51 of the 82 universities have accepted autonomy.
Promised to make work pay more "work more to earn more," put in place plan to get rid of taxes on overtime. Says the French need to work harder.
But still hard for firms to let workers go (especially if they are making a profit). Workers can sue to force companies to keep them on.
Didn't take on 35-hour work week.
Hoped to lessen state role by reducing taxes.
Has plans to reduce the size of the state by not replacing every retiree.
Not a free-market liberal, will defend French companies from takeover by outsiders.
Letting prime minister put austerity measures in place while he crosses France visiting those in economic trouble.
Consequences of the Global Economic Crisis
Harder to reform when the world economy slowing? Or is a crisis needed to make the French realize that change must come?
February 2009: cheap government loans to Citroen and Renault in exchange for not laying off workers. Also, rescue of Valeo, car parts maker.
New politique industrielle, investments in biotech.
Sarkozy actually crowed about strength of French model in standing up to the crisis. Strong state regulation kept France from being hurt as much as US and UK in current meltdown. But, freemarketeers maintain, will be slower to grow again in the future (evidence is bearing this out). Sarkozy's own prime minister says that sluggish growth and debt threaten economy's long-term survival. European model of long vacations, short hours, high wages, job security, and comfortable retirement threatened by globalization.
European leaders know reform is needed. Juncker of Luxembourg 2007: "We all know what to do, but we don't know how to get re-elected once we have done it."
French call for "economic government" in Europe. Don't want cheaper labor countries, lower tax rates to draw business away from France.
Sarkozy has been following a "socialism lite," levies on the rich.
NEW INFORMATION RESOURCE
United Nations Human Development Reports at http://hdr.undp.org/en/.
Last updated: September 13, 2011.
Author: tanp@uncw.edu.