The political debate, in France, regarding economic issues, could be summarized in this way: the Right and the Center believe, to improve the economic situation of the country, that the right thing to do is to follow a supply-side policy. Reforms and financial transfers will give to companies more room to maneuver. That will sustain growth and they will create jobs. It is what Emmanuel Macron explained last Sunday when he was talking about past and coming measures, including the reform of the wealth tax which would guide saving toward investment in enterprises. On the opposite, the Left, with all its components, thinks that it is through the increase of the purchasing power and of public investments that growth will restart and unemployment will fall. The president of the Republic has not changed his mind since the period when he was François Hollande economic adviser and he recommended this supply-side policy.  

This debate is also present among economists who opposed themselves for decades on that same issue. Keynesians stay loyal to their master who, according to what must be considered as a legend, recommended to Roosevelt the New Deal which permitted to the country to go out from the 1929 crisis. Regarding the liberals, who inspired, during the Eighties, Ronald Reagan and Margaret Thatcher policies consisting in reducing the role of the State in the economy and in giving a maximum freedom to enterprises, they believed that free and non-biased competition would bring the maximum of rewards to everybody. These two visions are rather caricatured. The Keynes invaluable contribution cannot be summed up to “the rebound plan” concept but to the demonstration that the market doesn’t always find by itself the equilibrium and it is the duty to the State, in case of disequilibrium, to find the appropriate remedies. The concept of “economic policy” is the most valuable legacy of Keynes thought. In the same time, the liberal vision which consisted in finding a better management of the State intervention in fighting against bureaucracy, in having trust in competition to reduce  inflation and in opening borders to offer to consumers a larger choice of products, has proved itself successful, notably in France, during the Eighties. We could add that that opposition between these two visions is artificial because it exists a time when a demand oriented policy is necessary to stimulate activity when that one is deficient and also time when the support to enterprises in order to invest is appropriate.

But the debate, especially in France, has reached such a high intensity that these kinds of nuances are not, or not yet, a topical question. The French economy suffers, since 2011, i.e. since the mechanical rebound following the 2009 Great Recession, of an unprecedented stagnation. It is necessary to come back to the Thirties to find, in a peace period, such a situation. The first consequence has been an also unprecedented rise of unemployment. Even if the overall economic situation seems to improve for some months, the problem has not been solved. The opposition between the two economic policies which, it is useless to deny recreates the traditional split between the right and the left which is not as old-fashioned as some are frequently saying, is still very present. What are the reproaches made to the demand-oriented policy which is proposed by all those who note that the policy concentrated on the supply side has not given the expected results?

Before answering this question, it is necessary to remind that the stimulation of demand is not absent but it has a new origin because it has been transferred to central banks. Through the reduction of the interest rates level and through the support to economic agents to indebt themselves in order to invest, they play the exact opposite role they used to have in the past. In order to fight against inflation, they were completely free to weight on demand through interest rates increases in order to dissuade economic agents to borrow and to invest. The “Trial of rebound plans” is not new but it is frequently founded on a wrong case, the policy followed by the Left in France in 1981. It is now established that the foreign trade deficit increase in 1982, which will provoke monetary realignments inside the European Monetary System and the severe measures adopted in 1983 was not the consequence of a household spiraling consumption generated by the purchasing power increase but by the impact on the French oil bill of the sharp increase of the dollar caused by the American interest rates rises decided by the FED. Supporters of supply-side policies explain, in France that if a support of internal demand is decided, that will generate more imports which will not generate any job creation because our companies are not “competitive” which justifies the policy in their favor to allow them to regain that lost competitiveness.

Unfortunately, this argument has been invalidated by facts. Despite the policy followed since 2012 in favor of supply, no progress has been accomplished, even the opposite, regarding employment with a huge rise of the number of jobseekers, or foreign trade where manufactured goods deficit increased year after year to approach 20 billion euros. In 2011, income taxes brought to the State 51.4 billion and corporate taxes 39.1 billion. In 2017, according to the last estimations published by Bercy, the first one will bring 73.4 billion and the second one only 29.1 billion. Fiscal charge transfer has been massive but it is difficult to pretend it has produced the expected results. The truth is that it is not the State, even when it is an important shareholder as in Renault for instance, which determines strategic choices of French companies. These ones have adopted a delocalization policy to the opposite of their German competitors. The case of the car industry, which is the industrial activity which carried one of the the heaviest charge on French foreign trade deficit and on employment, is a good example. Germany chose to keep assembly lines on its territory in using robots to a maximum extend. That has also strengthened its position in the mechanical industry. But French carmakers closed their plants and got supplies from abroad. The comparison between countries of the number of operating robots per 10 000 salaries is revealing: they were, in 2015, 300 in Japan and in Germany, 175 in Italy and only 125 in France. The supply side policy did not incite our enterprises to modernize themselves and to keep on their territory the value-added.

It could be added to the trial made to households that it is not the low-wages employees who acquire Audi or Mercedes, even if everybody should be more responsible when they spend their money. The president of the Republic has chosen to be careful when he was asked when the results of his reforms will be felt: “in 18 months or in two years” he said. That gives him enough time to correct his policy in a direction more favorable to purchasing power because, as a great French industrialist, François Michelin, explained once:” the most important persons in a company are their clients”.