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AB 2000 studies

Alain Boublil Blog

 

The three causes of the French crisis

The crisis France is going through has deep roots. The disorders which are going along it and which are heavily hurting its image in the world are without precedent for almost a century. The support this movement receives in the public opinion, despite the unacceptable violence it generates shows the dimension of the country discontent. Political leaders public declarations, set aside the support to the forces of law and order, show their disarray. The few reactions to the first measures decided by the government confirm that only major changes must be proposed this one wants to put an end to the crisis. How did we get there? An economic policy based on false ideas, a punitive and wrong vision of ecology and an unsuitable communication have driven France where it is today.

The first of these causes, and definitely the post important one, is the economic policy chosen by the president of the Republic, which lies on the continuity and even the accentuation of his predecessor’s one. It is not surprising. He was his main advisor at the Elysée before becoming Minister of Economy from 2014 to 2016. Economists design it as the “supply side policy”. To make growth rebounding and to improve the ability of enterprises to cope with foreign competition, so to be more competitive, it is, following this policy, necessary to generate a big financial transfer to their profit. Between 2013 and 2018, corporate tax receipts fell from 47 billion to 26 billion euro. To finance a share of that measure, income tax on households rose by more than 10 billion, due to the fiscal shock occurred in 2013.

This policy has been increased after Emmanuel Macron election: augmentation of CSG levied on pensions, reduction of APL, des-indexation of social benefits, freezing of the minimum wage and of interest rate paid on Livret A saving accounts notably. It has been accompanied by “reforms” reducing employee rights. These measures were supposed to stimulate investment in suppressing hiring barriers. That policy has failed. The French economy is experiencing a quasi stagnation for six years, if we set aside a semester in 2017 which took advantage of a favorable international environment. Unemployment has not fallen, enterprise competitiveness didn’t improve and no amelioration regarding foreign trade balance has been noticed. Financial resources they received have not been used to increase wages, with the exception of top managers ones. A very low part of them has been spent to invest. Enterprises have used them to make foreign acquisitions, to remunerate shareholders and, regarding major listed companies, to proceed to share buybacks. Successive governments have asked French people to make financial sacrifices and to renounce to some of their rights without producing any result. That is the fundamental cause of the political leaders rejection and, at their head, of the president of the Republic.

The fuel prices increase has been the straw that broke the camel back. It results from the confusion between climate warming cause, CO2 emissions, and the pollution coming from particles emitted by diesel engines, coal-power plants and wood-fired boilers, among other sources. That confusion is born during the “Grenelle de l’Environnement” in 2008 and has been strengthened by a 2015 law about energy transition which has been one of the most damaging texts for the French economy. Fortunately, most of its content has been cleared out. To limit nuclear power production is absurd. That would provoke an electricity price increase much heavy on purchasing power than what had been announced on fuels. France is, among developed countries, one of the lowest emitter of greenhouse gas. The fight in favor of the climate is a noble one and allows our politicians, men and women, to appear in front of the international scene and to satisfy their ego. But this fight must not worsen the French economic situation. The fossil fuels end is a myth impossible to make accepted by families who use gas-heating systems and who need a car for there daily travels. To the opposite, the progressive exit from diesel is a public health obligation. The “Grenelle de l’Environnement” has been at the origin of a major mistake through the reduction of the taxes levied on this fuel and the incitation made for households to adopt this category of motorization for the vehicles they bought. An abandon of this policy would have been understood if that mistake had been recognized and explained, if the alignment on essence had been progressive and if supporting measures had been adopted. Instead of that, it has been imposed to French people a global rise of the taxation of the whole energy consumption, including electricity, whose production in France doesn’t emit CO2 to the difference of Germany or Poland. In a social environment made worse by the failure of the economic policy conducted since 2013 and the general diminution of purchasing power, the instauration of a punitive ecology became unsupportable.

The third cause of this crisis comes from the priority given to communication and announcement effects to the detriment of political action. The fuel taxes increases decided for the next four years had, as an objective, to strike public opinion. The objective has been reached. But, in reality, they didn’t bring anything since, anyway, fiscal measures must be voted every year in the finance bill due to the “annual principle”. If the government had merely pointed out and made adopted a rise for 2019, the measure wouldn’t have been so badly welcomed. The favorable decisions regarding purchasing power, as the suppression of the residential tax or the de-taxation of overtime hours are presented with a large publicity but they have few short-term impact. Regarding residential tax, its suppression will be staggered over four years. The perception of these who will benefit of it is not as important as in the official message. Regarding benefits offered to the employees, these ones are not fooled. They know very well that their employers will take notice of them in the evolution of their remunerations to limit it and that a large part of these advantages will have been an illusion.

To take France out of this crisis, the president of the Republic has only one possibility: to be humble and to recognize he was wrong. It will not be easy for him. He will have to build a new economic policy and to clearly justify his choices without paying too much attention to communication. Maneuvers margins exist. For instance, it is absurd to weight on the level of pensions with such a brutality when they are reserves of near 100 billion euro in the cash boxes of the additional pension systems. A more active management of the public debt would allow to reducing its cost. The reduction of the social and fiscal charges weighting on enterprises could be slowed because it has very few impact on growth and employment. At the end, it is urgent to put an end to the proliferation of administrative organisms, to the bureaucratic drift and to reform the territorial mille-feuille whose functioning is costly. Technocrats and local elected representatives won’t be happy maybe. But they are less numerous than the “gillets jaunes”.        

          

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