I Do Wish Somebody Would Respond to Martin Wolf re Sarkozy

Martin Wolf says that he doesn't know what will happen. Neither do I. But I do wish somebody who does have an informed view would comment...

Economists' forum: **Why Sarkozy’s triumph portends strife in Europe:** What does the election of Nicolas Sarkozy mean for France, the European Union and the world? The answer will depend on whether what now emerges is a European France, a French Europe or a France set against Europe. Any of these three outcomes is possible. Only the first would be desirable. Which it will be depends on Mr Sarkozy’s true identity. Will he be an economic liberal or a populist interventionist? It is probable that he will turn out to be a mixture of the two. If so, his arrival is likely to deliver the last of the three alternatives: France against Europe.

The French agree on few things. But on one thing, they have close to a national consensus: free markets and free trade are a diabolical Anglo-Saxon plot. In a thought-provoking book on the challenge for French policymakers, Georges de Ménil, himself an American-trained liberal economist, ascribes this hostility to the legacies of Catholicism, Cartesian rationalism, revolutionary utopianism, nationalism and the dominance of the state.

For a modern politician of the right, such as Mr Sarkozy, it is the last two elements that are most important.

I would guess that a "French Europe" is most likely. I've talked to too many Frenchmen, Germans, and Britons over the past five years who say that George W. Bush has made it very clear that Europe needs, for its own safety, to start acting like a superpower. And I suspect Sarkozy is of that faction. And that would mean a "French Europe."

Comments

[otto]

1. Sarkozy may have enough trouble on his hands with the Paris street not to have any meaningful policies towards 'Europe' at all. His reputation will stand, or be broken, by labour market and public sector reforms. There I think that Wolf is more-or-less on his side. Any success there may help in fact with France's relationship with the EU.

2. Wolf merges too many features into 'the constraints imposed on France by the EU ("In other words, France will, willy nilly, accept the constraints imposed by membership of the EU."). There are lots of constraints that the EU imposes on France that aren't remotely electorally defensible, aren't part of EU law, and wouldn't even be on the agenda in the US. For example, the eventual admission of Turkey, which no one in France wants, which is only a 'constraint' because of EU-level inter-elite consensus entirely separate from any electoral support. If the election of Sarkozy brings to the fore an EU politics consisting of a 'thinner' version of what the EU constraints are, where national governments feel free to reject permanent enlargement and shout at the ECB in the same way that US members of congress shout at the Fed when the dollar becomes (politically) overvalued, that may be all to the good. Indeed, its probably the only way that the EU can survive in the long run. A political system cannot healthily institutionalise the election of a European David Broder.

[James Killus]

Never underestimate a country with its own thermonuclear weapons.

[Barkley Rosser]

Sigh. This all or nothing trichotomy boringly reminds me of all those headlines back in the 1990s about whether we would see "a German Europe or a European Germany." Do we know the answer even today?

Offhand this looks likely to be a mixed bag outcome with forces pushing in all three directions. So, yes, lots of Europeans are pissed at Bush and the US, but much of Central Europe is now in the EU and would like to be pro-US, especially once Bush is gone in less than two years, if not even sooner. Europe is bigger, so it will be harder for France to dominate Europe than in the past, when de Gaulle played veto politics on things like the CAP (and all French presidents have continued to do so since, and that is the really big economic issue facing the EU, including for its relationship with the world, think failed WTO global trade deals).

France will do better than many think, and would have even if Sego had won. But it will not dominate again. However, it is worthwhile putting the politics in historical context. While lots of US commentators are looking at Sarko as a pro-US figure, he does come out of the Gaullist parties, and can be expected to assert French nationalism in a variety of ways, both against the US and against Europe, even as he will cut deals with both, thus giving us the muddle.

The historical context is that for on the order of 700-800 years the dominating political conflict of western Europe was England versus France, much more important than the much-ballyhooed France versus Germany one, although that can be traced back to the breakup of Charlemagne's empire at the Treaty of Verdun. As they became the two leading powers in the world in 1600s, their conflict became virtually a global conflict, with the War of the Spanish Succession essentially a Franco-British world war.

