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Sarko has some terrible ideas

Every time he has tried to address a flaw in the French economy he has made it worse


 

090413_wells2When I returned from France after a year abroad I was surprised how often people asked me about Nicolas Sarkozy and Carla Bruni. Fair enough: the French president married a pop singer who likes to pose naked. It’s the sort of thing that makes people curious.

But in France people don’t talk much about Carla Bruni. In France everybody is a pop star who poses naked. And when it comes to Sarkozy they have bigger things to worry about. Mostly they talk about the way Sarkozy has shattered their hopes.

There is a new book about all this: Les Réformes ratées du Président Sarkozy (“The Failed Reforms of President Sarkozy”), by two economists, Pierre Cahuc and André Zylberberg. Its conclusion is breathtaking. Every time Sarkozy has tried to address a flaw in France’s economic policy he has made it worse. That sounds like a joke or hyperbole, but Cahuc and Zylberberg aren’t wacky guys. They build their case implacably, showing how failure is built into the way Sarkozy goes about his business.

“In every area we looked at, the government thought it could catch off guard those interest groups that would be threatened by reform by imposing very short deadlines for consultation,” they write. “But these groups are very well organized. They mobilize quickly. Their expertise is often greater than that of ministerial staff and parliamentarians.” So Sarkozy announces a grand reform, then charges into negotiations with unions, business groups and other special interests and loses his shirt.

Take the first great emblematic reform of Sarkozy’s presidency. He wanted to let the French “work more to earn more.” Previous governments legislated a 35-hour workweek on the assumption that the amount of work in an economy is finite and must be rationed like beef in wartime. Sarkozy is persuaded that “work makes work,” that up to a point, increasing labour produces its own returns that pay for the extra investment. He’s right. But what did he do? He made overtime tax-free, eliminating employees’ income taxes on every overtime hour and reducing employer-paid premiums for the same hours.

After announcing the broad outlines of the reform, Sarkozy sat down with the labour unions and the employers’ federations, who negotiated circles around him. The resulting law allows employers to pay lower wages for some hours, and make up the difference in richer overtime. In effect, they can designate as “overtime” hours that used to be worked as part of the ordinary week, and pay their employees, say, 20 hours at the lower salary and 15 at an overtime rate. The employee works the same hours, and gets the same pay, only now both employee and boss pay fewer taxes. The cost to the French state is huge, about $9 billion a year. The effect on productivity is negligible.

Onward. France’s employers are reluctant to hire anyone because it is so hard to fire them. One reason out of many: courts have declared that layoffs will only be permitted so a business can safeguard its competitiveness, not to improve it. Michelin was made to pay $15 million for the crime of laying off 147 employees while the company was running a profit.

Along comes Sarkozy in 2007. His prime minister, François Fillon, proposes a labour-market reform. Negotiation with the usual suspects produces no change to the morass of pre-existing labour law. But the “social partners” do come up with a change that allows bosses and employees to part company amicably. The ex-employee then gets unemployment insurance. For three years.

This is a great deal for employees, who can retire at 57 and spend three years on pogey before qualifying for an equally generous state pension. It’s a great deal for bosses who can replace pricey senior employees with cheap rookies. It’s a lousy deal for the government that pays for all of this without improving labour mobility. But by the time Sarkozy and Fillon figured that part out, it was too late to back out.

What else? In 1937 there were 14,000 taxis in Paris. Sixty-nine years later there were still only 16,000. Prices are high if you can even find a cab. If you want to break into this racket you can buy a new hack licence (the going rate is between $270,000 and $600,000) or get on a waiting list (the wait time is 18 years). Cracking that market open would create tens of thousands of jobs. Sarkozy and Fillon tried. By the time they were done, cab fees were up and nothing else had changed. Other professions need reforms to cut costs and increase employment: hairdressers, veterinarians, pharmacists, notaries. Having failed at his first move, Sarkozy will not try again.

The French hired Sarkozy to simplify their lives, to strip away the layers of regulation plastered on by too many too-clever-by-half governments. His last month as a popular president was September 2007, when the streets were clogged by strikers. People thought change had come. They knew it would be hard but they thought it would be worth it. Five months later Sarkozy had a new wife and everything else was the same. Today a friend asked me how Sarkozy is doing in the polls. I didn’t know how to explain to him that for the French, nothing could matter less. It’s an unbelievably sad story.


 

Sarko has some terrible ideas

  1. Interesting column. It’s too bad that Sarko turned out to be such a dud, because the French clearly need some real reforms. France seems like a dysfunctional welfare state that was struggling to stay afloat during the best of times. Now that we are in the worst of times, the outlook for France is bleak.

  2. I did not believe it possible that any French president could be worse than Chirac. How wrong I was.

  3. Poor France. Perhaps it’s their stupid presidential election system? I’d be hard pressed to say how it’s stupid, but somehow the sensible voters end up with no choice in the run-off: eg. in 2002 (no choice at all), and again with Sarko in 2007. I mean seriously, choose between Royal and Sarkozy on who’s less incompetent. Or maybe the French public, as a whole, is to blame for letting these kind of candidates seem credible. The real tragedy is that, in reaction to Sarko, they’re probably going to go the other way, into even more nebulous interventionism, in 2012, so it will be 2017 (at a minimum) before somebody shows up to free the poor (and the economy) from the bourgeois hostage-takers.

    • “The French hired Sarkozy to simplify their lives, to strip away the layers of regulation plastered on by too many too-clever-by-half governments. His last month as a popular president was September 2007, when the streets were clogged by strikers. People thought change had come. They knew it would be hard but they thought it would be worth it.”

