Striking the old year out...

As predicted in my last post, the public transport strike has turned into a battle to influence public opinion between the government and France’s most militant trade union, the CGT. Its secretary general, Philippe Martinez, declared over the weekend that Emmanuel Macron has reached his “Thatcher moment”, meaning presumably that he is determined to fatally weaken the power of trade unions to oppose his reforms. In response, the secretary of state for transport has accused the CGT of trying to bring the country to a standstill and intimidating non-strikers. There is surely some truth in both assertions.

For all its rhetoric, it is easy to forget that the CGT, although strong among train drivers, has seen its influence erode for a number of reasons since the last big public transport strike of 1995. Its former pride of place among unions has been taken by the more reformist CFDT and its leader's stance is not always supported by his own rank and file. It is also worth pointing out that union membership in France in general is among the lowest in industrial countries and concentrated in the sprawling public sector. The spread of the Internet has not only enabled many people to work from home but has also facilitated last-minute on-line reservations for car-pooling rides and trips on long distance coaches and buses (largely liberalised by Emmanuel Macron himself when he was a minister under François Hollande). “How come the trains are empty?” asked one seemingly surprised anchor man on the evening news two days ago, as cameras panned slowly over half empty carriages in high speed trains. The obvious answer seems to be quite simply that many French employees and/or holiday makers have made alternative arrangements to get where they want to go, to work, to join their families for Christmas or take a holiday on the ski slopes. If the usually rapid and efficient trains are seen as temporarily unreliable, they grumble a lot but are quick to find alternatives. Driving of cars, scooters of all kinds, from near motorcycles to electrically driven runabouts, bicycles and walking have increased massively as a way of getting to and from work for instance, and by the time the Christmas holidays end on January 6, strikers, and more importantly, the top managers of the SNCF, will probably have drawn the conclusion that the much feared competition to public sector trains and metros has already arrived. People have been able to adapt and can no longer be stopped going about their business by strike action, as was the case before the Internet era. Some strikers seem to have drawn such a conclusion already and their number has fallen steadily over the past week or so. And thanks to 4G enabled smart phones and mobile apps, it is now possible to see which trains and metros are running and adjust travel plans accordingly. In all likelihood, the strike will eventually peter out, despite desperate and largely illegal action by CGT members to prevent trains running by physically occupying their tracks or temporarily cutting power supplies to some areas.

The government, it must be said, has also, played a skilful hand, even if its announced  grand design of a “universal” pension system had had to be sacrificed for political expediency, in application of the age-old principle of divide and rule: the police force, the fire service, airline pilots, stewards and stewardesses, fishermen and ballet dancers at the Paris opera have all been bought off with promises of specific arrangements for their pension scheme and retirement age, but the determination to put an end to the remaining retirement privileges of many public transport workers and public sector workers in general remains intact.  With some further face-saving concessions in the negotiations scheduled for early January, the government is still likely to have a points-based system for pensions adopted by parliament in 2020 and ensure that when it is finally introduced in 2025, for everyone except those entering the workforce before then, the deficit of between 8 and 17 billion Euros predicted by the official pensions watchdog will have been reduced to zero.

All this being said, the political price that Emmanuel Macron will ultimately have to pay for his probable victory remains uncertain. It was interesting to see for instance that for the first time last Saturday, a street demonstration saw members of the CGT and a large number “gilets jaunes” marching side by side. Does this mean that they have found common ground, and will this show of unity lead to anything? Somehow I doubt it, given that for the moment the only factor that unites them is their intense dislike of the President and their distaste for his reforms.  The next big national test will come with the country-wide municipal elections next March. Macron’s party, la République en marche has invested heavily to prepare them, by selecting or supporting candidates for all of France’s major cities and most towns. The “gilets jaunes” for their part, have not moved on much from their stance as a protest movement and the unions traditionally play a very minor role in such elections anyway.

As we strike the old year out and ring the new one in, the only certainty is that 2020 will be another eventful year for France!

Wishing all my readers a very Happy New Year!

A strike for pension reform

Former French Prime Minister Michel Rocard once quipped that “pension reform has the potential to bring down several governments” (avec la réforme des retraites, il y a de quoi faire sauter plusieurs gouvernements). On Thursday of this week, France will suffer once again what promises to be a more or less total shutdown of public transport in the Paris area, a very limited number of mainline trains in the rest of the country and union sponsored street marches, probably accompanied by masked and helmeted hooligans hiding behind them. Many people who remember the three week long public transport strikes of 1995 are openly wondering whether the current President and his government will suffer the same fate as President Jacques Chirac and Prime Minister Alain Juppé, who were eventually forced to retreat ignominiously and withdraw the pension reform that they had proposed. In 2019, Emmanuel Macron’s chances of bringing his five-year term to a successful close by introducing a reform that has been fiercely resisted every time it has been attempted, hinge on the outcome of this show of force. Be that as it may, it is such repeated failures to bring about fundamental structural reform that have earned France a reputation among foreigners for being ungovernable.

The terms of the current conflict are deceptively simple. Back in 2016, when Emmanuel Macron announced that he was standing for President in 2017, he declared that one of his main policy ambitions was to reform the French pension system, turning it into a “universal scheme” in which every contribution would give rise to the same pension entitlement, regardless of whether one worked in the private or public sector or was self-employed. The simple message was that “1 euro of contribution would give the same entitlement to every pensioner”. Nothing was said at the time about raising the retirement age or increasing contributions or the dire and converging forecasts about future deficits, but it is worth noting that the French pension system as a whole absorbs more than 14% of GDP, quite a lot more than in other comparable countries. Much of it comes out of the state budget.