When the US displaced Britain as the leading Anglo power, it took over the role of UK in that long conflict, although they were allies with the rise of Germany in the first half of the 20th century, and the conflict remained muted during the Cold War. Thus, de Gaulle did resent the Anglo-American alliance, ultimately symbolized by the agreement over sharing cryptanalysis data between NSA, GCHQ, and the respective agencies of Canada, Australia, and New Zealand as well, which excluded France. De Gaulle showed his independence by withdrawing from NATO, even as he signed on for the bottom line showdowns over Cuba and so forth, against the USSR.

So, with the Cold War gone, France reemerges in its historic role as the great European competitor of the Anglo power. Sarko will play this role, as did Chirac (and Chirac reportedly came close to signing on to the Iraq war), but in the longer run this game will become irrelevant because of the rise of China and India and so forth, not because of anything Sarko does or does not do, although the remark about thermonuclear weapons is correct. People in the US tend to laugh, but indeed France is one of the top two or three military powers in the world, with still probably the #3 military budget and a lot of high quality high tech weapons, along with armed forces that get plenty of practice in those former African colonies, still so closely tied to the ancien metropole.

[yabonn]

"The answer will depend on whether what now emerges is a European France, a French Europe or a France set against Europe."

Or Europe chugging along, sometimes better, sometimes worse, with France in it? As usual? As from the begining?

Really, there's no really response here because, there nothing, apart of some vague ill wishing, and a recycling of that "Europe as French plot" zombie I thought the "no" to the european constitution had put to rest.

Jerome à Lutece is annoyed too, goes into more details, better than i would be able to do.

http://www.eurotrib.com/story/2007/5/9/7237/88363

[Orrin]

Sarkozy is a european neo-con, the ties between france and the us (neo-cons) will be strengthened with him as the french president.
The french hysteria against turkey's admission to eu was started by politicians in france to woo armenian votes. Sarkozy will now openly support bush in his iraq war. It is a sad time for the french democracy. Sarkozy is an avowed immigrant basher, it remains to be seen what will happen next. With Sarkozy as the president of france it seems to me that we are on the dawn of the sixht republic in france.

[burritoboy]

"France reemerges in its historic role as the great European competitor of the Anglo power."

Oh, give me a break. That's not even remotely descriptive of anything real today. Sarko's not going to lead Europe, he's a Gaullic Berlusconi and he'll end up like Berlusconi did - a loudmouth fool who everybody laughs at. What, does anybody think Germans, Italians and Spaniards are going to suddenly fall in love with the guy?

"Europe needs, for its own safety, to start acting like a superpower. And I suspect Sarkozy is of that faction."

Europe simply doesn't have the money to start acting like a superpower. Being a superpower is incredibly expensive - you need a huge population base (USA 300 mil, old USSR 300 mil, China 1 bil). Yes, the EU has that gross population, but with 27 different national taxing authorities. There's no way to be a superpower without a unified all-Europe military command structure (highly unlikely), a single taxing authority and certainly implying a single political structure (how else are you going to have a single tax structure unless you also have a single state?).

Sarko's not going to seriously agitate for greater distance between the US and France. His primary elite backers are precisely the elements of the French business community that would be hurt the most by that sort of thing.

[Barkley Rosser]

burritoboy,

Oh, I love it when people start getting all arrogant and then say silly things. Sarko a Berlusconi? Are you kidding? Berlusconi was under all kinds of indictments for all kinds of criminal corruption. He had to become PM to get himself immunity from that. Sure, he was very wealthy, but he had even The Economist calling for his head. Sarko has his faults, but I have heard of no indictments against him, in contrast with what Chirac may be facing, now that he is leaving office.

I would also say that you do not understand the business interests in France. While there are some that are tied in with US companies, most are not. The Gaullist line was always to support "national champions" against all outsiders, with this reaching a peak under Pompidou. Sarko will be more likely to weaken that policy for other European companies because of the EU rules, but he will not be under any serious pressure to do so vis a vis US companies. If you know so much, burritoboy, would you like to name some specific US companies that Sarko is all palsy-walsy with, please?

[Elliott Oti]

List of top 20 countries according to military expenditure.

