Wednesday 5 December 2018

Toil and trouble


It is hardly necessary to go back to the storming of the Bastille on July 14,1789 to find examples of insurrectional violence of the kind that occurred in Paris last Saturday. France’s history is pockmarked with citizens’ uprisings of varying degrees of severity. Now over 50 years old, the uprising of May 1968 for instance is too far back for those born after 1960 to remember this seminal event in the history of the Fifth Republic. But there are also the strikes of November 1995 that brought he country to a standstill for a few weeks or, in a more recent variant, the violence that accompanied the normally peaceful May Day march on May 1st of this year. Not to speak of the torching every year of about 1000 cars on New Year’s Eve around cities like Paris, Marseille, Toulouse or Strasbourg. Journalists on the rolling radio or TV news networks with their breathless coverage of barricade building and grenade throwing tend to forget the precedents or the context, especially when violence ignites around a national monument like the Arc de Triomphe. The fact is that the French temperament has a habit of boiling over every so often, more often than not triggered by a seemingly insignificant event. Such has been the case this time when a protest against a rise in fuel taxes, ostensibly to reduce pollution, has led to scenes of urban violence that have taken everyone by surprise. Par for the course in this hot-blooded country, whose revolutionary streak is never far below the surface, many observers would say.



The violent young men who smashed shop windows, battered down doors and railings and tagged the Arc de Triomphe are not, by all accounts, an integral part of the yellow jackets movement. They have certainly piggy-backed on it, but are driven mainly by their own anger and aggression and a burning desire to vent it on the symbols of capitalism and the security forces. It is not easy to pin a label on them. “Alt right” and “alt left” have been bandied about by politicians and the media. The OECD, in its inimitable jargon, would probably qualify most of them as NEETs (not in employment, education or training). Nobody has revealed where these young men come from. And as violence breeds violence, it seems clear that some of the yellow jackets, especially the younger ones, have felt encouraged to join in the smashing and breaking.



What the two groups do have in common however is their rejection to varying degrees of what is held up with pride by most French citizens as the French social model: a supposedly all-encompassing set of services and benefits administered by both central and local governments designed to shield the less well-off from the adverse consequences of capitalism, give every citizen equal chances and reduce inequalities. It is clear that the model is not working satisfactorily for some and the current protest movement suggests that their number is increasing. The school system lets far too many pupils leave school without any useful qualification, only 40% of first year university student finish their degree course, the monolithic employment and benefits agency has made little impact on some of the highest unemployment figures in the EU and the vocational training system seems unable to train people for the numerous job vacancies that employers are trying desperately to fill. And at the same time, a hugely complex web of benefits leaves many claimants without enough to live on. The trouble is that this enormous state-run system costs an enormous amount of taxpayers’ money, as France’s outstanding debt approaches 100% of GDP. Reforming it in depth, something Emmanuel Macron promised in his election campaign, is not going smoothly and, above all, is not producing results quickly enough for those who should be benefitting. The rise in fuel taxes seems to have been the last straw for many, particularly in the French provinces, who often have to drive a long way to work and back.



Commentators have been falling over themselves to find sociological explanations for the phenomenon: “peripheral” France against the urban elites, say some, rural areas against the cities, or, quite simply, the rich against the poor, say others. None of these explanations are fully satisfactory. My own feeling is that the cost (and the taxes required to pay them) of public services, whether in cities or in rural areas, outweighs their usefulness for many people. In their regular contacts with these services, most French people deal with a plethora of lowly civil servants in central or local government administrations. Far too often, they are unsympathetic, unresponsive and inflexible, sometimes even downright incompetent. And their attitudes and culture have changed little over the 40 years that I have been living in this country.



Emmanuel Macron has promised to bring profound transformation to the country that elected him President in May 2017. His intention is obviously sincere and his only option is to continue to try and reform the system he has inherited and that his predecessors were unwilling or unable to change. He has chosen to do so over the heads of the traditional intermediaries in society, like the trade unions, that he clearly considers to have failed in their representative missions and grown too flabby and out of touch. In doing so, he has adopted a monarchical and authoritarian posture that puts him in the front line when things go wrong, generating, whether he likes it or not, the perfect figure of a scapegoat in the eyes of the protesting masses.  It is surely significant that many of the recent demonstrations have called for his immediate resignation.



Backing down now would invalidate his whole strategy and make it a largely ineffective for the rest of his term of office. In 1789, faced with sudden and violent demonstrations, Louis XVI took fright and tried to flee the country. He was caught, put on trial and executed. In 1968, General de Gaulle, it is said, considered ordering tanks to roll on Paris before he recovered his composure, delivered a hard-hitting speech to the nation, called fresh general elections and won them handsomely. Emmanuel Macron will now need all the political and leadership skills he can muster to strike the right balance between authority and concessions and find a political solution to the current wave of protest and violence, while keeping his programme intact. If he succeeds in overcoming what is undoubtedly the most serious crisis since he won power, he has a good chance of being re-elected to continue his reforms in 2022. If he fails, he will probably lose no more than that election. But France could stand to lose a lot more. Looking at events in many other countries in Europe and around the world, the omens in that case are not good. 

Wednesday 14 November 2018

The price and the value


Every so often, the French become fixated on the price of some product or service. Going back nearly 40 years, Jean-Claude Guillebaud, a journalist at “Le Monde”, wrote a series of articles on Asia (Un voyage vers l’Asie – August 1979). The last article of the series, entitled  “Returning home” (Retour) and published on August 30,1979 was arguably the most interesting. Seeing his home country again through the distorting lens of the month-long trip he had just returned from, he noticed… 
“ ....on  closer inspection, that the pavements of Paris look decidedly less cheerful than those of Calcutta or Chandernagor. Sombre figures with gloomy looks, reminiscent of the atmosphere around a sickbed. The inescapable conclusion is that France is becoming more desperately inward-looking by the day, grumbling loudly about the latest scare stories and problems with petrol…”



(On trouve d'abord, à bien regarder les trottoirs, que Paris a plutôt moins bonne mine que Calcutta ou Chandernagor. Figures maussades et regards consternés : comme si on se retrouvait au chevet d'un malade. On constate ensuite que s'accélère à vue d'œil un incroyable recroquevillement de la France sur elle-même, ses trouilles bruyantes et ses problèmes d'essence).