In contrast to the proposed reforms put forward by Alain Juppé’s government in 1995, for which there was hardly any prior consultation with those most directly concerned, there is no doubt that this time the government has fallen over itself to consult as many parties as possible and public debate has been vigorous and encouraged. However, as these consultations have proceeded, under the guidance of the avuncular Pensions Minister, Jean-Paul Delevoye, what looked like a simple solution has turned out to be a lot more complicated and the attempt to merge 42 individual pension schemes into one has hit many obstacles. For a start, to whom should the reformed system apply? To those who are 5, 10 or 15 years from retirement? Or only to those entering the workforce after the reform is adopted, a situation that would be tantamount to no reform at all for the next 40 years or so? What about the pension schemes that have managed themselves quite happily for many years, whose demographic characteristics are favourable and who are likely, under the proposed reform, to lose control over the reserves thy have built up? Is it fair that metro and bus drivers in Paris should be able to retire almost ten years earlier than their colleagues in other large French cities? Is it true that their working conditions are so much worse than those of nurses and doctors, whose jobs can be considered just as demanding and essential for society but who have no particular pension privileges? And on top of the proposals for a systemic reform, other more short-term but constantly recurring questions have also been raised: should the retirement age be raised for all, contributions increased, or existing pension entitlements reduced?  In the face of the number and complexity of such issues and the very different possible outcomes, the government had been criticised for not making its intentions clear, and by the more suspicious in nature (a large majority of French citizens!) for having a hidden agenda! But when all is said and done, the point has now been reached at which it is clear that the crux of the current reform effort is the reshaping of pensions in the public sector and particularly in big public transport companies like the SNCF and the Paris based RATP. And once again, the majority of unions in these and other public sectors have made it clear that they are prepared to bring the country to a standstill to stop the reform. Listening to a union representative on the radio this morning describing what he characterised as appalling working conditions in the Paris metro, I was left wondering why he and so many of his colleagues had not already left their jobs to look for something more congenial. But rightly or wrongly, their determination seems as strong as ever. In this respect at least, nothing has changed since 1995.

And in this conflict, as in so many others between the government and the unions, it is the evolving state of public opinion that will ultimately determine the outcome. For the moment, the attitudes of men and women in the street are inconsistent and contradictory. Some polls indicate that a majority is in favour of a straightforward, one-size-fits-all pension system, but other polls have found that many also have sympathy with those who are presented as, or loudly proclaim themselves as, losers in the process of simplification.  Now that the strike has been called and is likely to be massively observed, any objective assessment of the “facts”, difficult at the best of times, will take second place to a battle of soundbites and images against the background of all too familiar scenes of demonstrations and paralysis. In 1995, one of the reasons the strikers won the day was that Chirac was perceived, correctly as it turned out, as a half-hearted reformer. Macron is of a very different mettle. It is too early to tell whether Michel Rocard’s prediction will once again turn out to be true or whether Emmanuel Macron is the President who will at last break the curse of fundamental structural reform in France and succeed where many others have failed.

Does France want a federal Europe ?

In the U.K referendum of 2016, the case for Brexit was essentially about “taking back control”. Many years before, a London taxi driver had explained to me, repeating the mantra of Margaret Thatcher at the time, that “Europe” was fine but that a “federal Europe” was out of the question.  It seems therefore worthwhile exploring the extent to which the European project in general is indeed federal and whether France in particular is keen on a federal Europe, a concept that the UK has always rejected, even before the fateful referendum of June 2016.

The influence that France has always sought to exert over the rest of Europe has strong historical roots. Only going back as far as Napoleon Bonaparte, his German, Italian, Austrian, and Russian campaigns of the early 1800s were intended to produce a federation of Europe, with members of his own family in charge of its component parts. Carl von Clausewitz, the Prussian general who theorised the philosophy of war in his major work “On War”, was so influenced in his outlook by Napoleon’s campaigns, that he encapsulated their essence in famous phrases like, “War is therefore the use of force to impose one’s will on an adversary” (“Der Krieg ist also ein Akt der Gewalt, um den Gegner zur Erfüllung unseres Willens zu zwingen”) and “War is simply the pursuit of political ends with other means” (“Der Krieg ist eine bloße Fortsetzung der Politik mit anderen Mitteln”). It is an irony of history that in the 20th century, Germany itself, under the Nazis, would also set out to put these ideas into practice.

The European Union, as it has now become, was designed precisely to banish war forever as a means by which European countries could pursue political ends. But the gradual process of European construction has not put an end to France’s political ambitions in Europe. Far from it. For its part, Germany, sometimes characterised as an economic giant but a political pygmy, is still living with the political and psychological consequences of its recent history and subsequent partition and has been reluctant to define and project any European ambition. France has had no such qualms. But it is also striking to observe that it has always taken grave exception to any post-war integrationist agenda of which it disapproved, starting as early as 1954, when its Parliament torpedoed the European Defence Community. And only a few years after the successful establishment of The European Economic Community by The Treaty of Rome, built around French agriculture and German industry, it was General de Gaulle who simply refused to attend EU ministerial meetings for six months, for fear of being outvoted, before accepting “the Luxembourg compromise” in 1966, which effectively gives member states a veto over any decision if its “vital national interests” are at stake. It was another French President, Valery Giscard d’Estaing, who succeeded in upgrading the European Council to a highly effective tool of intergovernmental cooperation to counter integrationist initiatives of the supranational Commission. The European Council, that was enshrined in the EU’s institutional machinery by the Lisbon treaty of 2007, is now the key body that sets its political agenda and strategic direction.  In short, as far as France is concerned, the European project, it seems, can only advance on French terms and as a result of intergovernmental agreement. Emmanuel Macron’s current attempt to assume the political and intellectual leadership of the EU  (see: “The Economist” - November 9th ) at a time when Germany is temporarily weakened by the long drawn-out end of the Merkel era and the UK is on its way out, is simply the latest example of a very long-standing French ambition to forge Europe and its current incarnation, the EU, in its own image.

