TheMillerCircle.org

The staunch conservative British publication The Economist has perhaps shocked its readers who have heretofore been inculcated by free market economic models and typically pray at the alter of letting business run the economy, just as we used to do it here in America with our Chicago-school of economics, the brand some might call Reaganomics, or if you are on the other side of the Atlantic, it would be Thatcherism.  But the editors of that solidly right publication apparently have not been immutable to their surrounds and the economic fragilism that is coming out of most countries around the globe. Even The Economist seems to acknowledge that the Reaganomics/Thatcherism model is dead. The last rights for those systems have yet to be administered, but when finally undertaken, someone must ask the question whom did such a model actually serve? Far more important than administering the last rights of one system however, is to look around for another to replace it. In the May 7th issue this year, the magazine declared that the French way of doing things looks pretty good right now. This is roughly the equivalent of committing journalistic seppuku.  William Pfaff has also picked up on this story and he is always worth a read.  If you have ever read The Economist (I used to subscribe to round out or balance  my portfolio of reading (initially a gift from a friend), but I quit on it about a year or so ago), you can appreciate that they must have swallowed hard to print this story and provide some facts supporting their conclusions. The truth is, that to this hard right journal, other economic models look pretty good right now and France is the current target.

France is a strong social contract state, with heavy taxation, regulation and protection. In recent years, the French economy has come under criticism for not generating enough jobs and oddly enough, the new French president, Nicolas Sarkozy, once declared the French model was moribund and needed to reform along the lines of the American and British models. Before Sarkozy was elected, members of the IMF laid out the failings and costs of France’s public spending system, which in 2007 accounted for 52 % of GDP, compared to 45% for Britain and 37% in America. During the decade of 1997-2007, France’s annual rate of GDP growth was below the OECD.

The French economy has been hit hard by the recession, with unemployment reaching 8.6 percent in February, and there have been incidents of “boss-napping”, a form of kidnapping in which managers are kept overnight in their offices by the workers of the companies (something we could use to good effect here in America). But, the French economic model has shown other signs of endurance and superiority over its European counterparts. The French GDP is expected to shrink by about 3% this year, according to the IMF, with Britain at 4.1%, 4.4% in Italy and 5.6% in Germany. France is far less dependent on exports than Germany. The French are good savers. They didn’t spend heavily on mortgages and household credit debt as a share of GDP is less than half what it is in Britain or America. As we lie here, captives of our failed banking system, the French have not yet had to rescue any French bank from collapse and none have been nationalized. While there is outrage about bonus payments for executives in France, as elsewhere, the income gap in France between the top 10% and the bottom 10% is far smaller than that of Britain or America. The French are now taking delight in the expressions of the Obama administration who are sounding more and more like they want a French model for the American economy, though no one as yet has called it by that name. But Obama wants Americans to spend less, carry less debt, save more and make real things through manufacturing rather than have our leading economic gains be achieved through the financial sector of our economy–paper profits. Both Gordon Brown of Britain and Mr. Sarkozy have declared that “laissez-faire has had its day.” Britain is beginning to look towards France rather than America as the French long-term strategic planning has been identified as one of the stabilizing forces in the ability of the  French to soften the blow of the current down-turn. As you may know, the concept of long-term planning is a “no-no” in the U.S., because it implies more of a command economy, which of course, is precisely what the French have. At the last G20 summit meeting, Mr. Sarkozy called the meeting the end of the Anglo-Saxon model of capitalism. So in this economic downturn, the French model has found favor, even in France.

“In bad times, it is the French social system that enables people to keep their heads above water,” said Caroline Cayeux, the mayor of a small town in the Picardy region of France. Even small towns in France that have felt the blow of factory closings, retain the normal activities that give the French cities the appearance that nothing has changed. The flower beds are as rich as ever, being tended by 130 gardeners in the city of Beauvais and 43% of the town’s residents live in rent-subsidized housing. It is hard to sense that public activities have diminished almost anywhere in France, due to the layers of social protection that assist people in good times and bad.

21% of French workers have jobs in the public sector, but a far larger percentage have jobs or are in retirement plans that are relatively free from wide shifts in the economic cycle. In addition, unemployment benefits up to 75% of salary, a significant number of payments for families, including a payment plan for newborn babies, helps to shield the French from disastrous outcomes when the economy goes south. Consider the contrasting situation in America, where we have created thousands of new homeless  families who have very dim prospects of ever returning to a home. The way our economy is rigged, the lower rungs of our economic ladder will remain that way, while the top rungs make a more significant recovery. Unless something very dramatic is done to our economy, the recovery from this downturn will further increase the difference between the high and low income levels of the country. That’s the way our economy is wired. Things flow from the bottom to the top. The capitalism that we have allows rich people to make money off the poor. As Bill Maher said on his show the other night “what other country allows people to make money by screwing its own citizens?”

France’s health care system is another jewel in the crown. It is a mixture of public and private provisions which provides universal coverage, with a relatively healthy population for half the cost of our American disaster we call a health plan. The French have a higher life expectancy than the British or Americans. A means testing system in France is used to determine who needs private insurance to give people full benefits which are the same for the wealthy and the poor. The wealthy pay a little more for their insurance. The World Health Organization (WHO) has declared the French health care system to be the best in the world. Imagine covering everyone in America for about half of what we pay out today for health care!

The public outlays that the French already make to support their system constitutes their “stimulus package” and it is one reason why Sarkozy has said that France is already doing enough to keep the economy going in these rough times. The difference between America and France, is that the French have a continuous on-going stimulus package, whereas ours has to be generated transiently and politically, sometimes with great difficulty and once put in place it is never focused as well as that of the French system. To the French, it is outlay of cash benefits. To Americans, we would rather deal in tax incentives or tax credits. In our case, you sometimes have to wait a year to see the benefit.

The modern French economy began to develop after World War II, when much of France had to be reconstructed from the ravages of the war. Long-term planning entered into the equation, including that for infrastructure and the social contract and network system of support. France has a robust rapid rail system that reaches 190 mph and these trains provide a viable and ecological alternative to cars. These trains connect between the major cities and are used by businessmen to travel. Nuclear energy now supports 78% of all French electricity and the country is a net exporter of electrical power. The French government is not afraid to start new companies, or rescue financially troubled ones and try to improve them. The French have a group of highly technically skilled workers trained in their education system, so they have the engineers and technologists who can step in and improve companies or begin new operations. As with any planned economy, the French have a lot of rules which prevent excess, like the number of taxis allowed on Paris streets (15,300). Lorries cannot use the highways on Sundays. The French airliner Air France is said to be the best airliner in the world; it is certainly the most profitable. The French-dominated Airbus now sells more planes than Boeing.

Given all the obvious advantages of the French economic system for protecting people in good times and bad, you would think that Americans could learn a lot by studying the French model and hopefully we will. As I pointed out earlier, the Danish model is an excellent one as well, but people tend to diminish that model as one appropriate for a small country. But the French have proven that a more socialist economy can work far better and do so in a country large enough to consider the benefits that Americans might reap by borrowing from France. But, we must also keep in mind that the French had a major revolution, stimulated by the one we had against the British, just slightly later on the timeline of 1789-1799. But theirs was an internal revolution in which they guillotined a good many of the Republicans (aristocrats), perhaps laying the ground work for what we see today in the French economic model, which stresses equality far more than what we see in  our system. Does that insight lead us to a new strategy for fixing the things that are terribly wrong with our own system of social justice and the need for a new social contract? Well, maybe we can achieve at the polls what the French achieved with the guillotine.

RFM