If the same journalist were to return home from the same trip today, he would find that nothing much has changed. The “problems with petrol” have reared their head yet again but the prices of other goods and services regularly give rise to outbreaks of anger and protest. Sometimes it is the price of basic foodstuffs or motorway tolls. This week, it is petrol and diesel fuel once again, after a recent spike in prices.

The scenario of such protests invariably follows the same pattern. The media fix on a convenient scapegoat: the government, the supermarket chains, the motorway concession holders or the oil companies. Spontaneously generated groups of citizens demand action to lower taxes or grant subsidies. The government of the day does its best to deflect attention from its own policies, makes small gestures of appeasement in the hope that the protests will die away, calls in the offending scapegoats in a blaze of publicity and obliges them to “do something” or threatens to change the law. Sometimes the protests peter out, sometimes they don’t and prime time news is full of pictures of angry farmers besieging supermarkets, dumping manure in front of government offices or ambulance or taxi drivers blocking traffic. The “offenders”, whoever they are, make small and temporary concessions and wait until the media spotlight has moved on before returning to business as usual.

The current protests are true to form. The government has been called upon to reverse tax increases on motor fuels.  In an attempt to occupy the moral high ground, if has asserted that higher taxes are part of a grand policy to reduce pollution and fight climate change. But it has nevertheless agreed to subsidise the heating bills of the less well-off, even though economists point out that in terms of purchasing power, fuel in general and motor fuel in particular is a smaller part of most household budgets today than it was in the 1970s, as salary increases have far outstripped fuel price rises and cars consume much less fuel than they did then. But apparently it is a problems of “perception”, that people suddenly feel worse off because they have to pay €5 more to fill their tank than they did three months ago. The supermarket chains, that sell large quantities of motor fuel, keen to seize an opportunity to improve their image with consumers, have smugly announced that they will sell fuel “at cost price” until the end of November. TOTAL, the oil major that supplies most of the market, has conceded a small reduction in the prices it charges retailers, while protesting that its margins are “wafer thin”, an argument that carries little weight with most consumers who know only too well that the company’s profits exceed €1 billion a month. A lot of the country is likely to experience huge traffic jams on Saturday next as groups of protesters wearing eye-catching yellow jackets (gilets jaunes) organise what look like spontaneous protests that threaten to block the roads.


Most foreigners will probably consider this latest outbreak of anger and protest as par for the course in a country with a well-established reputation for such behaviour. Which it surely is.  But it also highlights other enduring features of French society, which are a little more difficult to perceive.  The first is that neither opposition political parties nor trade unions are behind it; none are in the front line of this latest protest, showing, once again, that they have been taken by surprise and are out of touch. Perhaps one of the reasons why the current, clueless, political opposition, on the right or the left, has been reduced, as so often in the past, to mudslinging or the mouthing of hackneyed soundbites instead of proposing credible alternative policies. And why trade union membership is one of the lowest in industrial countries.


Another feature of such protests is that they always concern products or services that people have to pay for out of their own pockets. At first blush, this may sound curious but, as I have written here before, the French live in a generally well-functioning society with good infrastructure and public transport, generous and universal provision for unemployment, health care and retirement, public education that is free from the age of five to the end of university and in which the most promising students can benefit from some of the best higher education in the world. The fact remains that they take most of this for granted in the seemingly unshakeable belief that it is their God-given entitlement and that, anyway, somebody else is paying for it. Which makes it appear all the more irksome when they have to open their own wallets a little wider to pay for something they want. An attitude typified by one motorist pictured on TV the other evening. She was using a mobile app. to find the cheapest filling station in her area and said that she might just be able to save enough to “visit her family over the weekend”. As if the government, the oil companies and “they” in general were all conspiring to stop her doing so!


In a way though, the biggest culprit is the government itself. Instead of playing the Great Provider or the courageous Make-Our-Planet-Great-Again climate change fighter and, through its lack of transparency, encouraging the wildest conspiracy theories about its hidden agenda, would it not be preferable to explain the bare facts, just for once?  That the public services of the highly valued “French social model” from which all French people benefit have to be paid for by higher national and local taxes than in most other countries, as well as a little too much debt that must be paid off in the not too distant future so as not to overburden future generations. Even within the EU after all, there are a number of countries not too far away like Greece, Romania and Bulgaria, whose people can only dream of the standard of living currently enjoyed by most people in France. Not to speak of the richest country in the world, the United States of America, where the very of idea of universal health care and a guaranteed pension is often roundly denounced as a socialist chimera.


Instead of following the time-honoured tradition of telling people only what they want to hear while spending far more money than the country has earned, like most senior French politicians over the past 40 years, Emmanuel Macron seems to want put things in perspective and has found his very own words to do so. In a TV show during the presidential campaign, he told one startled Uber taxi driver that it was better to have a low-paid job than no job at all. Not the language one normally expects from a candidate for his country’s highest office. More recently, he told a young man in a crowd who was complaining about not having a job that he only had to “cross the street” to find one! “The country would be better off if we stopped complaining”, he told a group of pensioners a few days ago, after visiting General de Gaulle’s house at Colombey-les-deux Eglises, adding, “you don’t realise how fortunate you are”.  The trouble is that the French are, as yet, unused to such plain talk and take it badly. The media immediately pick it up and accuse him of insensitivity and arrogance; opposition politicians seize a further opportunity to characterise him as “the president of the rich”. Maybe he and his government should follow in Jean-Claude Guillebaud’s 40-year old footsteps and take a month-long trip to Asia, starting in Eastern Europe. They would surely return with a clearer idea of France’s enviable position compared to the rest of the world - and how best to express that fundamental truth to its frequently grumbling and inward-looking inhabitants.

