Thursday, April 19, 2007

France: Economy Mired in a Statist Morass

You know that a free market economic philosophy has become dominant when even a Mainstream Media organization like the Associated Press blames the economic woes of a nation on government control.

But that’s what the wire service did in a report on France.

PARIS - Clusters of migrant workers mount the train’s crowded carriages, leaving their families and filing across the border to work at jobs more plentiful and lucrative than at home.

These hungry young men and women are not from lands riven by war or financial ruin, but from France — one of the world’s richest countries, and straining to stay that way.

Their knapsacks bear laptops or bottles of champagne, and their transport of choice is the Eurostar train, zipping them beneath the English Channel to London, a city radiating growth and opportunity.

The French workers are leaving an economy that is treading water while those of developing nations, and other wealthy ones, speed ahead. They’re fleeing a land once seen as a symbol of superior quality but that now even the French are convinced is in decline.

Half of French households live on less than $1,990 in income per month. Unemployment hasn’t fallen below 8 percent since 1984. Public debt has quintupled since 1980 to fund a welfare state that more people depend on for survival. Imports are spiking and fueling a ballooning trade deficit. France was among the top 10 richest countries per capita a generation ago — today’s it’s slipped to 17th place.

France is now on the cusp of change, choosing a new president who will be expected to yank the state-dependent economy out of its doldrums — but probably won’t. None of the candidates to replace conservative Jacques Chirac in the first round of elections April 22 appears to be a French Margaret Thatcher who would force profound and painful reform.

Fresh ideas

Some of the freshest economic ideas are coming from Francois Bayrou, a champion of the average guy riding on disillusionment with the left-right paradigm. Bayrou, polling in third place, would allow businesses to hire two employees free of payroll taxes and social charges for the first five years — a shocking proposition here. But he would govern by consensus, a formula certain to bury bold reform.

Across the spectrum, jobs are question No. 1 for French voters mulling their presidential choices.

“I’d like to live in France. But I don’t want to work there,” said Nicolas Boutry, whose family lives on the French Riviera but who works for a London bank.

“In France you either search eternally for a job, or you stay eternally in a job,” he said.

Strict French labor laws are dubbed “worker-friendly,” yet millions can’t find work. Industries decamp to countries like China where hiring is cheaper and easier. Job seekers leave for countries like Britain with more job openings.

It would take major upheaval in France’s labor markets to draw people like Boutry home. A dramatic solution, too, is needed for the chronically unemployed and for the minorities in French housing projects, where riots broke out in 2005 and up to half of young people are unemployed.

A generation ago, debt-laden, strike-suffering Britain looked enviously at France, which boasted lavish worker protections and paid its state-run businesses to innovate.

History, however, favored free markets. Thatcher’s unpopular economic reforms in the 1980s left Britain better placed to benefit from fast-changing labor markets and accelerated capital movements.

“We should not be afraid today to be inspired by what works. The British model managed to create a society of full employment, peaceful and confident in the future,” wrote Pascal Boris of France’s BNP Paribas bank, who heads a group of French executives in Britain.

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