But is that image one of a federal Europe? There are almost as many definitions of federal as there are federal countries. The most obvious example is that of the United States, but Brazil, Mexico as well as Germany and many others are also federal in structure with different types of relationship between central government on one hand and regional, state or provincial governments on the other. When people use the word “federal” in the European context, they usually mean a gradual process of greater integration and sovereignty pooling but the phrase “an ever closer union….”, first enshrined in the preamble of the Treaty of Rome, is sufficiently lofty sounding but at the same time sufficiently non-binding to accommodate different visions of integration and an open-ended timetable. And as far as France is concerned, as I have suggested above, further integration can only come in small steps and in slow motion  - and, to the greatest extent possible, on French terms.

The major integrationist steps in the EU so far have been mainly economic, with common policies on agriculture, trade and competition, among others, culminating in a (partial) monetary union and open borders between some countries of the Union, but not all. These policies have benefitted all member countries of the EU in terms of GDP growth and per capita income. And in spite of its occasional grumblings about “unfair competition”, particularly from the newer member states, France is no exception. And yet all this is still very much work in progress - economic and monetary union is far from complete and the current negotiations about rounding it out with a banking union are difficult and will be long drawn-out. The Schengen system has undoubtedly made life easier for many EU citizens, particularly in France, that shares a land border with six other European countries, five of them members of the EU. But in this sensitive area of national sovereignty, the Union has repeatedly failed to define an effective immigration policy and its external borders are, as everywhere, difficult to police. It is also worthwhile noting that the U.K, years before the term Brexit was even coined, opted out of both the Maastricht Treaty and the Schengen agreement. Why worry, one might ask, about “taking back control” when the country has already skilfully managed to sidestep the EU’s most decisive moves towards greater integration?

More significantly though, France is caught in a dilemma between its stated desire to pursue European construction and its profound nature as a centralised nation state. Its history, at least since the reign of Louis XIV, has been one of bringing its outlying regions like Brittany, Corsica, French Catalonia, and the Savoy under the control of a centralised state. After the Revolution, that centralised state became a centralised Republic, with its much-vaunted values of liberty, equality and fraternity. And indeed, in pursuit of these “republican values” centralisation is all pervasive in France. Prefects appointed by the central government ensure that legislation voted by the Parliament in Paris is applied uniformly in every corner of France, including its overseas territories. The National Education Ministry administers a monolithic and supposedly egalitarian public education system. A huge body of administrative law has been created and conflicts with the administration are handled by administrative courts. The powers that municipal mayors and local authorities do enjoy over local or regional matters can quickly be overridden by national laws and regulations. In one recent and telling example, the mayor of a small provincial town who had decided to ban crop spraying within 150 meters of residential areas was overruled by an administrative court enforcing a decree issued by the Ministry of Agriculture in Paris. Even local powers of taxation can be removed at the stroke of an imperious pen, as the recent government decision to phase out the locally important “taxe d’habitation” shows – a move that has left many local authorities in dire financial straits.

There are many other examples of central government’s heavy hand in French society. The inevitable consequence of course is that whenever anything goes wrong, anywhere, from street lighting in a blighted suburb to the closure of a factory in a small town, the “state” is called upon by all concerned to sort it out. A Financial Times correspondent in France recently interviewed Priscillia Ludosky (FT Weekend November 1^st) one of the leading lights in the gilets jaunes movement. She rehearsed once again the idea that many people in France feel they are trapped in “left-behind communities” and that it was this feeling that sparked the multiple demonstrations that started last November and continue, with varying degrees of intensity, to this day. And yet, the specific issues she pinpointed like inadequate child care facilities, lack of local transport and potholes in streets are not the responsibility of central government. They should normally and could realistically be solved by local authorities.

As I have suggested in this blog before  (“The state of the state” – April 2018) the French centralised state would therefore have a lot to gain, in terms of efficiency and acceptability, by embracing a more federalist approach and devolving real power, including inalienable power to raise taxes, to the regional or local level and concentrating on matters of national sovereignty like defence and security, justice and immigration for which, even in a federal system, central government is responsible. But for this to happen, France would have to break with its long-standing centralising traditions. And as far as greater economic and financial integration and steps towards a European security and defence policy are concerned, examples of where future European cooperation may be focussed, the central state would have to pool sensitive parts of its national sovereignty with other nation states. It is hard to see either of these two developments happening any time soon!

If there were still time for the U.K to wake up from its Brexit nightmare and take a more dispassionate look at the progress of European construction, it would find that the much-feared bogeyman of a “federal Europe” is nowhere on the near horizon and that “ever closer union” will continue to be a very slow and very tortuous process!

Thomas Piketty's second tome

Thomas Piketty was on the radio yesterday lunchtime, interviewed by a good economic and business journalist, Hedwige Chevrillon, about his new book, “Capital et Ideologie”, published a month ago in French.  As the translators into English and other languages beaver away over the 1232 pages of text, charts and graphs, the least of their worries will be the straightforward title!   

After the considerable interest in his last work  “Capitalism in the 21^st century”, not only in France but throughout the world – so far 2.5 million copies have been sold in over 40 languages,  (“only a small portion in English”, Piketty revealed)  - this second book will undoubtedly also be widely read and commented on.

Starting the interview on a provocative note, the journalist asked Piketty if he considered himself a latter day Karl Marx,  “Certainly not”, Piketty answered, “Karl Marx did not have the benefit, as I did, of 150 years of economic history from which to draw his conclusions and he was also unaware of the abject failure of Soviet style communism”. He then went on to give 20^th century western style capitalism credit for having raised standards of living and reduced inequalities through progressive taxation, even in the United States,  but blamed it for reducing taxes and preferring ownership and rent seeking to redistribution, starting with the “Reagan revolution” of the 1980s, making it clear that in his view, the policy stances of both Roosevelt and Reagan were based on ideological rather than economic choices. Interestingly, he admitted that after being liberally inclined when studying economics in the 1980s, he had changed his economic philosophy on the evidence of the collapse of the Soviet Union but also what he sees as the objective failure of Reagan’s economic policies, and those that followed his lead, to generate growth and investment.  The publicly stated justification at the time for drastically lowering taxes was the assertion that it would lead to greater investment, and therefore growth that would benefit the whole of society. This turned out, according to Piketty, to be false: the evidence he has gathered shows that since the 1990s, in the major developed countries, the rich have grown richer, growth rates of the post-war years have stalled and inequalities have worsened. He admitted sympathy for the main planks of the democratic platform for the 2020 election and scorned those who claim, once again on the basis of ideological convictions, that they are tantamount to socialism or communism by the back door.