Friday 12 October 2018

Charles Aznavour and the French "chanson"


Charles Aznavour, who died last week at the age of 94, was described on the BBC as a “French singer” and in some US media as the “French Sinatra”. In a way he was both. Not only did he continue performing long after what is considered a normal age for retirement but, almost uniquely among French popular singers, he was loved, admired and performed to packed houses all over the world. He conquered the United States in the 1960s performing at Carnegie Hall in New York and subsequently throughout the country. He had only recently returned from a concert tour in Japan. He sang not only in French but also in English, German, Italian and Spanish, playfully exploiting the quirks of languages in contact, as in his famous song “You are for.. mi… for mi… for mi dable” (pronounced à la française !)  However, his career as a performing artist is only a part of the story and does no justice to his place in the tradition of the French “chanson”, of which he was one of the most accomplished proponents and in which his most striking characteristic was his talent as a lyricist.  



Short literary forms are surely the most demanding. The great novelists of the 19th and early 20th centuries, be they English, French, American or Russian, developed their often epic stories and characters over hundreds of pages, narrating the fate of families or whole dynasties caught up in the movements of history. Short story writers on the other hand conjure up a situation, a character or an atmosphere in just a few pages. Add the further formal constraints of rhyme and meter and poetry is the result, whether in Shakespeare’s sonnets or Racine’s plays. Reduce it to three of four verses and add music and you have the essence of the French “chanson”. Charles Aznavour of Armenian origin but culturally as French as they come, developed from his favourite French authors, particularly Louis-Ferdinand Céline or Patrick Modiano, a feel for words and the capacity to use them with a “surgical precision”, to quote one obituary writer. Putting it more graphically, a fellow singer said in a radio interview just after his death, that, “Charles could write a 250-page book in 3 minutes”. Like Jacques Brel, Georges Brassens or Renaud, Aznavour was, above all, a poet who put words to music.



The French chanson is a unique musical genre. Like the best poets, the best French songwriters can conjure up so much in just three or four verses and a refrain - paint a picture, tell a story, evoke an atmosphere or convey emotion, all at once. As even a cursory analysis of some songs reveal, every word counts and no word is out of place. Has there ever been a more moving evocation of a young man’s unrequited love as in Jacques Brel’s tongue-in cheek “Madeleine” or the despair of second-generation immigrants in France as in Renaud’s “Deuxième Génération”?



One of my all time favourites in Aznavour’s vast repertoire is a song he wrote about the meagre joys and immense torments of a homosexual man in the France of the late 1960s: “Comme ils disent” … a title that means nothing and everything at the same time.  The bare bones in English are “(a man) as they say” … but to make sense it has to be read as something like “you know, that kind of man…. “ Just a year ago Aznavour told a TV interviewer that when he was thinking of lyrics, he needed first to find a title, and then he could weave the rest of the song around it. A similar point to that of Charles Dickens who said that he could only develop a character once he had found the right name. In an Aznavour song, as in many other “chansons à texte”, the precision of each word becomes apparent as soon as one tries to translate the lyrics into something that makes sense in English. The first line is,  “J’habite seul avec Maman…” .With whom ? “Maman”, not “Mummy” or “Mum”, too childish, nor “Mother”, too formal, only the French “Maman”, fits, both a name and a term of endearment, used not only by children but also by grown men and women to address or refer to their mother. And of course, it takes on a special resonance when used by a gay man. By the end of the song’s three verses, we have a complete picture of the “artist” performing striptease in a transvestite club, his late dinners with fellow performers “of all sexes”, the cruel and homophobic (as we would call it today) mockery from other clients of the bar, the loneliness, the torments of an unrequited passion for a younger heterosexual man. The picture, the story, the atmosphere and the emotion are all there, served by a melancholy and low-key musical accompaniment.



It is difficult to find such an all-encompassing genre in English or American popular music. It has little to do with blues or rock or soul that have been the mainstays of that tradition since the 1950s. The Rolling Stones rose to fame on the back of blues and rock and have hardly changed over 60 years. The Beatles started out as rockers but then Paul McCartney in particular explored other musical genres and styles and came closer to the French tradition in songs like “She’s leaving home” or “Eleanor Rigby”. Elton John indulged in bouts of atmospheric nostalgia in one of his early albums, “Tumbleweed Connection”, but never seriously returned to it. The singer who comes the closest I can think of to the idea of the French chanson is Joni Mitchell in the song, “The last time I saw Richard”.



All the songs quoted here can be found by using the links below. Make up your own mind and enjoy!



















The last time I saw Richard : https://www.youtube.com/watch?v=igj20M84hbo

Monday 17 September 2018

A final go for pay-as-you-go


At long last, after years of on-and-off preparation, months of testing and weeks of doubt in high places, France is finally to introduce a pay-as-you-go system for income tax on January 1st, 2019. The inception of this project goes back to the Sarkozy presidency and has been called off or postponed twice, making France look as if it were incapable of introducing a modern income tax collection system that all of its European neighbours have had for many years, in Germany’s case for many decades. Emmanuel Macron would undoubtedly have lost more of his already tarnished sheen as a reformer had he postponed it once again.  The reasons for his ultimate hesitations however reveal a lot about French attitudes to change in general and taxation in particular.



The French tax system as a whole has been designed to raise a huge amount of revenue by stealth. VAT, mostly levied at a rate of 20%, is so embedded in prices that it is practically invisible, levied as it is at the same rate for everyone, of whatever wealth or income. The same is broadly true of CSG, a supercharged contribution to France’s generous welfare system, levied at a flat rate of 8,3% since the beginning of 2018, on a very large base. As a salary deduction, it hardly raises an eyebrow, as most people only look at the net salary remitted to their bank account and pay little heed to this and the many other deductions detailed on their pay slip. Income tax on the other hand, in its present guise at least, has the major drawback of being both progressive and visible – inasmuch as it is paid in specific monthly or quarterly instalments. This is surely one of the reasons why almost 60% of French people don’t pay it all and why its revenue is less than half of that raised from VAT. Pay-as-you-go will make its progressivity more apparent and its visibility, temporarily at least, even greater.