1 United States 532,800,000,000
2 United Kingdom 66,800,000,000
3 France 64,611,000,000
4 Germany 57,500,000,000
5 Japan 46,000,000,000
6 People's Republic of China 45,500,000,000
7 Russia 32,400,000,000
8 Italy 32,093,537,000
9 Saudi Arabia 31,255,000,000
10 India 21,330,000,000
11 South Korea 21,050,000,000
12 Spain 15,792,207,000
13 Australia[4] 18,200,000,000
14 Canada 15,267,891,500
15 Turkey 11,492,161,000
16 Netherlands 10,369,920,000
17 Israel 9,444,000,000
18 Brazil 9,940,000,000
19 Republic of China (Taiwan) 7,923,000,000
20 Greece 7,648,561,000

Note the composition of the top 20. When Europeans are asked by the more militaristic Americans to "step up to the plate" and increase defence expenditures, one is forced to ask: "who against"?

And what exactly does being a superpower mean these days, militarily? The US' enormous and tremendously expensive capabilities for force projection has spawned a huge non-accountable military-industrial complex but has not enabled it to meet its objectives against such puny states as Afghanistan and Iraq; is this supposed to be the example the EU is to emulate?

In terms of pure defensive capability the EU is under threat from no-one. In terms of offensive capability and force projection the EU is - save for the US - globally unmatched.

The EU couldn't handle pacifying former Yugoslavia without the US; NATO has its hands more than full in Afghanistan, and Iraq has become the new Vietnam for the US. The lesson that has to be learned from this is *not* that the EU needs to tread in the US' footsteps, spend more money, or buld more aircraft carriers.

[Olivier]

I think Barkley got the best comment in here. And this comes from a French citizen who just moved on teaching in the US.
My feeling about Sarko is that we don't know much at all about him. Nervous, populist, ambitious, nationalistic and tough are givens, but besides that little is known. More will be known when he announces his government, in a week or so, in which there could be some surprises.
So who could he be compared to? Two names come to mind. He resembles Berlusconi on two grounds: his (indirect) control of the media and a certain taste to spend vacations on board private yachts. He may have something in common with Thatcher, too. But I doubt he will go as far as she did because of the reluctance of the French over the long run.
Sarko is a Gaullist and, in his priority list, he places French interests much higher than Europeans. I never heard him speak seriously about Europe for more than one minute. He remained silent during all elections on Europena matters, including the Constitution (but was nonetheless on the pro-side). The debate in France was not geared to that question at all. The only thing he said is that he said he would pass a short "core" version of the European Consitution, voted by Parliament --that is voted by his majority. I think this is his concession to the Germans, no more than that. He may want to free his hands that way so that he can turn his back to Europe for some time and concentrate on France, where so many things need to be done.
Now as for whether he will be more inclined towards "a European France, a French Europe or a France set against Europe" is a matter of taste and still uncertain to a certain degree. Not his priority right now; he could perfectly turn his back to Europe for some time and increase budget deficits -I don't rule this one out, as he may resemble another personality, Ronald Reagan. Over the longer run, my bet is that since the German-French alliance is long standing and working, Sarkozy might want to take control of the whole entity and bring it closer to to the British view, if that makes sense at all.
As for the relationship with the US, Sarko will never get too close to Bush and his collapsing party. Bad press. He will never support the US in the war in Irak for a simple reason, the state of the French military is catastrophic, having been underfunded for decades. He may be interested by the Iraqui recontruction deals. Sarko is also very close of prominent French businessmen, who in turn are very close to US businessmen and interests. New York banks, too, may be let to have a strong influence on French politics.

[anne]

Martin Wolf would do well to be a little less English, a little less wishfully English. France is Europe and Europe is France and there will be no change to France against Europe. The idea is absurd, though the English really are ever so wishful.

There are social and economic problems that will be fought over, but since France is doing awfully well for all the grumbling that is always France, there will be relatively little change. France will especially not become England or America, for there is little reason to imitate either.

Nicholas Sarkozy represents pretty much a continuation of a rather and rightfully self-satisifed France, that was completely right to the extent that it did not imitate especially America these last years and wanting to be a Tony Blair is surely no French vision.