Continuing the theme of his first book, Piketty also stated that progressive taxes should not only be levied on income but also on capital accumulated during a lifetime. A young entrepreneur, however brilliant his idea, however beneficial it may be to society and however big his ensuing business may become, has no right to be immune from the progressive taxation of income and accumulated wealth, both during his lifetime and when he dies. Turning from the US and Europe to Asia, he pointed to the paradox that inherited wealth is taxed at 55% in Japan, that runs a western style capitalist economy, whereas in China, ruled by a purportedly egalitarian Communist party, it is taxed at 0%.

All this of course is of more than just passing interest in France, given the continuing debate about the wealth tax that Emmanuel Macron controversially abolished soon after taking power in 2017. His publicly stated economic argument for doing so was very similar to that of Ronald Reagan in the 1980s: wealthy people will invest the money they haven’t been obliged to pay in taxes and therefore generate growth.  A recently released report produced by a panel of French economists, who were given the task of evaluating the impact of the measure, concluded that it is still too early to tell. It’s only tangible impact that they could point to for the time being is a considerable reduction in the number of tax exiles from France in 2017 compared to 2014. And while it is true that the trend growth of the French economy is a little higher than that of comparable countries, in particular Germany, many commentators put this down to the boost to consumer demand after the injection of more than €11 billion into the economy as a result of the gilets jaunes protests last autumn.

Will Macron’s more structural measures, like those in favour of vocational training or reducing unemployment benefits, add momentum to economic and wage growth in one or two years time? Again, it is too early to tell, but a lot of Macron’s credibility and therefore his chances of being re-elected in 2022, will be riding on their results.

Macron has also gone on record as saying that one of the greatest factors of inequality in France today is not having a job. This ties in with another of Piketty’s findings, that education and training are fundamental to reducing inequality and that the state should therefore encourage massive investment in education at all levels.

One imagines, although he didn’t say so, that Piketty would therefore give Macron credit for the measures that his government has taken to boost apprenticeships and vocational training, as well as focusing more resources on primary education, but that he would not be so complimentary about the abolition of the wealth tax! Nor can he be expected to have great sympathy for Macron’s championing of France as the “start-up nation” together with his frequently repeated encouragement to young entrepreneurs “to become millionaires”.

Towards the end, the interview degenerated into hubbub and confusion as both interviewer and interviewee spoke across each other and at cross purposes - too many questions to ask and too much information to impart. Radio interviews often, disappointingly, end this way for lack of time.

To find out more, there is no alternative therefore but to plough through the 1232 pages of Piketty’s book!

The future of Renault

France more or less comes to a halt in August, particularly over the 15^th of August, which is a public holiday. This year is true to form, with August 15^th falling on a Thursday and most people intending to take a summer holiday adding a long weekend to their entitlement. Like every year, the rolling news networks are clutching at straws to keep themselves going, covering mainly, in the absence of major international developments, the weather, traffic jams on the Mediterranean bound motorways and the all-too-frequent forest fires.

It is also a time therefore for discreet discussions about business mergers and acquisitions as the media spotlight is dimmed and the rumour mill running on empty. One imagines that this year in particular, intense discussions are ongoing between Renault, Fiat Chrysler Automobiles and Nissan, a month or so after the withdrawal of a merger proposal to Renault by Fiat and almost a year since the arrest of the erstwhile boss of both Renault  and Nissan, Carlos Ghosn, in Tokyo on charges of financial improprieties as CEO of Nissan, his ensuing dismissal by both Nissan and Renault and the serious deterioration of relations between the two companies.

That the global car market is suffering from overcapacity and has become fiercely competitive is not in doubt. One only has to listen to any French radio station or watch any TV network for more than ten minutes to hear at least two advertisements for some French or foreign car. Excess capacity has been exercising the minds of industry executives for at least 30 years. Sorting through some old papers the other day, I came across a glossy brochure prepared by the Renault communications department in October 1993 announcing details of the agreed merger between Renault and Volvo, which had been involved in an alliance for some years. “Why is the announced merger between Renault and Volvo necessary when, as has often been asserted, the alliance was working very well?” is the first question put to the boss of Renault at the time, Louis Schweitzer, on page 1 of the brochure. “Renault and Volvo are intending to merge because the alliance has been a success and that give us the guarantee that the merger will also be a success” is the answer. Had a merger between Renault and Nissan gone ahead, as Carlos Ghosn undoubtedly wanted but that Nissan was fiercely resisting, one could imagine almost identical words being written today. But they won’t be because the merger didn’t happen (or at least hasn’t happened yet!). Nor did the merger between Renault and Volvo. The underlying reason was the same in both cases: the presence, or as some would have it, the meddling of the French state.

Why exactly the French state finds it not just desirable but seemingly essential to be a major shareholder of a car company is for many observers outside France a puzzle and even an aberration. Interestingly, Emmanuel Macron, for all his purported credentials as an economic liberal has in this case adopted much the same attitude as his predecessors, espousing the long French tradition, initiated by Colbert under Louis XIV, of promoting and keeping a firm grip by the state on parts of French industry. As finance minister under François Hollande, Macron came up with millions of Euros of taxpayers’ money to buy enough additional Renault shares to force its AGM to adopt a resolution on double voting rights, thus ensuring effective state control of the company. It is now known that Carlos Ghosn was very much against this move and that Nissan was furious about it. It had long complained that Renault, with its 43% stake, whereas it only holds 15% of Renault, was the predominant shareholder in the alliance while Nissan contributed most of its profits! Ironically, this was the result of Carlos Ghosn’s 20-year stewardship of the alliance, starting in 1999, when Louis Schweitzer sent him to revive the almost bankrupt company in which he had just purchased that 43% stake. Similar to Renault and Volvo in 1993, Renault and Nissan were ripe for a merger after 20 years of a largely successful alliance. The surprise arrest of Ghosn in Tokyo last November seems to have been the last spanner that Nissan could throw in the works of a merger that would have formed a global company under the effective control of the French government. The Volvo scenario revisited 25 years later, but with much larger stakes.

