With Interest: France's costly obsession
Daniel Altman International Herald Tribune
SATURDAY, JUNE 4, 2005
This week the French were out in the streets again, nostalgically recalling their most glorious moments of anti-establishment uprising. But those who celebrated France's rejection of the European Union constitution may live to rue the day.
The constitution was far from a perfect document - something the Dutch, who rejected it for fairly different reasons this week, also realized. Non-Europeans who have lived for centuries under other constitutions probably wondered why this one had to be so long, or so detailed. Many of its 450 pages had little to do with core principles. Fittingly for France, the principles of those who opposed the constitution will surely become more important than the document itself.
Among the motivations for the no vote, two are especially worrisome for the French economy. The first is a leftist impulse to protect the French social model by maintaining heavy-handed regulation of labor markets and businesses. The second is a rightist combination of xenophobia and nationalism, manifested as a fear of immigration and cultural exchange.
The phrase "social model" may be unfamiliar to people living outside of Western Europe who were born in the past few decades. It implies that society can be planned and kept within certain boundaries, presumably by the government.
To the French left, the social model specifically implies, among other things, rules that make hiring and firing extremely difficult, limit working hours, offer generous benefits to the unemployed, curtail competition in the service sector and keep major industries under at least partial control of the government. In other words, social model is a synonym for quasi-socialist economy.
Quasi-socialist economies have not made the best of showings in the past century. In France, the quasi-socialist system has resulted in a prolonged period of high unemployment, by the standards of wealthy countries. Indeed, most of the rules contribute directly to that unemployment by restraining free enterprise or making unemployment seem more attractive. (Notably, the French seem unwilling to concede that a social safety net may coexist with free markets.)
Many French no voters seemed to think that they might lose their jobs if their country opened itself to competition from the other 24 members of the EU and relaxed some of the social model's rules. Some of them may have been right. But in this case, social model has another synonym: status quo. Keeping the social model may lock in comfortable jobs for millions of French people, but its inflexibility will also keep millions of others out of work.
The rightist fears are equally shortsighted. Cutting France off from the rest of Europe would hamper the exchange of talent and ideas, as well as hurting French companies' ability to expand into new markets. In addition, France will need new immigrants paying into its pension system to finance benefits for retiring workers. At the moment, the population aged 60 to 64 is just two-thirds the size of the next six five-year cohorts. And that's not because a third of 59-year-olds die every year.
It's not hard to predict what will happen if France continues to act on these dual impulses. First, its most entrepreneurial citizens will simply relocate. At the moment, the prognosis for new businesses in France could hardly be worse. Almost all of the country's neighbors offer a less antagonistic atmosphere, as well as looser policies on employment and establishment.
Second, foreign entrepreneurs and professionals will avoid France. The most able-bodied people from the 10 new member states, with their new opportunities to migrate throughout the EU, will choose other destinations. The French right will get what it wanted, but at a cost to France's future as an innovator.
These consequences will not be obvious right away, since they have more to do with what France will miss out on in the future. Soon, though, the French economy will inevitably begin to lag.
Furthermore, if France's fit of pique continues into the longer term, its consequences will multiply. Some of the EU's other members may not look so kindly on the heavy agricultural subsidies France receives - at their expense - if the country becomes an obstacle to their economic progress.
In all of these ways, France may become isolated from the rest of Europe. Because the forces that united to reject the European constitution in France cannot seem to agree on anything else, the country will gain little from having to solve its problems alone. And it seems unlikely that a xenophobic nation clinging to a quasi-socialist system will succeed for long in an ever-more-competitive Europe.
For pause, France might do well to consider these comments made in advance of another major step towards European integration, "If some countries are looking for reasons and alibis for postponing the treaty and its implementation, it may well be that others will take the lead." The thought continued: "It is a possibility we cannot rule out. Some countries may conclude that with the challenges we have to take up, they need to move forward sooner rather than later."
Jacques Delors, the former president of the European Commission, spoke those words in September 1992, before the institution of the Maastricht treaty. He warned that if countries like Britain dragged their feet, a core group of Germany, France, the Netherlands, Belgium and Luxembourg would stride ahead toward a closely knit economic union.
The chaussure, so to speak, is now firmly on the other pied.
This week the French were out in the streets again, nostalgically recalling their most glorious moments of anti-establishment uprising. But those who celebrated France's rejection of the European Union constitution may live to rue the day.
?
The constitution was far from a perfect document - something the Dutch, who rejected it for fairly different reasons this week, also realized. Non-Europeans who have lived for centuries under other constitutions probably wondered why this one had to be so long, or so detailed. Many of its 450 pages had little to do with core principles. Fittingly for France, the principles of those who opposed the constitution will surely become more important than the document itself.
?
Among the motivations for the no vote, two are especially worrisome for the French economy. The first is a leftist impulse to protect the French social model by maintaining heavy-handed regulation of labor markets and businesses. The second is a rightist combination of xenophobia and nationalism, manifested as a fear of immigration and cultural exchange.
?
The phrase "social model" may be unfamiliar to people living outside of Western Europe who were born in the past few decades. It implies that society can be planned and kept within certain boundaries, presumably by the government.
?
To the French left, the social model specifically implies, among other things, rules that make hiring and firing extremely difficult, limit working hours, offer generous benefits to the unemployed, curtail competition in the service sector and keep major industries under at least partial control of the government. In other words, social model is a synonym for quasi-socialist economy.
?
