Why France MUST Reform – MUST, I Tell You!

Since the withdrawal of the CPE and the resulting collateral damage to Dominique de Villepin, not to mention Nicolas Sarkozy’s unexpected appearance as a unity figure at the height of the crisis, it’s rapidly being promulgated as conventional wisdom that France “is ungovernable”/refuses to “reform”/cannot be “reformed”. There is only one problem with this discourse, very popular in anglophone leader columns and the like, which is that it’s nonsense.

It’s quite often been raised here on AFOE that the French economy isn’t actually in trouble. Growth, although not great, is ticking along, inflation is controlled, unemployment is higher than the UK but lower than Italy or Germany, and the demographics (as Edward Hugh will no doubt point out) look a lot better than many other countries. Certainly, there’s more youth unemployment than one might like, but almost all the figures for this are wildly misleading. The percentage rate of unemployment in the 15-24 years age group looks scary high, but is actually a very small percentage of that group–because most of them are in education or vocational training of some form and hence not part of the labour force. Unemployment as a percentage of the age group is rather lower than the national rate and not much different from that elsewhere in Europe. (Le Monde ran a useful little chart of this in a supplement yesterday that doesn’t seem to be on the web.) Much – indeed most – of the difference in employment growth between France and the UK in recent years has been accounted for by the UK government going on a hiring binge.

So why the crisis atmosphere? More, as ever, below the fold..

“Reform” is one of the worst instances of what Steven Poole calls Unspeak in current usage, at least as bad as “modernise” and those hardy perennials, “democracy” and “terrorist”. Poole conceived of unspeak as the use of language that deliberately contains no information-if you describe what you want to do as “reforming” or “modernising”, you essentially suck out any content from it. Not only do you shut off normative debate-whether it is good-but also positive, whether it is true. And you neatly frame it as inevitable and your opponents doomed and wrong.

A lot of the talk about “reform” in France, especially from English-speaking sources, seems to think that France is rather like Britain in 1981, a zone of vastly lossmaking, incompetent state industries that must be shut down with, no doubt, the smack of firm government for any progress to be made. This is insane. In 1981, indeed, France had inefficient and outdated state (and private) industries. And, strange to tell, it doesn’t have a vast and inefficient coal, steel and textile sector any more. The answer is that France did indeed go through a painful process of change – the whole coal industry was shut down – but unlike the UK, it also put a lot of effort into what might replace those industries.

The results have been, essentially, a two-speed economy; a core of high productivity, highly globalised but also highly labour-protected industries that you really don’t want to compete with (think Alcatel-Lucent, nuclear power, high-speed trains and AXA), and a crappy small business sector that tends to combine poor social protection with worse productivity (think – the local bank branch that is never ever open). So far, so AFOE, really.

Now, it’s pretty unlikely that a modest reduction in hire/fire costs for two years will get many of that margin of “NEETs”, to use the British welfare state’s ugly acronym for young people Not in Education, Employment or Training, into jobs in the high-tech core sector that’s meant to be so overprotected. What would Arianespace, Sanofi-Aventis and the rest do with them? Recruit more apprentices, perhaps, which happens to be what the French government is already paying them big money to do.

So what is going on? My thesis is that the divisions in the French government demand a constant crisis atmosphere. The main centre-right party, the UMP, is an entity reminiscent of Lord Curzon’s description of the Indian Congress – a ramshackle coalition of interests. Lashed together from diverse conservative, political-Catholic, free-market, centrist and Gaullist groupings as a King’s Party for Jacques Chirac after the 2002 elections, it was originally named the Union for a Presidential Majority before its members realised that this wasn’t exactly inspiring stuff, and could become dramatically silly if the president didn’t agree with them. It was hence renamed the Union for a Popular Movement, which isn’t so much a name as a description, and looks truly odd if you remember that “populaire” in French can be read as meaning “working class”, which they ain’t by a long chalk. They don’t share an ideology, and some of them maintain their own organisational structures, and the leaders are competing ruthlessly for the succession to Chirac.

One way to maintain unity is to seek what the Germans call a Feindbild or “enemy image”. Forget yer squabbles, fools, THEY are coming and we must sink or swim! Another, related one, is to convince everyone that an emergency of such moment is in progress that no effort can be diverted. This is roughly what the French Right has been doing for several years – constant crisis propaganda, used as the delivery mechanism for policies it rather likes and which will, crucially, stir up more crisis.

Funny figures are a running gag in the show–before the dodgy youth unemployment ones, finance minister and former France Telecom boss Thierry Breton pulled a similar one with regard to pensions by deciding to start talking about future pensions liabilities (a flow concept) as a stock concept that should be treated as part of the public debt. Curiously he didn’t ask the Ministry of Agriculture to do the same with farm subsidies, Defence with their future budget..nor did he actually introduce such an accounting treatment, as it would have blown the Maastricht and SAGP criteria to planet Zog. Yesterday, Breton was at it again, claiming that the student demos had cost the economy “hundreds of millions of euros” by frightening off foreign students. I rather doubt there are that many foreign students, and certainly when I was a foreign student I positively relished the prospect of a bit of protest, although I grant not everyone shares this taste.

If the French government wants to do something to tackle unemployment, may I propose the following: firstly, make it dramatically quicker to set up a small business. France already prides itself on a huge variety of independent shops, craftsmen and such–I would think there is a lot more potential here. And secondly, extend some of those employment protections out of the core, or perhaps do more to encourage unionisation in the noncore economy – if there really is a serious adverse selection problem that makes everyone want to be a civil servant, perhaps its other side needs some attention.