None of these developments of course have done anything to reduce overcapacity in the global car market. Carlos Ghosn had thought that he was running a global car company with the clout to become a, if not the, major force in the global market. Regardless of whether the charges against him are proven or not, he has done a superb job of turning around both companies and, with the addition of Mitsubishi, was on the cusp of achieving an ambition in tune with his exceptional talent - and exceptionally large ego!

The main conclusion I draw from this sad story is that the French administrative elite, unlike its business elite, is still under the influence of Colbert almost three centuries later and has not yet come to terms with some of the realities of globalised markets. Renault will have to engage in a merger soon as it cannot survive alone, given the huge investments that carmakers in general will have to make in zero-emissions and self-driving vehicles.  A merger with the other French champion, Peugeot, run by a former associate of Ghosn at Renault, Carlos Tavares, seems out of the question in view of the companies’ very different cultures and the EU competition issues it would raise. A merger with the smaller and struggling Fiat would bring Chrysler into the picture and with the addition of Nissan/Mitsubishi could form the leading car company in the world. The French government must soon decide if it can bear to loosen its grip on a national champion in order to replace it with a global champion with a French core. As negotiations proceed quietly before the end of the summer holidays, it does not have much time to make up its mind.

Back to work......for some

The French Prime Minister’s policy statement to parliament some weeks ago was billed as the beginning of Act 2 of the Macron Presidency, hopefully heralding a return to the path of reform from which Emmanuel Macron was temporarily ejected by the five month-long protests of the “gilets jaunes” movement. The FT titled the next day: “French Prime Minister seeks to get jobless back to work faster”, seeing the reform of unemployment benefits as the main takeaway from the speech. And indeed, a few days later, both the Prime Minister and his Minister of Labour, Muriel Pénicaud, officially presented the reform in detail.

Before delving into that detail, it’s worth pointing out that this is the second reform that the government has decided to remove from the time-honoured tradition of joint union employer/employee agreements, under which both side of industry are supposed to negotiate an agreement about how to manage vocational training or unemployment benefits or top-up pensions. When Macron became President, he made it clear that these three systems had to be profoundly shaken up, not only to make them more effective but also to reduce their respective deficits, which the state budget, in other words the taxpayer, ultimately ends up funding. Neither this injunction nor the fact that employee and employer unions draw some of their revenue from running these systems seems to have concentrated their minds. The first scheme to be taken over by the state was vocational training, now redesigned to be more responsive to the real needs of both industry and trainees. It is too early to tell whether a scheme run by public authorities will produce better results than one run by the “social partners” and if so, how long it will take to show. But initial indications are positive: it has been reported that new apprenticeship contracts for 2018-2019 for example have reached record levels even before the end of the school year.

The unemployment benefits scheme has followed suit. After months of negotiations from which no agreement emerged, the government has stepped in once again to take control. The detailed reform presented a few days ago is the result of its thinking. It is hardly a coincidence  in this context that Muriel Pénicaud herself, before coming to the attention of Emmanuel Macron and joining the French government as Minister of Labour, was for many years the top human resources manager of a large French company and has certainly a greater understanding of the corporate sector than most career politicians and their civil servants.

While most media, French and foreign, have focused mainly on the proposed curtailment of benefits for high-earning executives, an understandable if somewhat illogical approach given that it is executive staff and their employers who contribute most to the system,  the understated thrust of the announced changes seems to be to sharpen the incentives for the unemployed to find a new job rather than stay on benefits. As I wrote in a previous post (“Unemployment: really going down?” May 25^th, 2019) a lot of the unemployed are able to claim unemployment benefit after working for only 4 months in the previous 28 and entitled to claim full benefits again after only 150 hours of employment. In addition, due to the way in which benefits are currently calculated, they can end up “earning” more in unemployment benefits than they did in salary! The government has therefore plumped for an overhaul of a system it considers, in comparison with those in many comparable countries, overgenerous.  Under the new system to be introduced at the beginning of next year, employees will have to have worked for 6 months out of the previous 24 to be able to claim benefits and will not be able to claim further benefits before they have been employed for at least 900 hours. Care will also be taken to ensure that henceforth, anyone receiving benefits will never receive more than in employment. As far as employers are concerned, they will be encouraged to offer fewer short and very short-term labour contracts by being penalised if they continue doing so but rewarded if they are prepared to make longer-term commitments to their employees.

The overall package is of course not perfect. The government has not for example given too much publicity to the fact that the “medico-social sector” is not covered by the new bonus /malus system. Hardly surprising when one considers that most hospitals and a lot of social care institutions are in the public sector and the government is hypocritically but understandably reluctant to prescribe its own remedies to itself! This being said, the new system has drawn protests in equal measure from both trade unions and employers, an indication that it probably represents a reasonable and common-sense compromise.  The state employment agency, “Pole Emploi”, is also to be given a greater role in helping the unemployed find work, a worthy idea but probably of little effect given that the agency now spends far more time managing benefits than filling job vacancies, advertisements for which have largely shifted to dedicated websites and small ads. The revamped system will be no miracle cure for unemployment either; experts consider that it may bring up to 250 000 unemployed back into work, under 10% of the almost 3 million people registered as unemployed, a clear indication that, contrary to what many people think and some politicians publicly state,  indolence is not the main cause of unemployment. But these provisos aside, the reform does seem a sensible step towards sharpening the incentives to work while imposing no extra hardship on those affected and supporting them more in their quest.  Emmanuel Macron, whose consistent and single-minded policy has always been to change the work culture in France by profoundly reforming the labour market would certainly warm to the FT’s headline that this further step along that road is indeed designed to get more people back into work faster.  

