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AB 2000 studies

Alain Boublil Blog

 

Economic liberalism leads to populism

Liberalism has not the same signification in France than in Anglo-Saxon countries where it refers to political or societal issues. In France, it applies to economy and to a policy which confers to private economic agents the duty to reach major internal (price, full employment) equilibriums and external balances through the adjustment of the currency rate. To give a larger significance to this model, it has been invented the neo liberalism concept. It will be relaunched under Ronald Reagan mandate in the U.S. at the beginning of the Eighties through putting an end to policies inspired by Keynes and will let to the central bank the mission to re-establish price stability through a spectacular interest rate increase. A similar policy will be adopted a few times after in the United Kingdom under Margaret Thatcher who will break with the policies put in practice by previous Labor majorities and will achieve massive privatizations.

That trend progressively reached Continental Europe. Yet, British historian Tony Judt did very well explained that in the days following the war, England, through the institution of the Welfare State, France through the adoption of the program of the Resistance National Council and Germany through the creation of a shared prosperity system had chosen a new development model conceived to remedy to the economic unbalances which had been identified as the deep cause of the war. It was expected in doing that to avoid it replicates in the future. This analysis has started to be forgotten in Europe after thirty years of peace and prosperity.

Privatizations were not only regarding companies in competitive sectors. They targeted public services which were opened to competition. Under England influence, the move was extended to whole Europe along with restrictive rules applied to stimulate competiton. Mergers between companies would have to be approved by a European Commissioner granted with independent powers. The State aid concept was created to be immediately prohibited. A major tool of industrial policy, public orders, which had allowed France as Germany to favor the development of major groups in strategic sectors as rail transportation, telecommunications or space, was now prohibited. Yet, that had allowed to create hundreds of thousands jobs and the international development of companies confronted with their American competitors. The top moment of this policy will be reached with the project of a European Constitution where was inscribed as a principle, the “free and undistorted competition” to which national legal rules would have to compel.

The project will be rejected in Nederland and, through a referendum, in France. That decision was presented as a rejection of the European project but that was unjustified. What was then rejected was an ultra liberal conception of Europe and not the project by itself. A Treaty was signed after but it had neither the same legal consequences nor the same content because it didn’t include the principle regarding competition. So it is not right to pretend, as some are doing it today, that the government, at that time, had over passed the people will. But that has not slowed the increase of inequalities generated by the liberal choice. If wealth is accumulating itself inside enterprises, to the sole profit of their executives and their shareholders without putting in practice redistribution mechanisms, the resentment of the large majority of the population will be expressed by political choices in favor of populist parties, even if their leaders are not proposing remedies to the causes of this resentment. If public services are submitted to financial profits constraints, these ones will abandon less profitable territories and so new kinds of inequalities will be created.

Donald Trump election has probably resulted from the under achievements of the policy conducted by his predecessor to correct the impoverishment of a growing share of the American population. But the first victims of his policy, with his tax measures in favor of major companies and the invalidation of the system which insures against sickness risks, the “Obamacare”, will be precisely these who have voted for him. This situation has been made worse by technological innovations which, through “platforms”, have allowed to going round the few workers protective rules. The contestation of UBER driver contracts by the State of California which is governed by Democrats, shows that the debate is not over. It is the same thing in the United Kingdom with the choice, populist by nature, in favor of the Brexit which will hurt employment and the level of life in the regions where the referendum got its best score allowing its approbation. The difficulties of its achievement reveal the understanding by these who supported it that they will be the principal victims.

The contagion to Europe has not saved Germany, despite its system, celebrated for decades, where wealth is shared where it was created. The rise of the far-right party, AFD, is partly the result of a badly controlled immigration policy. But it is mainly the consequences of the inequalities between territories and the reforms, initiated by the last social-democrat Chancellor elected by the country, Gerhard Schroeder. At the beginning of the Twenties, unemployment rate in the former Eastern Germany was still around 18%, and migrations between the two parts of the country were restarting. The government made adopted texts changing the rules for unemployment compensations and opening the possibility of concluding precarious working contracts, the famous “mini jobs”. Unemployment fell in the East but it is still three times higher than in the West, poverty increased and that has induced AFD success in the State of Brandenburg with 22% of the votes and in Saxe with 27% of the votes during the last regional elections.

France, despite its redistribution system very high level, which is the purpose of many critics, has been much more affected than Germany by populism rise, either far-right or far-left. The choice, done in 2013 to reduce corporate social charges without any counterparts and to transfer the cost to household through tax increases and reductions of social allocations has made the gulf deeper between middle classes and the elite. This choice has favored neither growth nor employment. The reforms included in the program put in place from 2017 are amplifying this neo-liberal trend with the reduction of employees and jobseekers rights, the incentives to the creation of precarious jobs or without statutes ones as in the public services to adapt them to competition rules, the valorization of the role of “firsts on the rope” along with the recognition of the “runoff” theory, and, at the end, the threats created about pension systems. Growth is higher than during the two previous governments but it is still not strong enough to significantly reduce unemployment. The anxiety is increasing and generates hoarding behaviors which are the signal of a lack of trust. In the last European elections, the Rassemblement National arrived ahead of other parties with 23% of the votes.

The correlation between the implementation of liberal economic policies and the rise of populism is obvious. These policies are generating unbalances superior to their ability to reduce them. Political leaders in power are taking advantage of it because populism causes a rejection phenomenon among the population in France as in Germany. But are we sure that is forever?            

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