What future for French "capitalism?"
By Alberto Mingardi
One thing that always amazes me is how a free market economy is regularly the scapegoat of choice, even in societies that fall short of any sensible definition of “economic freedom”. Consider this Bloomberg piece, which advances the argument that “France’s Message for Capitalism Is Quite Simple: Adapt or Die”.
The piece interprets the revolt of the Yellow Vests in France, a rather complex phenomenon that saw different, if not conflicting, political sensibilities on the protesters’ side, as a wake-up call for “capitalism”. It is worth remembering that the Yellow Vests began, at least in part, as a protest against a fuel tax hike, sponsored by the Macron/Le Maire government, aimed at nudging people towards newer, environmentally friendlier cars.
Is that “capitalism”? Well, if we want to apply this label to social engineering, certainly it is. Later on, of course the protest began to incorporate different values, sponsoring bizarre proposals such as a “maximum” salary (together with an increase in minimum salary). I’m not the most attentive observer of French politics, but it seems to me that a huge variety of different interests coalesced here, with little ideological coherence, even though extremists of both the right and the left tried to jump on the band wagon. The relevant cleavage seems to be (as in much of contemporary “populism”) the one between the country and the city: the first tend to be suspicious of the second, as it is engaged in more “tangible” productions than those which came out of the service sector.
The article claims that France shows “inequality has made workers around the world more frustrated”. The Gini coefficient in France was 29.9 in 2009 and 29.3 in 2015. In the same period, in the Euro area, it moved up from 30.2 to 30.5. Italy, another country mentioned in the article as a wake up call for capitalists because of its current left-right populist government, saw the Gini coefficient increasing from 31.8 to 32.7. I am no statistician, but I wonder if the latter variation in the Gini coefficient can really be understood as signalling a momentous divergence between high and low earners.
What the article actually documents is the weakness of the French government, which has tried to undertake some reforms (for example, in the labour market) and now, bereft of popular consensus, has stopped and come to think it was wrong. That is hardly new in France, where trade unions and interest groups were often able in the past to stop even trivial attempts to introduce a bit more of flexibility in the economy. In what sense should this represent a failure of capitalism?
“You can’t fight populism with promises of more of the same”: so the article reports Societe Generale chief economist Michala Marcussen as saying. That is a good point. But more of the same in France is hardly “ultra-liberalism” (which is the way in which the French media labels even moderate market-oriented reforms), nor unfettered competition. French public spending is 57% of GDP: higher than in most contemporary, European social-democracies, let alone laissez-faire utopias.
It seems to me that claiming the protests to be a reaction to inequality is just a convenient shortcut. If people are angry, this must be about capitalism. And if you define “capitalism” as the status quo, sure they are.
Yet there are many things that may disappoint people in the status quo and yet have little to do with “too much” economic freedom. For example, unhealthy relationships between big business and big government. For example, the many personal bonds that tie together a political and business establishment which is considered self-serving and inward-looking, but is ready to call for ever more regulation and government intervention to address any issue. And sure you can have cases in which people’s perceptions are just wrong: it happens frequently insofar as immigration and international trade are concerned. And other cases in which interest groups are just protesting for a bigger cut of the pie.
The possibilities are quite a few, and that makes it all the more ridiculous to exclude them a priori, as all protests need to signal concerns for inequalities, and all concerns for inequalities call, of course, for bigger government