To someone who was asking him why, when he was going shopping, he bought rice and flowers, Confucius replied: I buy rice to live and flowers to have a reason to live. These words carry today a burning actuality. Is the State to allow us to survive, depriving us of our reason to live? The future will tell us but what is sure is, that everywhere in the world, we see the comeback of the State which breaks with decades during which, and not only in Western countries, followed policies were based on its disengagement and critics were tough, especially in France, against political leaders who were hesitating or slowing this trend.
This comeback first occurred in the many regulations dedicated to impeach the development of the corona virus outbreak. It was not without contradiction or without hesitation, regarding tests or the use of masks in public places. But they were resulting from past errors. Having no more the tools to cope with the virus contagion, the State, instead of recognizing its past errors, has started with disputing their efficiency, with the risk of affecting its credibility. It then took restrictive dispositions both about individual freedoms and economic activity which led France toward a major economic crisis and which forced it to carry out an unprecedented intervention policy to soften the consequences on economic agents, enterprises and household, of its action to fight against the pandemic extension.
During decades had been denounced the recourse to budget deficit to stimulate growth and the risks the public debts increase were weighting on “future generations”. Treaties were signed in Europe on these issues and procedures were created to fight against excessive deficits. Public services liberalization, now open to competition thanks to the State retreat, were supposed to increase their efficiency. Structural reforms were reclaimed to restore the welfare State balance affecting pensions and unemployment benefits. We were exclusively betting on the restoration of enterprises competitiveness through social charges and taxes reductions, the last one being the diminution of “production taxes”, a marvelous semantic invention which was giving the illusion that it was going to favor the comeback on the national territory of industrial activities when behind that wording was hiding the former professional tax which mainly weighted on big retail, banks and professional services. The assessment, produced by “France Strategies”, a government organism not suspected of hostility toward the dominant ideology, on the previous reform, the “CICE”, was, despite of that, damning. It has only generated the creation of 100 000 jobs with a cost of 18 billion euro per year during five years.
All these principles have burst into pieces with the pandemic. The State has been called for help and has not been aware of its resources. The 4th finance bill for the year 2020 would validate a public deficit of 11.3% of the GDP, i.e. 248 billion euro and an indebtedness level at the end of the year reaching near 120% of the GDP, i.e. respectively four times and twice more than what European Treaties allow. Arguments put forward in the past by economists, and which have been followed by political leaders, were based on the dangers such measures were carrying. Money creation and the demand increase would first generate an inflation wave. We exactly see the opposite, in France where it is near zero as in the other countries, especially in Europe. The public indebtedness increase was supposed to generate an interest rates rise which would heavily weight on debt charge “future generations” would have to endure. There too, the reasoning has been invalidated, and not only because of central banks action. The rate for French 10-years bonds during last October has been under -0.20% and November is not going to be different with a -0.35% forecast for the coming issuances.
The last evaluations of the pandemic cost for the State are mentioning 186 billion, i.e. 100 billion caused by the fiscal receipts fall caused by activities stoppages and 86 billon regarding granted public supports. The rebound program is forecasting new charges of 100 billion euro for the coming two years, including 23 billion which would directly profit to enterprises through taxes diminutions and capital increases (3 billion), amounts to which must be added investments and R&D programs in favor of competitiveness and ecologic transition. So the supporters of supply-side policies as these who defend Keynesian actions in favor of demand will be satisfied. But to make this policy efficient, the State must become again a Strategist-State and, when it is in charge as a shareholder or as a regulator, it must intervene in order to obtain that major French groups executives put an end to their passion in favor of mergers and acquisitions and spend more time to take care of their clients, of their employees and of their shareholders.
The de-industrialization and the disappearance of many national jewels has not as an origin, as it is permanently repeated, working costs and a lost of competitiveness but disastrous strategic choices frequently supported by the State. The acquisition by the former GDF-Suez, now Engie, for more than 10 billion dollars of coal and natural gas power plants has generated heavy losses and lead the group to sale its Suez shares. It was the same with the acquisition of ABB by Alstom which lead the group near bankruptcy and forced it to sale half of its businesses to General Electric, or again with Alcatel. Its merger with Lucent put it under the control of Nokia, which has just announced job reductions in Brittany. The EDF and Orange excessive indebtedness which still weights on their profits come also from uncontrolled acquisitions in Europe, in the U.S. and in Brazil during the Nineties. And this list is not exhaustive because it could also include Pechiney, Usinor-Sacilor now Arcelor under Indian control or again Lafarge after its disastrous investments in the Middle-East.
The State, which then pretended to reduce its influence, did approve the nomination at the head of these groups of high-level civil servants which made their carriers in Ministers cabinets. They preferred the company of their former colleagues which are now bankers or of their successors at the top of the State administrations to spending time with their employees or their clients. Their priority went more to the management of their businesses portfolio than to the strategy and the development of their businesses. They preferred to play Monopoly instead of the game of chess.
The great comeback of the State due to the outbreak must not be limited to deliver public funds to support activity and make it rebounding. Among the “structural reforms” France has to achieve, and it makes its difference with Germany, must be included the rehabilitation of industrial policy and the promotion of executives more committed to internal management and less motivated to imagine and negotiate financial operations. So, it will have been given to French enterprises a reason to live.