The responsible use of language

“Giving things the wrong name makes the world a poorer place” (“mal nommer les choses c’est ajouter au malheur du monde”) wrote the French writer and philosopher, Albert Camus. Conference interpreters and translators, professions of which I have been a proud member for over forty years, go to more trouble than most to find the right words as the quality of their work depends on it. Perhaps that is why I am particularly sensitive to the way that language can - and often is - twisted to meet particular ends.

Contrary to conference interpreters and translators, politicians and trade unionists can of course be excused for exaggerating – it’s their stock in trade, a time-honoured way of oversimplifying complex messages to make an impact on their voters or members. This tendency did not start with populist politicians, but their rise has certainly accentuated it. The erstwhile leader of the French communist party, Georges Marchais, for instance, was known for his pithy and colourful expressions and particularly his habit of blaming everything that was wrong with France on capitalist barons (“le grand capital”) regardless of the fact that his party, as part of France’s immediate post-war government, had helped lay the foundations of its very generous welfare state. Today’s communist party and its soul mates in the CGT union lose no opportunity to denounce “the deliberate destruction of the (French) social model (“la casse de notre modèle social”) after the recent loosening of labour market regulations, the end to a particularly protective labour contract for railway workers or the probable future reduction of unemployment benefits.  As if universal health care, family allowances and 5 weeks paid holiday were about to be ditched at the instigation of globalized capitalist lobbies (“les lobbys mondialisés”) advocating a policy of unbridled liberalism (“le libéralisme sauvage”). At the other end of the political spectrum, the supposed consequences of “being submerged by immigrants” (“ la submersion migratoire de la France” ) are regularly denounced by the parties of the extreme right  for whom l’identité française, seen only as white and Christian, is under threat (“menace sur l’identité chrétienne (de la France)”) and held up as an ideal that cannot possibly, against all historical evidence, accommodate people who have different histories, religions or skin colours.

Most of us, who hear such phrases every day, quickly shrug them off as crass exaggeration and tend to consider them as unimportant as everyone can see where these speakers are coming from. Maybe. But repeated over and over again, do they not gradually erode the possibility of engaging in balanced discourse and civilized debate? And encourage people who should know better to actually indulge in unbalanced discourse and appear to believe what they are saying?

Take for example the case of the novelist Eric Vuillard, the author of an interesting novel entitled “The Order of the Day (“L’Ordre du Jour”) about the willing complicity of German industrial barons in Hitler’s rise to power, that won the prestigious Prix Goncourt in 2017. During a recent conversation at the Hay-on-Wye literary festival, he is reported* to have described the French government’s response to the gilets jaunes protest movement as “authoritarian” and asserted that restrictions on press freedom in France were in preparation. It is unclear whether he was really trying to suggest sinister parallels between today’s France and Hitler’s Germany. The article suggests that he was.  Be that as it may, the idea that the six week “Great Debate “, together with subsidies, tax breaks and extra allowances worth €11bn. can be considered as an “authoritarian” response is little more than a gross distortion of the facts.  Even if he was referring to the legitimate controversy over the tactics of the French riot  police during the gilets jaunes’ regular Saturday demonstrations, the inference that the police behaved with deliberate  brutality akin to that  of Hitler’s brown-shirted thugs is entirely unwarranted and unworthy of an intellectual figure, especially someone talking to a foreign audience that is probably not familiar with what actually happened and has only seen dramatic TV pictures and YouTube videos.

A really scandalous distortion of the facts however must be laid at the door of the gilets jaunes themselves. In a demonstration against police tactics last weekend, they called themselves “the mutilated as an example to others” (“les mutilés pour l’exemple”) This time, the reference is crystal clear: during the First World War a  number of French footsoldiers were executed by firing squads made up of their comrades  and on the orders of their superiors “as an example to others” (“ les fusillés pour l’exemple”), largely on trumped-up charges of desertion or cowardice in the face of the enemy. Only recently, almost 100 years after the events, have their reputations been restored by the official recognition that the vast majority of the “fusillés pour l’exemple” were terrified and traumatised young men who, at the critical moment, were unable to bring themselves to face almost certain death when ordered by officers to charge enemy trenches.

The gilets jaunes who formed the association of mutilés pour l’exemple comprise a few who were indeed unfortunate enough to lose a hand or an eye as a result of being hit by a police grenade. While there seems little justification for using such dangerous weapons (the most dangerous have since been banned for policing demonstrations) and a number of policemen are under investigation for being too trigger happy, considering themselves “mutilated as an example to others” seems a totally unacceptable abuse of language. Were the demonstrators ordered to demonstrate and, in the course of those demonstrations, to throw stones and rocks at the police and set fire to or overturn their vehicles? Of course not!  Were the police under orders to fire their grenades indiscriminately with the aim of injuring and maiming as many demonstrators as possible? At a time when the 30-year anniversary of the Tienanmen massacre is a stark reminder of what really happens when security forces open fire on a crowd with live bullets, precisely as an example to others, the suggestion is preposterous. Were any demonstrators actually killed as a result of police action? No. The only fatalities that did occur during the gilets jaunes protests were caused by traffic accidents for which the protestors themselves were indirectly responsible during their occupation of roundabouts. And although losing a hand or an eye is certainly a serious injury, the small number of those who were injured in this way received prompt and effective medical attention.

By assimilating their fate to that of the “fusillés pour l’exemple”, these gilets jaunes have simply thrown discredit on their movement and clearly shown that shrill exaggeration can only obscure a balanced assessment of what caused their movement in the first place.

One can only hope that both the novelist and the shadowy gilets jaunes leaders will think twice before identifying their words or deeds again with far more dramatic and far-reaching historical events. Legitimate criticism or protest does not make the world a poorer place; self-serving and self-pitying justification for it certainly does.