[anne]

We, in America, who have the sense that the French really wish they were more American, are not looking at what has become of us these last years. What I find is a typically grumbly France, typically European France, that is awfully pleased and awfully fortunate not to have had George Bush or Tony Blair as president.

[anne]

Ah, and thinking of the catastrophic military of France. What are we to make of a military budget hear that is just about the highest in our history, as in 1952 during the Korean War? But, the military budget during Korea included the war in Korea, while the $190 billion direct spending on Iraq this years is, well, not in the military budget but, say, extra.

[anne]

I, of course, will be chagrined when France is invaded and conquered by Spain, but what do I know of military spending. Why would Spain wish to attack France anyway? The beaches are better in Spain. Still, Spaniards are a fierce people and the shopping is better.

[Barkley Rosser]

Regarding French military spending, one needs to adjust for PPP. Thus, the Brit pound is high now and the Chinese yuan/rmb is ridiculously low. China is probably #2 in real terms, and the UK is probably slightly lower than France, leaving it still #3.

Obviously there are various differences, but it is interesting to compare Chirac and Sarkozy. De Gaulle and his early followers, like Pompidou, were full bore Colbertiste dirigiste state centralizers, introducing and implementing vigorous indicative planning, a fair amount of nationalizations, and of course a host of support efforts for various sectors, from agriculture through the CAP to the subsidizing of various national champion firms. Chirac, was the original leader of the faction that wanted to go the other way, to be pro-laissez faire, following the US and Thatcherite models, and was indeed involved in various efforts to reduce planning and to privatize, especially while Mitterand was president. He also had a reputation for being pro-US, given all the time he spent in the US when he was young.

So, we all know how Chirac ended up after 10 years as president. The Economist whines about how he failed to follow through on all his free market reforms.

So, will Sarko follow the same path? Who knows? Probably he will do something to loosen up the labor market, given the youth unemployment problem. But, with the world's best health care system, well, there will be limits to undoing more traditional Gaullism.

[Ralph]

I find the discussion by Barkley and others about the direction that Sarko will take France economically to be fascinating. Mark Weisbrot of CEPR wrote an oped in the Washington Post that was interesting. He claimed that there is a widespread tendency to dismiss the French economy as weak because of its dirigiste, pro-labor laws. But in reality he claims the French have run their economy well and should resist pressures to turn in a ideologically rabid free market direction.

[anne]

http://www.mscibarra.com/products/indices/stdindex/performance.jsp

National Index Returns [Dollars]
12/31/96 - 12/31/06

Australia 12.8
Canada 13.5
Finland 17.4
France 11.9
Germany 9.7
Hong Kong 5.2
Japan 2.3
Netherlands 8.3
Norway 13.2
Sweden 13.3
Switzerland 11.5
UK 8.8
USA 8.3

National Index Returns [Domestic Currency]
12/31/96 - 12/31/06

Australia 12.9
Canada 11.6
Finland 17.1
France 11.4
Germany 9.3
Hong Kong 5.2
Japan 2.6
Netherlands 8.0
Norway 13.0
Sweden 13.2
Switzerland 10.5
UK 7.3
USA 8.3

Dollar Value Loss = 8.1%

[Notice the relative increases in stock index values for France and America or the United Kingdom these last 10 years.]

[anne]

http://www.cepr.net/index.php?option=com_content&task=view&id=1147&Itemid=45

April 26, 2007

Economic Misinformation Plays Major Role in French Election
By Mark Weisbrot

The elections in France demonstrate the power of faulty economic analysis, and more generalized problems with arithmetic, to shape ideas and possibly the future of not only a nation, but a continent.

The United States has faced similar problems with its debate over Social Security, in which the majority of Americans were convinced – based on verbal and accounting trickery – that the program is facing serious financial problems when the baby boom generation retires. (It isn't).

In France, Nicolas Sarkozy, the right-wing candidate, has taken the lead after Sunday's election with 31.2 percent of the vote, against Ségolène Royal, the left-of-center candidate of France's Socialist party, who garnered 25.9 percent. They face a runoff election against each other on May 6.

The general theme that has propelled Sarkozy into the lead is that the French economy is somehow "stuck" and needs to be reformed to be more like ours. It is also widely believed that France needs to be made more "competitive" in the global economy, since competition is tougher now in a more globalized world.