      It’s not the system, it’s simply lack of leadership. He can’t be removed for 5 years and doesn’t really care who heads up the government as he gets to choose the Prime Minister, so why does he cave in (like Chirac did) at every opportunity ? How terrible for the French to have their hopes raised only to have them dashed once again by this milquetoast.

      Maggie faced down the miners. Ronnie fired the air traffic controllers. Sarko married a model. Pathetic.

    • Perhaps it is a diabolical Sarkozy scheme?

      Leur donner assez de corde et ils se pendre.

      • Si on leur donne assez de corde, ils vont se pendre.

        Forget hanging – the way things are going in France, they’ll have to bring back the guillotine.

  4. Immobile labour ……… what a thought. Nail a note on the Guild Hall door.

  5. The only hope for France in 2012 is for François Bayrou to accede to the second round of the presidential election and defeat Sakorzy. The Socialist Party is in a shambles, and even those French who haven’t figured it out already (Sarkozy is not doing well in the polls) and who do not read Macleans, will have realized by then that Sarkozy is a hack. If Bayrou is elected France will have become a true democracy, capable of engendering change from the bottom up. Let’s hope it happens, because if it doesn’t, and either a Socialist is elected, or Sarkozy is re-elected, God have mercy on France.

    • I was cheering for Bayrou in the last French presidential election, until I saw his wishy washy platform …

      • Check again, Mulletaur, Bayrou is coming out with a book on April 29. He’s not wishy washy, he’s a centrist.

        • I am looking forward to reading this book. I hope that I will not be disappointed, Guynemer – on behalf of le peuple français.

    • I live in France and I don't read Macleans. But I know Sarkozy is a hack … and so is Bayrou. We are doomed.

  6. OK, I’ve been pondering this, and I’ve decided (drumroll, please) that the problem is not Sarkozy per se but presidential government. The elected dictatorship thing is a recipe for disaster. First, if you pick a douche à la Sarko or Bush you have no recourse for four/five years. Second, the awful loneliness of the God King means that he doesn’t automatically have networks of influence, as he would have if he had come up through a parliament. Third, it’s a recipe for gridlock, as Bush’s second term and Sarko’s only term demonstrate incontrovertibly.

    Let’s give ourselves a pat on the back. We may have a completely dysfunctional Parliament and a hubris-crazed PMO, but even so they’re more in tune with the nation’s mood and more sensitive to criticism than a God King would be. Long live Westminster government!

    • Hear, hear!

    • Actually, the authors of the book I crib have an interesting diagnosis about what caused this mess and how to fix it. I’ll get to it tomorrow, I hope. Short version: it is indeed systemic, not personal.

      • Ah, I look forward. The good thing is that the French are not averse to changing their constitution. This Republic has lasted 50 years, longer than any other; maybe time for a tune-up.

        • Er, longest except for the Third Republic, I mean. So, uh, Vive De Gaulle!

      • So why are we in Canada trying to emulate these bozos? If you were to seek the common thread that links nearly every disaster in the Canadian federal system it is trying to shoehorn our “blacklist” Westminster system into the European civil code “whitelist” system. C51 and C52 and now C6 explicitly allow the imposition of these foreign (to all but Quebecers) ways without even the casual oversight of Parliament.

        Canada was built into one of the most desireable places to live in the world based on the principles of the Westminster form of government. The waves of European immigrants to Canada were not drawn here by the weather or the CPP. Rather the opportunity to be free of the oppressive, intrusive, irrational, corrupt bureaucrats and vested interests…sorta like our last 15 years do have a precedent.

        My father-in-law came here from France and he died still hating that sad sack nation and its corrupt institutions. He’d be rolling in his grave, had he not been cremated, seeing where we are headed

      • I am interested to see what you will post tomorrow, and will try to keep my mind open about it, but François Mitterrand demonstrated that many things can be done within the system of the Fifth Republic.

    • I don’t know if this supports or undermines your argument, Jack, given the state of the Commons, but most of our party leaders seem to come in from outside Parliament. Or, at any rate, are carried in by their support outside of the House (Dion, Harper, Mulroney, Layton … does Martin fit?)

      • Interesting point, Gary. I think it’s a very good thing that outside support can sweep in to install a new leader, as has recently happened with Ignatieff and has done with your list of names. Fresh talent etc. But they still have all had to do habituate themselves to existing structures: Dion was a minister for a long time, Harper had been an MP and was a Reform veteran, Mulroney was in opposition initially, etc. No Sarah Palins, i.e. outsiders who are still wet behind the ears when they start to campaign. IMHO, Iggy would have been trouble for the Liberals (and the country) if he’d won in 2006, but he’s really benefited from the learning curve.

  7. “Previous governments legislated a 35-hour workweek on the assumption that the amount of work in an economy is finite and must be rationed like beef in wartime”

    It’s truly hard to believe this actually happened. You can’t entirely blame Sarkozy for the craziness that went on before he got elected.

    “One reason out of many: courts have declared that layoffs will only be permitted so a business can safeguard its competitiveness, not to improve it. Michelin was made to pay $15 million for the crime of laying off 147 employees while the company was running a profit.”

    Even more outrageous.

    “If you want to break into this racket you can buy a new hack licence (the going rate is between $270,000 and $600,000) or get on a waiting list (the wait time is 18 years)”

    Insanity.

  8. Sounds plainly that interest groups have too great of control and none of Sarkozy’s plans actual materialized as he planned. How do you reduce the ability of interest groups to manipulate legislation if they get to decide how the bill would be written? Perhaps it’s a time for a change in culture and not legislative change for the French?

  9. More to the point, How does any government enact drastic reform if the checks and balance system would lose it’s entitlements/ kickbacks? It’s can be ugly when this type of rot settles into governing mechanisms, especially in democracy where it’s harder to get it it out since the rot isn’t accountable to the voters.

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