Income tax, like many things in France that have been forged in the fertile imagination of the administration, is more complex than in many other countries, probably more than it needs to be. Over the years, it has been used for multiple purposes, either as a tool of social policy or in the form of incentives to soothe the sting of its progressivity, often both at the same time.  For instance, to promote a high birth rate, families have always been granted generous tax allowances for each child, with very little modualtion for household income; to persuade home owners to pay social contributions for their home-helps and occasional gardeners (and lift them out of the grey economy), half of their total cost is tax deductible; to stimulate the construction industry at a low ebb in the business cycle, investment in build-for-rent housing is periodically subsidised through the tax system; to encourage investment in France’s far flung overseas territories, tax deductions are allowed for investment in real estate,  plant and machinery. And so it goes on. An additional complication for pay-as-you-go is that members of a household are not taxed individually, as in other countries, but together. Thus, if the household rate is communicated to employers, they will have a clear idea of whether a husband earns more than his wife or vice-versa as well as any other income the household may enjoy. To avoid what is considered an unwelcome intrusion by employers into the private lives of their employees, the government has proposed the option of an individual rate of tax.



As in any pay-as-you-go system, the task of collecting income tax will henceforth be largely delegated to companies. So far they have been complaining loudly, especially smaller ones, about this “extra administrative burden”, and the fact that their employees will not only be unhappy that they will be able to guess how much each household earns but also that they will be the first port of call when something goes wrong. While the French are renowned for finding some reason to complain about any reform proposed by their government, this particular complaint sounds very hollow when one considers that businesses have been collecting both VAT and multiple social contributions on behalf of the state for many years and that collecting income tax will probably require no more than an extra line in their software packages. The owner of a flower shop, interviewed on TV a few nights ago was grumbling precisely about this extra “burden”, making it sound as if he would have to burn the midnight oil to make out horribly complex new pay slips, whereas not only has he been collecting other taxes for years but that all of his accounting is probably outsourced to an accountant anyway. Over and above the inevitable glitches that will be recorded in the first few months, it seems safe to assume that businesses will adapt quickly to the new system. Large companies with well-staffed HR departments appear to have done so already.



The much trumpeted psychological effect of lower take home pay is the most difficult to understand from a people priding themselves on their sense of logic and rationality. The lament that “purchasing power will be reduced” by having tax deducted at source is ubiquitous and strongly relayed by most media as well as the opposition parties, clearly keen to strike a blow at Macron and his reforms. In the midst of this collective psychosis the simple answer, “….but you will no longer have to pay income tax in separate monthly or quarterly instalments” seems to have been totally ignored. Speaking on prime time news on the day the final go-ahead was announced, the Prime Minister was at pains to point out that employees would in fact see a better balance in their income tax payments by paying twelve times a year at the end of the month rather than in monthly or quarterly instalments in the middle of the month. His message seems to have made little impact. And yet his “logic” is impossible to fault.



I suspect that, unless there is a serious IT problem, once the system has been in force for a few months, the media frenzy has died down and the opposition has found fresh political arguments, the French will indeed conclude that the new system makes little difference and will probably end up echoing the sentiments of a German employee, interviewed by French television the other night, who said quite simply: “the good thing about our system is that you always know exactly how much you can spend”.



 And from the French government’s point of view, taxation by stealth will have taken another step forward!

Friday 31 August 2018

Business as usual ?


The sudden resignation of Nicholas Hulot, from his post as Ministre de la Transition Ecologique et Solidaire (Minister for Ecological and Soldarity-driven Transition) may have come as surprise by the manner and timing of his departure, but it is surely less of a surprise to those who have become used to the regular reports of misgivings about his role in government and his seeming inability to make a meaningful impact on France’s environmental and energy policies.



Nicholas Hulot, now 63, was, the pollsters tell us, the government’s most popular minister, well-known in France for many years as an environmental activist. He rose to fame through a series of TV programmes that he made and introduced, designed to illustrate the impact of our growth driven economic model on the natural environment and its responsibility in climate change. He set up a foundation to promote environmental responsibility but also, with the help of the large French company, L’Oréal, launched and sponsored a range of beauty products bearing the name of his TV show “Ushuaia”, from which he continues to make a comfortable living. Politically, he was courted by no less than three French presidents, Jacques Chirac, Nicholas Sarkozy and François Hollande, keen to enlist this popular public figure in an attempt to burnish their own green credentials. Although Hulot was happy to serve as an unofficial advisor, he did not, until persuaded to do so by Emmanuel Macron, accept a ministerial position, considering that he was more useful trying to influence the policies he advocates from outside government. Paradoxically, his 15-month stint as minister of Edouard Philippe’s government has proved that he was right. Temperamentally ill-suited to the cut and thrust of everyday politics, profoundly unhappy with opposition from both within the government, notably from the Minister of Agriculture, and outside it from lobbies of all sorts, he swallowed hard as many government decisions went against him – on the use of pesticides in agriculture, the reduction of France’s considerable nuclear capacity, the watering down of his attempts to promote animal welfare and many others. The presence of a well-known lobbyist at a meeting convened by the President with representatives of the hunting community seems to have been the last straw. The following morning, he announced on a radio programme, to the astonishment of even his interviewers, that, “unwilling to lie to myself any further”, he was leaving the government, without so much as notifying the President or the Prime Minister beforehand.



If this were just another case of strongly held views clashing with the inevitable compromises required by cabinet government, the story would be only one more example of many a civil society figure who has come to grief as a politician. As former socialist grandee, Jean-Pierre Chevènement, once pithily observed, “a minister either resigns or keeps his trap shut” (“Un ministre ça démissionne ou ça ferme sa gueule”). I fear however that this particular resignation is more significant, as it touches on the heart of the project that Emmanuel Macron has sought to promote, the main reason why this relatively unknown figure emerged from the shadows to set up his own party and conquer both the presidency and a whopping parliamentary majority in little more than a year. And also finally persuaded Nicholas Hulot to accept a formal political mandate.