(PS: does linking Dan Davies and Jerome in the same post make me Europe’s biggest blogwhore?)

13 thoughts on “Why France MUST Reform – MUST, I Tell You!

  1. “Funny figures are a running gag in the show–before the dodgy youth unemployment ones, finance minister and former France Telecom boss Thierry Breton pulled a similar one with regard to pensions by deciding to start talking about future pensions liabilities (a flow concept) as a stock concept that should be treated as part of the public debt. Curiously he didn’t ask the Ministry of Agriculture to do the same with farm subsidies,”

    Mr Breton actually has a good point there, future pension liabilities (funded and unfunded) will be included in the System of National Accounts (SNA 1993 update) once the official review is complete.

    It´s a touchy subject for a lot of countries involved! 😉
    http://unstats.un.org/unsd/sna1993/comments.asp?ID=2&atp=1

  2. “The percentage rate of unemployment in the 15-24 years age group looks scary high, but is actually a very small percentage of that group–because most of them are in education or vocational training of some form and hence not part of the labour force”

    When people can’t find work they go back to school so they have enough skills to find that elusive job.
    Your logic, like the youth of France, doesn’t work.

  3. What’s your estimate for the number of 15-24 year old Frenchmen – schoolleavers essentially – who have already “gone back to school”? Seeing as the standard school leaving age is over 15, and my point is that the proportion of people who go from school to the dole queue is tiny, you must be assuming a gigantic churn rate in and out of the labour force…which doesn’t really fit with the supposed welfare-dependency that you (going by yr. blog) think is the problem.

  4. Yes, but the parties on the French right have always (for which read post-1945, or perhaps post-1968) been personalized vehicles for the top leader. That’s just one of the reasons I always chuckle about democratic criteria (e.g., for Central Europe) that call for parties to represent segments of society and avoid personalization.

    So the UPM is just the latest in a long-ish line of parties that try to unite fractious coalitions behind a single personality. That’s the French right.

  5. Your thesis is very neat except for one small problem – France is in a state of crisis not because of UMP political manipulation but because the French people are genuinely disillusioned, angry and frightened at the current state of the country. Based on your description of the UK pre-Thatcher I would guess that you were not old enough to have experienced first hand the same crises atmosphere in the UK back then. What I hear and see in France today is a rerun of the UK back then. The Thatcher ‘revolution’ was less economic than cultural, and thats what France needs today, a Sarkozy to shake things up, rather than ENArque fluff like de Villepin or Royal

  6. Thanks for the link. Here’s a new graph from the FT on what the “unemployment rate” means:
    http://www.eurotrib.com/story/2006/4/20/12054/3629 (I am adding a link to your interesting post there)

    (feel free to post the image if you want: link is http://www.eurotrib.com/files/3/060420_youth_unemployment_FT.jpg)

    Remember, the real problem of France is that we still have it “too good”, according to the economist (http://www.eurotrib.com/story/2006/4/15/15148/1138)

  7. I think the french are doing just fine too. I see no need for them to do anything different. They are one of leading lights of Europe and the world.

    They should just keep on keeping on.

  8. From the A Fist Full of Euro Link:

    The unemployment rate for the under 24s in France is indeed 23%. But you have to remember that the unemployment rate is the ratio of unemployed to active population (i.e. those working or seeking work). Counted as a ratio to the overall youth population, unemployment is only 8%, just like in the UK or the US.

    This doesn’t track. According to the subsequent illustration only 6.8% of French students work while going to school compared to 42% in the UK. To get the same unemployment rate while counting the 93.2% of French students who do not seek work you would need significantly more jobs available in the UK than in France.

    Moreover, unless French parents are extremely generous, the 93.2% of non-working French students must receive a substantial subsidy from the state. Economically, they are on the dole. If the state suddenly cut back on the subsidy could French students expect to find jobs like their counterparts in the UK? No they could not because even with roughly 36% of their peers removed from the workforce by state subsidy as compared to the UK, they still have the same unemployment rate as the UK.

    Obviously, the French economy provides far fewer jobs for the age group than does the UK.

  9. 6.8% sounds like a very low number. So low that i suspect that it is an statistical artifact and not reality.

    ps. I doubt 42% of students have full time jobs.

  10. A few comments from France :
    – Undoubtedly, it is very difficult to build up a business in France. I run one, I can tell you. Administrations and banks make it tremendously challenging to cash the first euro.
    – French Education ignores the labour market. For instance half of European students in psychology are in France (40k), another 40k study to become sports teachers, with less than 1000 jobs in each case. Studies last very long, and obviously qualified people fell frustrated to work in call centers or fast foods because they have no choice. It is difficult to hire in many fields.
    – But these studies are free which explains why few students work, and longer, which explains why there are so few actives in the age class.
    – Dear Mr jmc, yes we do have a huge problem of global disconnection of “ENArque fluff” like Chirac, de Villepin, Jospin or Juppe with the real world. We do have a huge problem of populism with Sarkozy when he said last week “France like it or leave it”, while foreigners bad treatments by the police (he runs as Minister of Interior) reach summits.
    – There is a lot to do in France to improve the Economy (to which I dedicate my blog, in French sorry) and it is indeed urgent to do so. However, don’t throw the baby with the bath water, social protections, public transportations and health system are good.

  11. Just a humble suggestion: when dealing with quantitative issues, use numbers rather than adjectives. An article such as this, so devoid of numbers–but crammed full of adjectives–projects the image of innumeracy and unreliability. I realize that this idea flies in the face of everything that’s taught in J school, but there must be a reason why newspapers are doing so poorly, and the quality of the writing is one prime candidate.

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