New York Times columnist Thomas Friedman has been the most popular proponent of the idea that French workers must lower their living standards because of the global economy. "All of the forces of globalization [are] eating away at Europe's welfare states," he writes . . . "French voters are trying to preserve a 35-hour work week in a world where Indian engineers are ready to work a 35-hour day." For Friedman and most of the pundits, this is impossible.

It is important to understand that there is no economic logic to the argument that the citizens of any rich country need to reduce their living standards or government programs because of economic progress in developing countries. Once a developed country has reached a certain level of productivity, there is no economic reason for its residents to take a pay or benefit cut, or work more hours, because other countries are catching up to their level. That productivity, which is based on the country's collective knowledge, skills, capital stock, and organization of the economy, is still there, and in fact it increases every year. To the extent that international competition is being used by special interests to push down the living standards of French or German or U.S. workers – and it is – it just means that the rules for international commerce are being written by the wrong people. It is a problem of limited democracy and lack of representation for the majority, not a problem that is inherent to economic progress.

Another mistake that is commonly made in this debate is to compare France's income or GDP per person to the U.S., by which France lags: $30,693 for France versus $43,144 for the U.S. (these are adjusted for purchasing power parity). But this is not a fair comparison, because the French do not work nearly as many hours as we do in the United States. Economists do not say that one person is worse off than another if she has less income simply due to working fewer hours. A better indicator of economic welfare in such a comparison is therefore productivity, which is as high or higher in France as it is in the United States....

[Ralph]

Besides Mark Weisbrot's oped, I ran across another article that seeks to refute the (suffocatingly) prevalent view that France's economy has fallen far behind the British and American economies because of its "anti-free market" dirigiste ideology. First, the reference is titled, France is a Basket Case Says Everyone, by Alex Higgins. The url is: www.axisoflogic.com/artman/publish/printer_24503.shtml/. Second, a few quotes. "If you've read an article in the US or British press about the state of the French economy,society,and body poilitc, you should read one. And only one. Because when you've read one, you have pretty much read them all." "In London, Washington, and New York, the analysis of France is simple and unchanging. France suffers because it has failed to make its economy more like those of the USA and Britain." "Virtually all indicators of living standards put France ahead of the US and Britain." "Poverty in France has fallen by 60% in France in the last thirty years - a staggering contrast with the US and Britain, where it has risen substantially since the 1970's....." "French babies survive more often than ours, they go on to live longer lives....."

[dave]

It means a more conservative Europe and one more sympathetic toward the current "Anglo-Saxon" strategic viewpoint. People seem to be forgetting Sarkozy's Islamophobia, which sits nicely alongside anglophone phobias provided those "allies" aren't dumb enough to ostracise France again for the offence of having some kind of national foreign policy.

In economic terms, I've seen no more indication of failure in France then in Britain; in fact the Franch quality of life seems far better and infrastructure more efficient. France's one obvious problem is its unemployment, for which Sarkozy's flagship proposal to ease overtime restrictions (getting more out of existing employees) seems just about the worst possible response.

[anne]

Thanks to Ralph, for suggesting Max Waisbrot and Alex Higgins, I would add for perspective:

http://www.nytimes.com/2007/05/13/opinion/13sun1.html?ex=1336708800&en=d16f14990a0d1b4e&ei=5090&partner=rssuserland&emc=rss

May 13, 2007

Hunger and Food Stamps

If you think people do not go hungry in America, you're wrong. At last count in 2005, 35 million low-income Americans — about a third of them children — lived in households that cannot consistently afford enough to eat. Since 2005, the situation has most likely become worse. Last year, real wages for low-income workers were still below 2001 levels. This year, job growth is slowing and prices are rising.

And each year, the federal food stamp program — the bulwark against hunger for 26 million Americans — does less to help. In large part, that is because a key component of the formula for computing most families' food stamps has not been adjusted for inflation since 1996. Over all, food stamps now average a meager $1.05 per person per meal....