Macron clearly sees himself as a man with a mission to profoundly transform France, harbouring a clear vision about what he wants to achieve and an unshakable belief in his ability to bring about the changes that the country has shirked so often in the past: freeing businesses from the shackles imposed by an often overbearing administration in order to create more jobs, make work pay and reduce unemployment, thereby reducing public spending and making France, particularly its public sector, leaner and more efficient.



There are many who share Macron’s view that France must accept radical change to achieve these goals, and they see him as the agent of that change. The resignation of Nicholas Hulot is an important signal that things are not going according to plan.  A transition towards a greener and less energy intensive economic model is clearly being resisted by deeply entrenched interests that have most to lose from it: the powerful nuclear lobby, afraid of France losing its technological expertise, a strong farming lobby, still wedded to its pesticide and energy fuelled quest for ever greater yields, to name just two. There are other signals too: the preparation of next year’s budget is constrained by an unexpected dip in growth, a rising deficit and fears in high places about the psychological impact of the pay-as-you-go income tax scheme, due to be introduced in January.  On the basis of what we know so far, the draft budget to be debated in parliament this autumn sounds decidedly unradical, based on little more than the time honoured methods of reducing the number of civil servants, cutting social benefits and surreptitiously increasing taxes.



In a word, after what looked like a promising start, the profound transformation that was Macron’s pledge to the French people seems to be running into the sand. The government and its supporters point to the policies of encouraging investment, making the labour market more flexible, promoting the training and retraining of workers and employees and plead patience. Such measures will of course take time to produce results, but there nevertheless seems to be little trace of a root-and-branch restructuring of central and local government that other countries like Canada, Sweden, or the UK have introduced in the past decades. On top of that, where is the evidence of a new paradigm reconciling economic growth with less pressure on natural resources and more renewable energies? At a time when Germany is implementing a radical decision to close all its nuclear power plants by 2022, there were reports yesterday that some experts in France recommend building no less than six new EPR reactors starting in 2025. After a series of official meetings earlier this year on food production and retailing, it is clear that the French are increasingly keen on organic produce and recycling, but supermarkets still vie with each other to sell processed foods laced with additives and fruit and vegetables raised on chemical fertilisers and pesticides at the lowest possible prices.



As Macron makes a start on a decisive year for his presidency, these questions remain unanswered.  The outcome of the budget debate, the name of the next minister of the environment or perhaps a fresh political initiative will either confirm that profound transformation is still on the agenda or, on the contrary, that France is back to business as usual.

Wednesday 22 August 2018

Air France or Air Chance ?


Ever since he was elected to the presidency of France in May 2017, Emmanuel Macron has been done his best to portray France as an outgoing nation, keen to engage with the rest of the word and particularly with France’s European neighbours. He has not been unsuccessful in improving the country’s image beyond its borders with many captains of industry reporting that their foreign counterparts have noticed the difference. It is true of course that many of France’s most dynamic industries went global years or even decades before Macron appeared on the scene. Companies like LVMH, Total or Schneider Electric, to name just three, garner more than 50% of their profit from international markets. Large holdings of companies in the CAC 40 index are owned by non-resident investors, as is a considerable portion of France’s public debt. But Macron has definitely given this established trend a further push, consolidating it with more business friendly policies, like the loosening of employment regulations and the neutering of the wealth tax in the hope that wealthy French people will invest in businesses in their home country rather than hide themselves, and their fortunes, in more tax averse jurisdictions. Macron’s France has also been keen to style itself as a start-up nation and encourages its numerous start-ups to go global as soon as they are up and running.



Against this background, it comes as a considerable surprise to hear the unions representing the staff of France’s flag carrier, Air France, reacting so violently to the appointment of Ben Smith, ex Air Canada, as the airline’s CEO starting at the end of September. A press release issued by all of Air France’s union said: “it is inconceivable that Air France, that has been French since 1933, should fall into the hands of a foreign manager at the probable instigation of one of its major competitors”.  The major competitor referred to is apparently Delta Airlines that holds 8.8% of Air France’s stock and with which the airline has a code sharing arrangement, as it does with many other European and international carriers.



Once the initial shock of such a statement has passed, it is worthwhile recalling the state of Air France in 2018. Despite participating in the wave of consolidation of European airlines since the turn of the century by merging with the Dutch carrier KLM in 2004, in what is a textbook example of a globalised industry, Air France has been bleeding market share for years: to airlines based in the Gulf at the premium end of its business and to the likes of Easy Jet and Ryanair at the cheap end. Meanwhile, its pilots and cabin staff have been embroiled in endless negotiations over pay and working conditions with a series of bosses, all from the senior echelons of France’s civil service, ending more often than not in damaging strikes. The latest strike this summer is reported to have cost the company well over €300 million. Its most recent boss resigned in June after losing an ill-judged referendum that he called over the heads of the unions. After what must have been frantic behind the scenes consultations within the French government, that still holds 14.4% of the airline’s shares, the company’s Board has only just got around to appointing his successor. Meanwhile, passengers flying out of France are busily comparing prices on the Internet and voting with their wallets. Even those, like myself, who have always had a soft sport for the national flag carrier and make it their first choice as a matter of principle, are increasingly fed up with its frequent delays, often surly and off-hand cabin staff and regular strikes.



The reaction reported above would perhaps be more comprehensible if Air France was the one and only French company to be managed by “a foreigner”. But it is not. The good old French tradition of having its leading companies managed by graduates from Polytéchnque and ENA has been slowly breaking down, for better or for worse, for over ten years. Its number 1 drugs company, Sanofi, was managed for some years by a Germano-Canadian, Christopher Viehbacher. Its number 1 retailer, Carrefour, had a Swedish boss, Lars Olofsson, for three years and Carlos Ghosn, who has a stellar record of turning around and expanding the country’s number 1 carmaker, Renault, does indeed hold a French passport  (and did graduate from Polytéchnique!) but is also Lebanese and Brazilian, definitely global in his outlook and is known to eschew hobnobbing with home-grown power brokers and influencers. Not to speak of French managers who have made their mark abroad, like Jean-Pierre Garnier who ran Glaxo for seven years and engineered a major merger to form GlaxoSmithKline, or Xavier Rolet the boss of that ultimate den of capitalism, the London Stock Exchange, for eight years until 2014. As more and more global companies, including French ones, find it perfectly normal to scour the world for top management talent, regardless of nationality, why is it that the appointment of a Canadian manager with a proven track record in his industry raises so many hackles in France?



