“It’s not expensive; it’s paid by the state.”

On the 6th of November, French President François Hollande (PS) gave a 90 minutes interview on the occasion of the half time of his mandate. During this interview, he managed to summarise everything that is wrong with the political system of today, in one simple sentence.

“It’s not expensive; it’s paid by the state.”

Before we dig into the meaning of this sentence in today’s society, let’s just have a quick look at the context in which François Hollande said this. In fact, Hollande had got an audience question by a young man who had stopped pursuing his law studies and who couldn’t find a job. The French president then said this[1]:

Hollande: “We will create jobs for people without a diploma.

Interviewer: “But that’s really expensive!

Hollande: “No it’s not. It’s paid by the state.

7174043798_87747bebd9_o

It’s certainly an extraordinary statement (and hopefully all of my liberal friends who had not heard of this already are still breathing by now), that characterises the way government spending is perceived so often today, and especially why it does not work out. François Hollande studied political science at the Paris Institute of Political Studies and he worked at the Court of Auditors, so he should, by every means, have the knowledge why things which are paid by the state cannot in any way be considered as free. It should make sense even to a child of young age, that the ice cream paid by his parents with its own pocket money, is not free. Yet it is a common assumption today, that the money we get from state institutions comes from “somewhere else”, prescribing its sole existence on the good will of the government.  That is why students, just as well as companies, unions, religious communities etc. demand more subsidies. The trouble with saying ‘it’s free’, is that eventually people will believe you. They will deduct that if it is free, there should be no opposition as to increase the quantity. After all, someone else is paying anyway. Imagine all supermarkets would be controlled by the state, and a certain quantity of articles could be picked up every week. It is far more likely that in state-controlled supermarkets, people will ask for more free goods, since they consider that they are more deserving than others, than in a free market situation where people see the direct link between their financial resources and the goods they can afford.

So yes, the question people ask themselves is “how can I get more of it?”, rather than “where does it come from?” or “what else could have been done with that money?”. We can certainly all agree on the fact that the government is definitely not going to magically increase the value of its tax income, or as Frédérique Bastiat would have put it[2]

I must beg you, gentlemen, to pay some little regard to arithmetic, at least; and not to say before the National Assembly in France, lest to its shame it should agree with you, that an addition gives a different sum, according to whether it is added up from the bottom to the top, or from the top to the bottom of the column.”

Until this point, members of all political spheres can agree on the point that the services are not free, but that the money is merely redistributed. Now the problem with this redistribution is that it changes with the definition of what is ‘fair’ or ‘effective’ made by the respective legislator. Government X thinks the tax income should be spend on wars overseas, Government Y thinks big corporations should get further subsidies, while Government Z considers that the increase of pensions for old people to the detriment of the young generation is important. Apart from the arbitrary judgement of government interpretation of fairness and effectiveness, we have the simple inefficiency of the state. Why? Efficiency on a marketplace for example is determined by self-interest and by competition. The state is subjected to neither of those: it doesn’t have a self-interest and it has no one competing for better quality or price. That is why government institutions run a deficit: they have no incentive for improving and can’t go out of business (or at least it takes a long time to do so). This also explains why there is less innovation under a monopoly than under competition.

10600607_10152350620280197_8745295833416356581_n

Now you might say ‘ok I got it, it’s ineffective and it’s arbitrary, but how is Hollande’s statement so representative?’. François Hollande did not say this sentence on purpose. There is no deeper intention behind it. It is just telling us so much that he made this statement as if it would go without saying, as an automatism. After all François Hollande is the most important political figure in France, and at one point he was legitimately elected. The fact that the French are highly disappointed with his work is mainly because they reject his exploitation of the middle class and businesses, as it will lead to the country’s bankruptcy. But it seems that in the meantime, handouts proposed by the oppositions just appear to them as an alternative, so it’s rather the unpopularity of one politician than a changing political ideal.

You can undoubtedly do the test: Ask people around you if some services they use without directly (!) paying for it, are free. A good example is national education: almost everyone would describe the education system as being free, and therefore wouldn’t favour a privatised system. Now if you engage them in a discussion and ask them ‘who pays for the system at the moment’, they remember that it is paid with taxes, and think that it is opportune for them to know exactly how much that is. In an OECD report we learnt that Luxembourg actually spends almost 14.000 USD/per student on primary school education and almost 20.000 USD/per student on secondary school education (which is double the OECD average). With this amount of money a luxembourgish family could also finance a private school, even in a system with only a few competitors on the market.

CaptureOECD

The premise is thereby simple: imagine what you could do with your money if you regained control over it.

It seems as if the French don’t ask themselves that question, they prefer hating the president in charge. They think it’s more important to know who might be the next president, is it Hollande again, or Sarkozy, Juppé, Strauss-Kahn, Royal?

So you ask who’s going to win? Let me put it this way: Not you.


[1] As translated and quoted from this article in Le Figaro

[2] From That which is seen, and that which is not seen, chapter III Taxes http://bastiat.org/en/twisatwins.html

Pictures are Creative Commons.

The carricature is from the Young Americans for Liberty Facebook page.

Thanks for liking and sharing!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s