*In an article in the Financial Times of May 30, 2019: “Lessons for the present from French historical fiction” by Frederick Studemann.

Servants of the public ?

One the more surprising and at the same time revealing moments of the crisis of the “gilets jaunes” was a scene broadcast on the evening news some time ago in which a pensioner thrust his pay slip into the hands of Emmanuel Macron on a walkabout and demanded to know why he was receiving €100 less from one month to the next. In full view of the attendant cameras, Macron considered the piece of paper, explained some of the deductions but after poring over the slip for a minute or so, ended up admitting that he couldn’t answer the question!

There are a number of conclusions that can be drawn from this scene and none reflect well on the enormous French administrative machine and the army of civil servants who run it: the first is that pay slips, like so many other official papers, letters and circulars either from, or in the form required by, the French administration are frequently not easy to understand. The number of lines in a pay slip, detailing all the deductions described in acronyms like CSG, CASA, CRDS etc. is probably pretty incomprehensible to most employees, even those who have completed high school - notwithstanding that two of them disappeared during 2018. Little wonder that most people only look at the bottom line which is their take-home pay and are not fully aware that such deductions from their gross salary correspond to their contributions to health care, unemployment, occupational accident insurance and pension.  It is true of course that their employers’ contributions to these same services are much higher.

More generally, the big and largely successful effort made some years ago in the British civil service to write “plain English” and make official letters and circulars more easily comprehensible even to the least educated members of society has not yet been seriously considered, let alone copied in France. Perhaps now that 80% of any age group pass their school leaving baccalauréat at 18, it is generally considered that they are well armed to understand opaque civil service prose and abstruse acronyms! There was, it is true, under the Hollande presidency, an attempt to simplify many administrative procedures. A Simplification Committee was even set up. It doesn’t seem to have simplified very much and, more importantly perhaps, its remit didn’t run to actually simplifying the language in which such procedures are written.

Another conclusion that can be drawn from the scene mentioned above is that public services are not always easily accessible and that many civil servants are not doing their job properly even when they are. One imagines the pensioner referred to above trying to call an official from the pension service to ask about the series of deductions that he clearly does not understand. The chances are that after being asked repeatedly, by a suave and usually female recorded voice to the accompaniment of a repetitive and irritating jingle, to press 1, 2 or 3 on his keypad, he will end up with a recorded message saying either that his call will be answered in no more than 10 minutes or that nobody is available to answer it and that he should please call back later. Should he be lucky enough to live close enough to an administrative office and try to consult a real live official, he can expect to wait for quite some time before being called forward - the whole process usually taking the best part of half a day. But there are fewer and fewer such offices. In my home town of over 20 thousand people in the Paris area, the social security office has been closed down and moved 20 kilometers down the road. If you live in a rural area you would be lucky to find an office within 50 kilometers of your home. As to the state-run pension service, it has been “streamlined” over the years and only one national telephone number is now available for queries.

Little wonder that anger and frustration have built up among people who do not understand the constant changes to legislation and regulations that can have a big impact on their pensions or other benefits. The lack of understanding and access to another human being who can give comprehensible and reassuring explanations breeds suspicion if not downright hostility. 

The French system is surely not alone in these failings. Even if the French have coined the adjective “kafkaien”, derived from Franz Kafka’s stories, to describe the cruel absurdity, seeming indifference and real opacity of an administrative system,  it is little comfort to a flummoxed French pensioner to be told that it can be a lot worse in other countries, particularly the U.K, as anybody who has seen Ken Loach’s film “I, Daniel Blake” will know.

To be fair though, there are timid attempts in France to bring the administration closer to the people, especially those who are scattered throughout mainland France's countless rural areas. A network of public service hubs (Maisons de Services au Public) is being set up, complete with computers, internet connections and dedicated phone lines, where people can go and either call or connect to a number of public services. On TV the other night, a pensioner was seen asking for help from the sole employee at the desk of one of these newly opened facilities. He refused to help out in a rather surly manner, saying that if he left his desk, he would be unable to answer other queries. As is often the case, the idea is sound, but the initial implementation is poor and the front-line staff apparently unprepared and probably untrained. The latest official figure puts the number of these hubs at 1281 but many are still a long way from where some people live.

Interestingly, in the nationwide consultation in connection with the “Great Debate”, two questions asked whether respondents would like to see itinerant public services or multi-purpose civil servants who could answer a series of administrative questions on anything from health care to unemployment benefits and pensions. It has also been reported recently that following the loosening of criteria for income related tax benefits (crédit d’impôt), 340 extra officials have been recruited to help claimants fill out their application forms at local family allowance offices.

This is surely a positive move but behind it lies the whole question of a root and branch reform of the very organisation of public services in France that would make them more accessible to people, regardless of their claim or query or where they live. Ideally, answers to such calls and queries, providing incomplete and sometimes incomprehensible answers should give way to a pro-active attitude where front-line public servants would provide accurate and straightforward answers to queries and provide information about rights and how to claim them. This would surely do a lot to relieve legitimate frustration and hostility. The timid attempts so far show that there is at least an awareness in high places of the need to act in this way but it is very early days yet, and it will take time as well as long and difficult negotiations with the powerful civil service unions to break many entrenched habits and turn an army of mouse clickers, often barely visible behind their large screens, into people who can be truly called servants of the public !

Unemployment: really going down ?

The recent announcement that the unemployment rate in mainland France has fallen to its lowest level in over ten years has led to much comment and analysis. The government is clearly delighted that such good news should break just a few days before the European elections and sees it as a vindication of its policies at a time when its list, led by the decidedly uninspiring Nathalie Loiseau, is running neck and neck with that of the Rassemblement National led by a young protégé of Marine le Pen. Others point out that, even if unemployment has fallen consistently since the election of Emmanuel Macron, a rate of 8.7% is still among the highest in the EU and compares unfavourably with that of Germany and the UK, although slightly better than that of Spain and Italy. They also highlight the paradox that there are 2.8 million people enrolled in the national employment agency at a time when so many jobs are on offer and that so many businesses are unable to find the employees they are looking for.