One can only hope that Air France’s unions and the employees they represent will finally wake up to the dire straits in which their company finds itself, realise that the French government’s patience is no longer endless and engage with their new CEO, who, despite his very Anglo-Saxon sounding name, does actually speak French! He also comes with a reputation for dialogue and a track record of turning around Air Canada by, among other things, launching a low-cost subsidiary. In his first press release, he has said that he is looking forward to working with all the airline’s staff and their representatives. He will certainly have his work cut out to avoid further turbulence and yet another strike that has been threatened unless substantial salary increases are awarded.



It is often said, somewhat complacently perhaps, that so many things have changed in France since Macron became President. In some ways they have, as this blog has attempted to chronicle. The events surrounding the appointment of Air France’s new CEO however are just one illustration of how far it still has to go.

Tuesday 19 June 2018

Macronomics - Part 2, pension reform


Behind the focus on investment, training and work lies an even more serious purpose in Macron’s vision which turns on the much heralded reform of the French pension system, now expected to kick off in 2019 and scheduled to be phased in over a period of about 10 years.  A high Commissioner for pensions has been appointed and he has launched an extensive public consultation on the Internet, to be followed up by citizens’ meetings before the government drafts its legislation and submits it to parliament in the spring or summer of next year. 



The pension system of any country is highly complex, the product of past history and successive reforms, major or minor. France is no exception and only a few experts, whose job it is to manage the system, understand its full ramifications. The bare facts are that it is a mandatory, pay-as-you-go system for both the basic pension (Pillar 1) and the occupational part (Pillar 2). Contrary to many other advanced industrial economies in which the state provides only a minimum basic pension and the occupational part varies widely from company to company, the largest part of most pensioners’ income in France is the responsibility of the state, supervised and guaranteed by the state, to which employers simply contribute a large amount. It is a system to which the French are profoundly attached, emphasising, as does any PAYG system, the idea of inter-generational solidarity. The huge pension funds of the United Sates, the U.K or the Netherlands are not only unknown but also unwelcome in a country in which many people view the workings of financial markets through a haze of deep suspicion. The state guarantee is taken for granted. The idea that retired fire-fighters - as happened in Detroit for instance - could be deprived of their pension because the city had gone bankrupt, is totally beyond the realm of understanding of most people in France.


 There are several drawback to PAYG systems in general and to the French system in particular: with rising life expectancy, a large cohort of baby boomers at retirement age, younger people joining the work force later, and older workers leaving it earlier, the demographics are unfavourable, pushing up the dependency ratio and requiring regular adjustments to the level of pensions or the retirement age. Successive French governments have done both: in 1993 (the Balladur reform) subsequently in 2003 (the Fillon reform) and again in 2010. The main result of these reforms, approved by parliament after protracted opposition on the streets, is that the official retirement age for both private and public sector workers is now 62, still lower than in most comparable countries. In addition, private sector pensions are calculated over the 25 highest earning years of a career whereas civil servants still get 70% of final earnings, often boosted, somewhat artificially, in the last six months of their career.  It is clear however that even these reforms have not gone far enough because of two very specific issues to France that successive governments have tiptoed around but have been afraid to tackle head on: the cost of administering the 40 odd retirement schemes for specific industries and sectors, that some experts put at €6 billion, and, above all, the perceived inequality between the private and public sectors, and within the public sector, the very favourable schemes enjoyed by employees in the railway and electricity industries. Alain Juppé, as Prime Minister back in 1995, is the only other politician to have attempted serious reform. His efforts led only to the most damaging wave of strikes to affect the country since May 1968 and his government was forced to back down ignominiously.


From a macro-economic viewpoint, whatever pension system it adopts, a country can only devote a given amount of the wealth it produces to its pension provision. And in France, it has become clear over the years that groups with considerable negotiating clout, notably civil servants and equivalent, have captured a greater proportion of that wealth to the detriment of less powerful groups like small farmers, employees on the minimum wage or the self-employed. This is surely one of the reasons why Macron has promised a long overdue root and branch reform of the whole system, encapsulated in the simple idea that each Euro of contribution will give exactly the same pension entitlement to every contributor. But all other things being equal - and there is no doubt that the special schemes, will be fiercely defended by their beneficiaries - the reform can only work if the economy creates more wealth, with more people in employment and paying more into the system for longer rather than draining national wealth in the form of benefits. Which brings us back to the need for investment, continuous training and a flexible labour market that I referred to as essential components of Macronomics in my last post.



The current strike in the SNCF is only a foretaste of what is likely to happen once the government officially announces its plans and sends draft legislation to parliament. And one of the reason why the railway unions have opposed SNCF reform so doggedly is to put on a show of strength in preparation for the struggle to come, where they will inevitably find more common ground with other public sector workers than they have so far, even though many judge their retirement privileges out-dated and unjustified. And yet, on the face of it, what is there to object to in the idea that every worker should get the same pension entitlement for every Euro of contribution and that the whole system should be managed under one set of rules by one state-run administration? It would not of course mean that every pensioner would get the same income but it would ensure that the state remains the pension system’s manager and guarantor and would be seen to acting with even-handedness, and not, as happens at the moment, indulging in behind-the-scenes pressure and opaque accounting practices to subsidise schemes in deficit by those in surplus.





