Global Affairs

A pauper France is a threat to Europe

That may well come to pass if the country persists in its refusal to reform its economy

LONDON • Most developed countries periodically tweak laws governing relations between their employers and employees, and usually need just a brief parliamentary debate for this purpose. Not so in France, where a planned and relatively modest change in the country's labour laws sparked off a massive political battle, shaking the very foundations of the French state.

Hundreds of thousands of students protesting against the new labour law occupied a central square in Paris for weeks, trashing everything in their way, from trees to lamp posts. Night after night, televised debates argued gravely whether France as we know it could even continue to exist if changes in the labour law are implemented. Government MPs rebelled, accusing the ruling Socialist Party of betraying its core values. And the employment procedures only passed because the French government avoided putting them to a parliamentary vote altogether; instead, it simply rammed through the rules by using an obscure technicality in the country's Constitution.

The episode serves as a reminder of one of Europe's biggest problems: France's unwillingness and often inability to embrace the economic reforms required to boost the nation's economy and help propel the continent out of its current stagnation. Since France is the euro zone's second-biggest economy, the country's rejection of economic reform amounts to a European failure of monumental proportions. And one which, if left untreated, could inflict a much bigger blow on the survival of the euro common currency than the long-running threat of bankruptcy in Greece.

Nobody doubts the country's malaise. France's economy has barely grown over the past four years, 3.5 million of its people - or 10.5 per cent of the total labour force - are out of work, roughly double the figures for Germany or Britain. French unemployment is stubbornly persistent: the last time it fell below 7 per cent was a quarter of a century ago. And unemployment hits young people hardest: one in four of all young French adults aged 25 or under has no job.

Meanwhile, the country's projected deficit for next year is estimated to be 4 per cent of France's gross domestic product, better than before but way over the 3 per cent limit mandated by the European Union for countries operating the euro currency.

French politicians of every stripe have long accepted that their country is paying a heavy price for its inability to reform. Mr Nicolas Sarkozy, the former centre-right president who hopes to recapture the presidency at the general elections scheduled for next year, likes to point out that only a few decades ago, the French economy was 25 per cent bigger than the British one, yet today the Brits have overtaken France. Mr Francois Fillon, a former prime minister, calls France "the sick man of Europe"; the country, he says "is turning into a pauper". And even President Francois Hollande recently admitted that, barring fundamental changes, his country is threatened with permanent stagnation.


ST ILLUSTRATION: MANNY FRANCISCO

But none of these politicians acted on these dark predictions. When the Socialists were last in power, their approach to tackling unemployment was to decree a shorter, 35-hour working week. The idea was that this would force employers to hire more people; the effect, predictably enough, was precisely the opposite.

But President Sarkozy, who came to office promising a clear sweep of all regulations shackling business, also did nothing of the kind; he ended up advocating vague concepts such as "regulated liberalism", by which he meant that it was still up to him, and not markets, to regulate economic activity.

The 35-hour working week, which every expert blames for France's stifling working environment, continues to this day. And the Labour Code, the collection of legislation regulating employment, grew from around 3,000 pages in 2007 to an astounding 4,000 pages today.

There are many reasons for France's unique reticence in implementing economic reform. For over two centuries, the surest method of reforming France was through revolution or war. It took defeat in World War II to achieve the social contract which underpins the French economy today, and it took the threat of civil war in 1958 to modernise the country's constitutional system. It's not in the French psyche to pursue incremental reforms; these are usually postponed until the last possible moment, and then implemented wholesale, under street pressure.

The historic republican political legacy of France also puts great emphasis on a centrally-controlled state, seen as the source of all wisdom and the best agent of economic change. Most Frenchmen and women still believe that the state is a far better economic manager than the market, and that all measures which reduce the powers of the state increase the vulnerability of ordinary people: Latest opinion polls indicate up to 60 per cent of the French electorate supports the idea that state corporations should have a "decisive role" in the country's economy; 70 per cent want no change to France's welfare system; and no less than 78 per cent of French voters want their government to remain "strongly interventionist". That is precisely the opposite to beliefs held in most English-speaking countries.

The broader political climate in France doesn't favour economic reform either. This is one country where being an intellectual is not merely an aspiration or a hobby, but a serious profession. French intellectuals are seldom preoccupied with the workings of the economy, often regarding this as a lower-level preoccupation in comparison with dealing with more lofty concepts such as eclecticism, spiritualism, rationalism, positivism or any other grandly sounding "ism".

These armies of self-important intellectuals have succeeded not only in discrediting the idea of economic reform along market economy models, but have also perpetuated the myth that France has a special mission in the world, a destiny to be different. "France's vocation is to consume herself for the glory of the world, for others as much as for herself, for an ideal which is yet to be attained, of humanity and world civilisation", wrote Edgar Quinet, the 19th-century historian. In any other country, such a bombastic statement would have been greeted with roars of laughter and consigned to oblivion; in France, it is still listened to reverentially.

But probably the biggest reason for the country's inability to embrace radical economic reform is France's ambivalent attitude towards globalisation. As the world's biggest exporter of luxury goods and one of the world's top tourist destinations - to quote just a few of the country's assets - France has benefited hugely from globalisation. Still, globalisation is seen as an "Anglo-Saxon" phenomenon, a tsunami generated by English-speaking nations led by the United States, which undermines France's past achievements.

The result is that, instead of debating how they can benefit from globalisation trends, most of France's politicians see themselves as fighting a rear-guard battle to fend off the forces of the global market, by creating special protection regimes for various activities, such as the French film-making industry. And the French public shares these sentiments: When respondents were recently asked by pollsters whether they'd welcome a "time machine" which could return them to the past, 54 per cent answered in the affirmative.

For some European politicians - particularly some in Britain - France's economic difficulties are a source of gratifying satisfaction: Anti-EU campaigners in Britain often cite France as an example of what happens to nations "stuck in the past".

However, this kind of beggar-thy-neighbour rejoicing is stupid, for Europe will be nothing without France's participation. The country retains a global foreign policy vision, and a determination to defend international order and security by deploying its forces in counter-terrorism missions in Africa. Furthermore, the EU project would not have ever succeeded without the historic reconciliation between the Germans and French. The British, constantly jealous of the Franco-German "axis", never seem to comprehend that Britain's own relations with most other European countries was rendered easier and calmer by the Franco-German alliance.

But the French, in turn, never seem to understand that their persistent refusal to open up their economy to today's global economic forces is a constant drag on Europe's performance. The French government should be congratulated for mustering the courage to implement changes to labour legislation. Still, the rest of Europe should pluck up the courage to tell Paris that France is simply too important now to be left to the mercies of timid French politicians alone.

A version of this article appeared in the print edition of The Straits Times on May 16, 2016, with the headline 'A pauper France is a threat to Europe'. Print Edition | Subscribe