Keynesian Sarko

It has come to this. Does anyone remember Nicolas Sarkozy of a year ago? Back then he was being feted by the anglospheric media as a French Thatcher, a neoliberal wind of change shaking a battery of outdated perceptions to its heart and mixing a few other metaphors whilst they were at it. We blogged a certain amount about how vacuous so much of this was; France, after all, did indeed go through a fearfully tough industrial restructuring in the 1980s, apparently entirely unnoticed by the media establishment. Its economic problems simply are not those of Britain in the early 1980s; anyway, a lot of people are now busy amending the level of confidence they have that those solutions were appropriate at all. (This London Review of Books article is required reading.)

Without the original radical-right dream, which had little enough substance to begin with, the Sarko presidency basically returned to its default settings and ran on under automatic control. Now, however, the banking crisis has given him a new dose of authority, much as it has to Gordon Brown; but nobody is talking about making everyone work more hours, or facing down the trade unions, now. Instead, Sarko has found his inner Gaullist; perhaps it was never so far away. Here’s the German newspaper whose website is slightly better organised these days; the factoid is that the prez wants to set up a state investment fund to buy into “strategic” industries, as part of a broader reflation strategy for which he intends to bring forward a lot of capital expenditure projects and cut taxes on business.

(Remember when “les caisses sont vides!” and scares based on funny figures were the order of the day? As Max Sawicky so wisely put it, there are no atheists in foxholes; we are all Keynesians again now.)

There’s more detail in Le Monde; especially, there’s one specific detail we’ll have to come back to. A lot of people have greeted the news of the fund with a certain degree of nonsurprise. Since when hasn’t the French government taken stakes (and influence) in “strategic” industries? The new fund will be managed by the CDC, the state-owned bank which exists to, well, invest in strategic industries. It’s no great surprise that the Germans, and specifically the CDU, are suspicious to critical at what they probably think is an invitation to put their money into the French military-industrial complex.

There is certainly a very traditional look to some of this proposal; the prime minister has ordered all the 93 prefects to hold monthly meetings with banks and enterprises on their turf to ensure the availability of credit, which as well as being suitably Bonapartist also reminds me of the passage in J.K. Galbraith’s The Great Crash about the importance of meetings that are held to do no business. Handelsblatt‘s blog duly hands out the pious opposition; they even descend low enough to say such things should be left to Russia.

But there’s an interesting detail in the Le Monde version which no-one else seems to have picked up; rather than Alstom, Alcatel, Thales, EADS etc, this new fund is meant to buy into small and medium-sized companies, which makes it considerably less of a classic military-industrial stitchup. That, at least, suggests that this project or perhaps this one might not be beyond its scope.

Over and beyond this, Sarkozy has revived the regular French suggestion of an “economic government” for the EU, or the Eurozone. Now, my problem with this has always been that the EU already has an economic government; it’s called the European Commission. However you cut it, it’s a governmental institution, and the great majority of its functions are economic; which goes double, as the economic functions are the ones in which it has exclusive jurisdiction. The usual suspects are delighted by this, and by the fact that there has been a summit meeting of Eurozone members. Oddly, they don’t seem to say much about the fact it was bookended by full European Council meetings, or that the plan it adopted originated in the UK, although much if not all of its content originated with VOXEU academics.

You could often get the impression that if the conversion of Europe into a single state occurred tomorrow, there are quite a lot of important people in France who would welcome it as a chance to call a Eurogroup summit meeting, such is the obsession. And there is no reason why they shouldn’t have it; after all, as the usual suspects point out, all it amounts to is a “point of contact”. However, one thing the crisis has shown up is that there isn’t a sensible economic distinction between the EU and the Eurozone; problems blow up in one and pass straight into the other, as do solutions.

Of course, the real difference between the Commission and an “economic government” is economic; it’s the member states who have serious money available, the Commission’s budget power being further restricted by its mandates under the CAP. And the upshot has been that no-one has really looked to the Commission for anything much in the crisis; it’s been either the ECB, or else the intergovernmental wiring that gets used. If they want to be relevant, now’s the time to put the Commission’s money where its mouth is and back something like the Sarkofund. If you want a soundbite, perhaps it’s time for it to move from funding the transition to membership to funding the transition…to the future! Corny!

One thought on “Keynesian Sarko

  1. Why is the LRB piece essential? I clicked on it in search of clarity, and I encountered precisely the sort of frantic ideologically conditioned rant that was part of the reason I cancelled my subscription a few years ago (though they still send me begging letters). I’ve just had that decision confirmed, and, to be honest, I wish I hadn’t, since I find this sort of writing depressing.

    There are lots of more measured and intelligent – and infinitely less provincial – liberal left analyses of the current situation out there.

    Paul Krugman? Dean Baker, even?

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