So what then can we conclude from all this about Macron’s overall economic strategy? Why is he on course to put France through another wave of strikes and disruption? He has gone on record as saying that his ambition is to profoundly change the country for the next 50 years and there is no doubt that a successful reform of the French pension system would do more than anything else to change the state of France’s economy and the mindset of its people. It would be a profoundly significant signal that France is changing its ways. This is perhaps the key, and, as I suggested in my last post, most French commentators have not yet fully picked up on it. It is all about the concept of self-reliance, a quality more reminiscent of Anglo-Saxon and Nordic cultures and somewhat foreign to France, where the nanny state is invariably seen as the Great Protector and the Great Provider. It is the same concept that underpins all of Macron’s economic policy initiatives so far, from the changes to labour legislation, the promised reduction in unemployment and other social benefits, to the radical changes in apprenticeships and vocational training. Tellingly, it is a concept that does not translate neatly into French, where the words “autonomie”, “autosuffisance” or “indépendance” do not fully capture the idea that people should rely more on themselves and less on the state. There have been occasional and half-hearted attempts to establish this idea in France’s recent past: by Edouard Balladur for instance, who as Prime Minister between 1986 and 1988, presided over a wave of privatisation and wrote a book about it in 1992 entitled: Je crois en l'homme plus qu'en l'État”  (“I believe in people more than the state”). But Balladur was only a closet liberal and so much a product of France’s elite culture that his timid steps were quickly and silently crushed under the weight of a left leaning establishment. About ten years later, in 1995, another politician, Alain Madelin, a controversial and maverick figure with genuine liberal credentials, was appointed Minister of Finance but he too quickly came up against establishment norms and resigned just three months later. Margaret Thatcher of course was the great promoter, for better or for worse, of individual responsibility and self–reliance, in the UK of the 1980s. But although some see Macron’s tussle with the railway unions as his “Thatcher moment”, the excellent “Economist” commentator on French affairs, Sophie Pedder, who has just written a book on Macron (“Revolution Française” - Bloomsbury, 2018) writes this: “ A Thatcherite vision this is not. Macron, like many of his generation, may speak English. But he does not seek to emulate les Anglo Saxons.” 



I’m not sure that I entirely agree. First of all, as I have suggested above, the conflict with the railway unions may turn out to be extremely tame in comparison with the forthcoming conflict over pension reform. And even though Macron is clearly determined to keep the basic structure of the French social model, if my reading of his economic policy is correct, he is nevertheless trying to wean the French off their overreliance on the state. Equally tellingly, a leading German newspaper titled a recent interview with Angela Merkel, in which she “responded” to Macron’s grand designs for Euro area reform, as follows:  “…. People in the EU must take their fate more into their own hands. The Chancellor tells us what this means in concrete terms”  (die Menschen in der EU müssen ihr Schicksal mehr in die eigene Hand nehmen. Im F.A.S.-Interview erklärt die Kanzlerin, was das konkret heißt…) The literal translation “take their fate more into their own hands” can also be read as “people in the EU must become more self-reliant”. And, as Chancellor Merkel made clear, she was not only delivering a message to Donald Trump and the Chinese about Europe’s external credibility but also to other European leaders about its inner workings.  No serious progress has ever been made in the EU if France and Germany have not seen eye to eye. Since his election in May 2017, much has been made of Macron’ desire to convince Germany that he is serious about reforming France in the hope of greater financial solidarity within the Euro area. Is this not the outline of the grand bargain to come: more self-reliance in France, more financial solidarity from Germany? Pension reform is probably, in his view, the key that will unlock that move. And, if successful, it will be the clearest signal yet that France can put its own house in order, generate stronger growth, put more people into work and take pressure off the public purse, thus gradually reducing debt. How convincing this, inevitably long-term, vision will appear to the outside world and particularly to Germany will start to become clearer at the summit on Euro reform at the end of June.




Sunday 20 May 2018

Macronomics


About fifteen years ago, I was doing my best to introduce would-be interpreters to the basics of economics, of which students with a background in languages and the humanities generally have little idea but which is essential for any aspiring conference interpreter. I was talking about the French economy and repeating a point made by many economists that its level of public debt was unsustainable. One student ventured to ask why the French could not choose to have a shorter working week, longer holidays and earlier retirement than most other Europeans. My answer was that they were perfectly entitled to make that choice but if they did, they couldn’t expect to continue to enjoy world class health care, some of the best infrastructure anywhere and generous retirement provision, because the country would not be able to pay for it without levying punitive taxes and incurring ever greater levels of debt that future generations would be burdened with.



Fast forward fifteen years to Emmanuel Macron’s first Armistice day ceremony as President last November 11: “My daughter has just got a job and I wonder what kind of pension she will have when she retires” asked an onlooker whose outstretched hand he had just shaken. His spontaneous answer was: “I’m all in favour of the welfare provision that we are able to afford”.



As the contours of Macronomics start to take shape, one year into his presidential term, it seems worthwhile to look more closely at the implications of this answer for clues to his basic economic philosophy which, it seems to me, is very different from the consensus view that has prevailed in French decision making circles for as long as I have lived here.



During those fifteen years of course, we have witnessed how a national economy like that of Venezuela can descend into chaos or, closer to home, the sad and sorry state of the Greek economy over the past ten years to understand what can happen when governments make explicit or implicit promises to their people that they are subsequently unable to keep. Without going so far as to suggest that the French economy is close to falling into similar straits, it cannot be a matter of indifference that its annual budget has not been in balance since 1974, and that its national debt is now close to 100% of GDP, a portion of which is held by non-residents. With slow growth, high unemployment and interest rates starting to rise from record lows, the danger signals are there for all to see.



Emmanuel Macron is not the first leader of France to have seen them but he does seem to be the first to take them seriously enough to want to do something about it. Others before him have tried but failed. Going back no further than 2007, one remembers François Fillon, when he was Nicolas Sarkozy’s Prime Minister, declaring publicly that he was at the head of a “bankrupt state” (“un état en faillite”). All he got for this rare admission of reality was a widely reported dressing down from the President for saying it, after which the financial and banking crisis broke and the whole episode was forgotten. The “bankrupt state” continued to borrow wildly to contain the damage.



Macron seems intent on breaking the vicious circle of rising public spending funded by higher taxes and higher debt and is doing so with his now familiar single-mindedness, driven by an economic doctrine that breaks radically with the comfortable but lazy consensus on economic policy that has prevailed since well before he was born. 



