What France Really Really Needs

This article is a publication for the European Students for Liberty Blog, which regularly publishes liberty-related news stories. You can check out my articles on my blog profile here. The version on the ESFL Blog has been slightly edited.

10 years ago the The Economist created sort of an outrage and quite possibly the only front-page of the magazine that the République will never forget. “What France needs – France is in a similar funk to Britain in the 1970s: a Madame Thatcher could restore its confidence” showed Margaret Thatcher with the French flag as a background. It’s 2016 now and it’s really, really about time.

Economist_20061028issuecovEU_What_France_Needs_Thatcher

Strike culture

Whenever something becomes a word, you know it’s a major phenomenon that requires a specific term to describe it. “Gréviculture” is the French word for “the habit of unions to use strikes as a regular method of negotiation“. This is ironically indicative of what is profoundly wrong with France: having a word for a problem but not a solution. When I wanted to write on the current strikes against the labour law first, then ultimately did not because of my exams, I thought that by the time I get back to it the situation would be resolved. But this country never leaves you hanging, even when your expectations were low to begin with.

So who’s fault is it that France is not working? (in the literal sense and… well actually, in both senses)

France has five big trade unions of which the biggest one is the CGT (Confédération du Travail / General Confederation of Labour). We don’t have the time to dive into the various differences considering the other four (nor is it really of interest) but quite logically all of them compete for the membership of workers, which makes it a competition of who can blow off the most steam, off who can have the most influence.

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They think we’re fools. The labour law reform is only good for employers”

That seems odd, is France not already the most union-friendly country in Europe. In fact, in 2015 43% of the general population viewed the trade unions as favourable for their workers rights, a number that increases the younger the surveyed people were (32% for 65+, 54% for 25 and under). Here’s a demonstration of just how influential the French unions are: in 2012 there were 2.4 times as many companies in France with 49 employees than with 50 (Source). This is not out of employers’ love for uneven numbers, but much rather with the French Labour Code that makes much of its restrictive content effective as soon as a company passes to the number of 50 employees. Union representatives then sit on boards, get daily meetings with executives and co-decide on pretty much everything from contracts to rearranging the furniture.

The CGT is now protesting the new French labour law – a spineless project that has no effect in loosening the tough labour regulations – for several weeks, with no end in sight. Streets of major cities are routinely blocked for protests and violent groups attack police officers, with results in conservative (opposition) politicians and trade union representative accusing each other of violence.

The exact same thing happened last year when Minister of the Economy Emmanuel Macron liberalised the inter-city bus industry and allow more businesses to open on Sundays. For the trade unions it’s not about the actual substance of these laws, it’s a demonstration of their power. And power they have.

The dramatic dilemma of the Socialist party

When François Hollande opposed Nicolas Sarkozy (conservative president 2007-2012), his agenda was a newborn French left: declaring war on big financial institutions, protecting French labour rights as they are. Unfortunately for the Socialist party, ideals met reality and seemingly recognised that France’s level of taxation and labour protection, together with a bloated public sector, would ultimately lead to it’s transformation to the next Greece. The controversial 75% tax on individuals making over 1 million euros a year got scrapped after a year, and the change of rhetoric and legislative priorities made Hollande lose support of the Green Party and created numerous rebellious elements (of which many sit in parliament) in his own majority.

The favourability ratings of François Hollande are at a record low, recent polls now show him being beaten by both the eventual conservative candidate and the far-right Marine Le Pen in the upcoming presidential elections next year. His own party members are now suing the party so that primaries for these elections will be organised, which could very likely be the end of Hollandes’ political career. The government lacks all cohesion. We’re now in the fourth restructuring of ministerial positions, since Hollande’s own members of government repeatedly quit and later join the government again, if they believe it wil help them to get reelected. Hollande and his government cannot give in to the unions, as it would be their decline. It’s all about surviving until 2017 at this point.

France’s problem with taxation and regulation

In the Heritage Foundation Business Freedom Index France is ranked as being ‘moderately free’, a devastating regional ranking for Europe of 32nd (out of 44). Comparing its overall score to the United Kingdom easily visualises the situation, notably since the country barely keeps itself above the global average (with all the incredible unfree countries that includes).

HFFrance

grey: United Kingdom
pink: France
orange: global average

It’s not starting a business that keeps French people away from becoming entrepreneurs (according to the World Bank doing so only takes four days), but much rather maintaining it.  The corporate tax rate is at a staggering 33.3% as of this year (8+% above the OECD average and 11+% above the EU average). If you then add the strong trade union presence, strikes, and workers’ protections that can get you prosecuted for years to come if you lay them off, then making your living in the République does not seem too appealing.

“The code sets hurdles for any company that seeks to shed jobs when it’s turning a profit. It also grants judges the authority to reverse staff cuts years after they’re initiated if companies don’t follow the rules. The courts even deem some violations of the code a criminal offense that could send executives to jail.” [1]

Margaret Thatcher’s legacy

What needs someone like Margaret Thatcher, and it needs it soon. In the late 1970’s the United Kingdom was practically a third world country. Waste stacked up in the streets and electricity shortages were a daily experience as trade unions paralised the countries with strikes. The same as in France today, politicians seem unwilling to take the necessary courage to stand up to the unions and enable the so needed reforms.

Thatcher

Thatcher led a strong course of free trade and free markets. Thoroughly inspired by Austrian economist Friedrich August von Hayek, she knew that subsidising industries with taxpayers money would ultimately lead to the countries decline. Thatcher lead massive privatisation, weakened the influence of the trade unions via legislation, cut income tax and loosened up labour regulations. From 1983 on the United Kingdom saw itself go from a developped country with the highest unemployement rate to one the lowest.

Even today Thatcher’s legacy lives on, notably in the flat tax systems in the Baltic states, a system that the former UK prime minister never achieved to introduce in Britain.

France needs to get its act together  and change course before the turning point, which was 1979 for the UK, will be gone indefinitely.

Vive la France.


[1] Bloomberg

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