In a way, both are right. Or at least not entirely wrong. But whatever credit the government can take for the steady fall in unemployment over the past two years, the underlying situation is more worrying than it would like to make out.

The government can indeed take some credit for the downward trend in unemployment: Emmanuel Macron has consistently maintained that putting more people into work is the key to putting more money in people’s pockets, reducing social inequality and, at the same time, alleviating pressure on public spending. True to this vision, the government has made the labour market more flexible and given a boost to apprenticeships and vocational training since it came to power, as this blog has often reported. Even the emergency measures to contain the revolt of the gilets jaunes are primarily designed to favour people in work or actively seeking it: a reduction in welfare charges on overtime, an increase in employment related tax benefits and bigger handouts to single parent families. Taken together, all these measures will surely put more downward pressure on the unemployment rate as more vacancies are filled.

This being said, it is hard to see the French unemployment rate falling to German or UK levels without big changes to the benefits system and, more significantly, to the culture of work in France. In the euphemistic expression of an expert on the radio the other day, the French social model “is more protective than most”. Meaning that benefits of all kinds and particularly unemployment benefits are more generous, and more easily granted, than in most other countries. A restaurant owner I know in the Morbihan (a coastal département in Brittany) told me recently that he was having great difficulty finding a waiter for the winter. A number of those who showed some interest in the position made it clear that they were better off working for just a summer season and drawing unemployment benefits during the winter…but if the restaurant owner were willing to pay them cash under the table, they may be more interested! The CEO of a small construction and renovation firm in the same département told me that he had enough orders for another two permanent employees if only he could find them, but he couldn’t  In his experience, it was not just that potential applicants lacked the skills, it was simply that they found the work too demanding and the hours too long (despite the fairly strict observance of the 35-hour working week!). An article in the local newspaper reported in the same week that the regional employers’ organisation was desperate to fill at least 500 vacancies for delivery drivers and countless other unskilled or semi-skilled jobs.

What appears to be happening is that many people looking for work are only prepared to envisage clean, fairly undemanding and safe jobs, preferably not starting at 7 or 8 in the morning!  Unlike in Germany or the UK, a lot of the French reject the idea of zero-hours contracts or mini-jobs of the kind that have driven unemployment levels in those countries to record lows. Or putting a different gloss on it, why should they bother to accept such irregular jobs when a few months in a regular job is usually sufficient to be able to draw unemployment benefits for a few more? It is true of course that most job creation today is in service industries, that frequently offer irregular and unsocial hours, little stability and minimum benefits, if any. French unions and left-wing politicians regularly deride these kinds of jobs and the result is that they are alien to the work culture in France, where any job that does not guarantee a full working week, full benefits and at least the minimum wage is widely considered inferior and therefore undesirable. And especially after the gilets jaunes revolt, no French government is about to legislate to introduce them, nor any political party to champion them.  And yet, large numbers of young French people still emigrate temporarily to London for instance where they can easily find work, although it is invariably low-paid, unstable and they have to share cramped accommodation with three or four other people. Even if learning English is one of their motivations for working in London, it is not unreasonable to assume that they would prefer to find such jobs in France, where they would also benefit from a higher minimum wage and mandatory benefits. But that is precisely one of the reasons that stops employers from taking on unskilled and temporary staff. If wages were lower, hours more flexible and benefits optional, they would be willing to take on more of them. But in the present highly regulated labour market, they are not. As President François Mitterrand once famously said, “we have tried absolutely everything to reduce unemployment.”  Letting a lightly regulated labour market find its own equilibrium was clearly never an option. Nor has it ever been seriously considered in a country where social cohesion is more than just a slogan, and which does more than any other in the EU to reduce income inequality through social transfers.

If my reading of Macron’s economic strategy is correct, he is nevertheless moving ahead not only to promote greater employability through his reforms on training but also, slowly, cautiously and the gilets jaunes notwithstanding, on changing the incentives and disincentives to employment. A further test of his determination will come soon with the government’s proposed legislation to reform unemployment benefits and above all, pension benefits. On unemployment benefits, the government has not yet shown its full hand, but targeted leaks talk of executives’ benefits being reduced. This would not exactly be a seismic shift given the fact that unemployment among executives is about a third of the national figure. Nor would it be entirely fair, as executives, and their employers, are by far and away the biggest contributors to the unemployment insurance scheme in the first place. Are bigger changes in the incentives and disincentives to employment in the offing? Barring last-minute surprises, it doesn’t appear likely. The same seems to be true for the other major reform that Macron promised during his election campaign, that of pensions. Discussions have been going on for months between the unions and a government appointed mediator to knock into shape the bold promise that the 44 individual pension schemes, all of which of course are very much under the thumb of the state, would be merged into one, putting an end to the complexity of the current system and more importantly to the particularly generous pension scheme for public sector workers in general and utilities workers in particular. It could reasonably be argued, after all, that the French work shorter hours and take longer holidays than in most other countries and that they should therefore be required to work longer before drawing a pension, especially as life expectancy is now a lot greater than it was when the current arrangements were introduced after the war and that President Mitterrand made even more generous in 1981 by reducing, at a stroke, the retirement age from 65 to 60. Again, according to leaks to the media, the government’s strategy is to shift to a new system in which the “official” retirement age would remain at its current level of 62, but that all employees would in reality have to contribute longer to earn a decent pension. Once again, the government appears to want to act by stealth rather than coming clean and telling people the unvarnished truth.  So, even if these two reforms might still herald a big shift in the incentives and disincentives to employment, the signs at the moment are that, like so many reforms in France, they will be too timorous and half-baked to make a big difference.

But without such shifts in the system, and, more importantly, in the culture of work they might gradually bring about, don’t expect to see the French unemployment rate fall much lower than 8.7% and certainly nowhere near the levels of Germany and the UK.