The first part of this vision concerns his attitude to wealth. His highly articulate left-wing opponent, Jean-Luc Mélenchon has dubbed him “President of the rich”, a charge that has stuck in public opinion. It’s not difficult to see why. By emasculating the wealth tax, that now only covers real estate assets, introducing a flat tax of 30% on financial income but at the same time increasing the CSG tax by 1.7% for almost everyone, including a majority of pensioners, he has indeed laid himself open to the charge that he has favoured the rich, particularly the very rich, to the detriment of the less well off. The counter measure to this increase in the CSG, a reduction in social charges for those in work, has attracted a lot less attention. Human nature being what it is, people are quick to complain, as pensioners have done very vocally, about higher taxes but never turn out to manifest their joy at lower ones. Macron was at pains to explain this policy, a well-trailed part of his election programme, in another spontaneous comment to a lady in a crowd during a walkabout in a provincial town recently. The lady was complaining that she had contributed all her life to get a decent pension and that now she was seeing it more heavily taxed. “No”, Macron said, “what you contributed to was your parents’ pension. What I am asking you to do is to help your children contribute to your pension by making it easier for them to find a job and taxing their earnings a little less”.  



In another revealing comment during a TV interview some months ago, Macron dismissed the idea that he was reducing tax on the wealthy because he believed in trickle-down economics.  He expanded on this by saying that he does not believe that wealth trickles down from the rich to the poor but that the rich support the poor by their investments in the economy. He expressed it in the seemingly puzzling image of “the lead mountaineer on the rope” (“le premier de cordée”) pulling the rest behind him. Except that the image only makes sense if everyone behind the lead climber also makes an effort. An equivalent expression that suggests itself to me in English is: “everyone must pull their own weight”. The more well off must show the way ahead by investing their wealth in the economy, the justification for reducing their level of tax. But instead of simply benefiting from the trickle- down effect, the less well off must pull their weight too, by working more productively and being willing to undertake further training to change jobs more easily. This reading of Macronomics is also consistent with a remark in a recent interview by an up and coming MP in Macron’s party, Amélie de Montchalin, a member of the Finance Committee of the Assemblée Nationale. She too has a background in economics and banking and she too has a gift for plain language: “We are not”, she said, “pursuing a policy of redistribution”.



This comment has gone largely unreported in a country that has always had a particularly generous interpretation of the notion of equality. Generations of politicians, from every part of the political spectrum, have taken it for granted that Marx was right about the exploitative nature of capitalism and that therefore money must consistently be taken from the rich in the form of taxes and redistributed to the poor in the form of social benefits.  Thomas Piketty’s recent tome, “Capitalism in the 21st century”, for all its detailed documentation, seems basically to be a modern day restatement of this belief, except that poverty in France today, however visible in some parts of society, has little in common with the extent and level of povery in Marx's time. So entrenched has this broad and comfortable consensus become over the years that it has led to an inexorable increase in taxes, very visibly on those who have, or earn, a lot of money, more stealthily in the form of corporate taxes, high rates of VAT and other consumption based levies, and a concomitant increase in social benefits, not to speak of almost automatic annual salary increases for an army of civil servants, usually with no productivity strings attached but simply to keep them sweet and off the streets. Hardly surprising that the amount of wealth redistributed by the state, at over 45% of GDP, is one of the highest in the EU. And when tax increases no longer suffice, borrowing fills the widening gap, justified in the minds of many by another somewhat out-dated economic doctrine of deficit spending, designed to inject demand into the economy. The problem is that high taxes have gradually discouraged ambitious young people who, having benefitted from some of the world class training opportunities France has to offer, vote with their feet and take their ambitions, their talents and their skills to less highly taxed countries. It was reported the other day that their number rose sharply between 2009 and 2015, the last year for which data is available. As the French saying goes: “Too much taxation kills taxation” (Trop d’impôt tue l’impôt). When François Hollande seriously considered raising the top rate of income tax to 75% soon after the start of his presidency, his then chief economic advisor, Emmanuel Macron, exclaimed: “sounds like Cuba  - without the sun !”  Rising debt, given a powerful boost by the crisis of 2007 and 2008, now requires billions of Euros out of the annual budget to service it. Having become France’s leader, Macron seems to be doing his best to make it clear to the country that he is determined to break with an economic policy biased heavily towards wealth redistribution, funded by taxes and debt, and replace it with one of wealth creation first and foremost, driven by investment, work and training. In a word, supply side economics “à la française”!



All this also goes a long way to explaining his focus on work. The radical overhaul of apprenticeships and vocational training is a good illustration. For too long, such policies have been shaped in cosy negotiations between employers and unions and largely funded by the state. The system has gradually become ossified, spawning bureaucracy and sprinkling money over a large number of training courses with little relevance to job opportunities and from which the unemployed were often excluded.  (“Nice work if you can get it” – November 23, 2017). It is also suspected that large sums of money, supposedly earmarked for training, have ended up financing organisations on both sides of industry. No need to look further than the dramatic mismatch between skills required by industry and the crying lack of them among the three million or so unemployed to realise that the system has reached the limits of its usefulness. Ordered by Macron’s government to come up with something radically different, the industry/union partnership could only agree on more of the same. The government promptly rejected their conclusions and imposed its own, focused more on the needs of trainees and those of industry. Whether a system steered by the government will produce better results remains to be seen. But even if it takes time to do so, the new system can hardly do worse than the old.  A similar, although for the moment less radical, overhaul of unemployment and other social benefits is also quietly being introduced.



However much all this will contribute to growth and employment though, it is only part of Macron’s underlying purpose of reducing public spending. A far bigger drain on the public purse is the uniquely French pension system and its reform would therefore have a far bigger impact on spending than anything mentioned so far. Pension reform, I would suggest, is the main pillar of Macron’s much trumpeted “profound transformation” of the country and it is entirely consistent with his two revealing comments to onlookers reported above. I shall return it in more detail in the next post.