[anne]

http://www.nytimes.com/2006/09/30/business/30chart.html?ex=1317268800&en=ad5705f838858638&ei=5090&partner=rssuserland&emc=rss

September 30, 2006

A Statistic That Shortens the Distance to Europe
By FLOYD NORRIS

Europe has high unemployment, brought on by tight labor laws that make it hard to fire workers and therefore discourage hiring them. The United States, on the other hand, has low unemployment thanks to its vigorous and flexible economy.

That has long been the consensus view, and it is supported by official unemployment rates, which are much lower in the United States. But there is another rate that can be considered — the employment rate — and that shows that the differences are narrowing, if not vanishing, for those in the prime working ages. The employment of women in Europe has been rising at an especially rapid pace.

The employment rate simply shows the percentage of a given population with jobs. Unlike the unemployment rate, which ignores those who are not seeking jobs, the employment rate is not affected by the reason people are not working.

A decade ago, in 1995, the employment rate in the United States for men aged 25 to 54 was 87.6 percent. In Europe, including the 15 countries that were then members of the European Union, the rate was 85.3 percent, a difference of 2.3 percentage points. By 2005, the United States figure had slipped and the Europe figure was up, leaving a difference of just 0.3 percentage point.

Statistics released by the Organization for Economic Cooperation and Development, as compiled by the Center for Economic and Policy Research, show that in that age bracket European employment was higher than that of the United States in 2002 and 2003, when the American economic recovery was producing fewer jobs than it has since. The return to a higher employment rate in the United States probably does reflect the faster-growing American economy.

Among women, the percentage of workers in that age group slipped over the decade in the United States, to 72 percent from 72.2 percent, while in Europe it rose to 69.8 percent from 61.1 percent. That cut the gap from 11.1 percentage points to just 2.2 percentage points....

[anne]

"French men are a little less likely to be employed than Americans, while French women are more likely." Ah, but what is the American minimum which so many are trying so hard to raise but trying with too little success, is it $5.15 an hour? Universal health care insurance and free college-university school in France, and have you ever sat and looked and listened to what goes on about at a French cafe street table?

[dave]

The French also start drinking wine as soon as they can walk, yet unlike the average Brit they get to remember their first sexual encounters afterwards. It also means they can sit at sidewalk tables without a passer-by deciding to start a fight with them out of drunken boredom. You feel it as the southbound plane/ferry approaches its destination - the grey gloom lifting as you enter a land where life is enjoyed rather than experienced as a pitiless sentence. Vive la différence!

[Barkley Rosser]

Well, a lot of reasonable points are being made in defense of France and its economy and society. But before we go all overboard and gaga, a bit of perspective.

Looking at the latest Human Development Index, 2006, the US is 8th, France is 16th, and the UK is 18th. Norway is tops, which is a reminder that most commentators in the US keep forgetting that the Nordic model offers a very humane alternative to the current French model that avoids the more inhumane aspects of especially the US model that the French reasonably do not want.

France is tops in many things, health care system, quality of cuisine (although that has been true for several hundred years, assuming one does not prefer Japanese or some other Asian), and certainly many other aspects of culture and life, which is very pleasant there in many ways.

However, the employment situation is not something to write home about. The unemployment rate is 9.9% or thereabouts, and while it is true that Europe as a whole has about the same employment rate as the US, France's is a good deal lower, and is especially bad for youth.

Some have trumpeted the 35 hour work week as a quality of life item, but I note that it was originally implemented as a way of dealing with the unemployment problem. It was a total failure in that regard.

I do think it is reasonable to point to various forms of over-regulation, both directly in the labor market, and more indirectly regarding starting businesses and so forth, as factors in the unemployment problem of France. However, I do not have a handy dandy list of what should be done, and Americans who say "be more like the US" by and large have their heads planted firmly up their... It also does not help that right at this time France has just about the lowest GDP growth rate in all of Europe, just above 1%. That will probably pick up.

So, yes, concern about unemployment, of immigrants and youth, was a factor in Sarko's election. Nordic countries offer an alternative way to go, where employment is much better and without the poverty one finds in the US.

Also, while Sarko has been accused of being anti-Muslim, he has supported establishing official Muslim organizations and some movements to some kind of affirmative action. Again, it is hard to forecast what he will do once he is in office and with a government of his choosing.