Quasi-socialist economies have not made the best of showings in the past century. In France, the quasi-socialist system has resulted in a prolonged period of high unemployment, by the standards of wealthy countries. Indeed, most of the rules contribute directly to that unemployment by restraining free enterprise or making unemployment seem more attractive. (Notably, the French seem unwilling to concede that a social safety net may coexist with free markets.)
?
Many French no voters seemed to think that they might lose their jobs if their country opened itself to competition from the other 24 members of the EU and relaxed some of the social model's rules. Some of them may have been right. But in this case, social model has another synonym: status quo. Keeping the social model may lock in comfortable jobs for millions of French people, but its inflexibility will also keep millions of others out of work.
?
The rightist fears are equally shortsighted. Cutting France off from the rest of Europe would hamper the exchange of talent and ideas, as well as hurting French companies' ability to expand into new markets. In addition, France will need new immigrants paying into its pension system to finance benefits for retiring workers. At the moment, the population aged 60 to 64 is just two-thirds the size of the next six five-year cohorts. And that's not because a third of 59-year-olds die every year.
?
It's not hard to predict what will happen if France continues to act on these dual impulses. First, its most entrepreneurial citizens will simply relocate. At the moment, the prognosis for new businesses in France could hardly be worse. Almost all of the country's neighbors offer a less antagonistic atmosphere, as well as looser policies on employment and establishment.
?
Second, foreign entrepreneurs and professionals will avoid France. The most able-bodied people from the 10 new member states, with their new opportunities to migrate throughout the EU, will choose other destinations. The French right will get what it wanted, but at a cost to France's future as an innovator.
?
These consequences will not be obvious right away, since they have more to do with what France will miss out on in the future. Soon, though, the French economy will inevitably begin to lag.
?
Furthermore, if France's fit of pique continues into the longer term, its consequences will multiply. Some of the EU's other members may not look so kindly on the heavy agricultural subsidies France receives - at their expense - if the country becomes an obstacle to their economic progress.
?
In all of these ways, France may become isolated from the rest of Europe. Because the forces that united to reject the European constitution in France cannot seem to agree on anything else, the country will gain little from having to solve its problems alone. And it seems unlikely that a xenophobic nation clinging to a quasi-socialist system will succeed for long in an ever-more-competitive Europe.
?
For pause, France might do well to consider these comments made in advance of another major step towards European integration, "If some countries are looking for reasons and alibis for postponing the treaty and its implementation, it may well be that others will take the lead." The thought continued: "It is a possibility we cannot rule out. Some countries may conclude that with the challenges we have to take up, they need to move forward sooner rather than later."
?
Jacques Delors, the former president of the European Commission, spoke those words in September 1992, before the institution of the Maastricht treaty. He warned that if countries like Britain dragged their feet, a core group of Germany, France, the Netherlands, Belgium and Luxembourg would stride ahead toward a closely knit economic union.
?
The chaussure, so to speak, is now firmly on the other pied.
?
?
This week the French were out in the streets again, nostalgically recalling their most glorious moments of anti-establishment uprising. But those who celebrated France's rejection of the European Union constitution may live to rue the day.
?
The constitution was far from a perfect document - something the Dutch, who rejected it for fairly different reasons this week, also realized. Non-Europeans who have lived for centuries under other constitutions probably wondered why this one had to be so long, or so detailed. Many of its 450 pages had little to do with core principles. Fittingly for France, the principles of those who opposed the constitution will surely become more important than the document itself.
?
Among the motivations for the no vote, two are especially worrisome for the French economy. The first is a leftist impulse to protect the French social model by maintaining heavy-handed regulation of labor markets and businesses. The second is a rightist combination of xenophobia and nationalism, manifested as a fear of immigration and cultural exchange.
?
The phrase "social model" may be unfamiliar to people living outside of Western Europe who were born in the past few decades. It implies that society can be planned and kept within certain boundaries, presumably by the government.
?
To the French left, the social model specifically implies, among other things, rules that make hiring and firing extremely difficult, limit working hours, offer generous benefits to the unemployed, curtail competition in the service sector and keep major industries under at least partial control of the government. In other words, social model is a synonym for quasi-socialist economy.
?
Quasi-socialist economies have not made the best of showings in the past century. In France, the quasi-socialist system has resulted in a prolonged period of high unemployment, by the standards of wealthy countries. Indeed, most of the rules contribute directly to that unemployment by restraining free enterprise or making unemployment seem more attractive. (Notably, the French seem unwilling to concede that a social safety net may coexist with free markets.)
?
Many French no voters seemed to think that they might lose their jobs if their country opened itself to competition from the other 24 members of the EU and relaxed some of the social model's rules. Some of them may have been right. But in this case, social model has another synonym: status quo. Keeping the social model may lock in comfortable jobs for millions of French people, but its inflexibility will also keep millions of others out of work.
?
The rightist fears are equally shortsighted. Cutting France off from the rest of Europe would hamper the exchange of talent and ideas, as well as hurting French companies' ability to expand into new markets. In addition, France will need new immigrants paying into its pension system to finance benefits for retiring workers. At the moment, the population aged 60 to 64 is just two-thirds the size of the next six five-year cohorts. And that's not because a third of 59-year-olds die every year.
?
It's not hard to predict what will happen if France continues to act on these dual impulses. First, its most entrepreneurial citizens will simply relocate. At the moment, the prognosis for new businesses in France could hardly be worse. Almost all of the country's neighbors offer a less antagonistic atmosphere, as well as looser policies on employment and establishment.
?
Second, foreign entrepreneurs and professionals will avoid France. The most able-bodied people from the 10 new member states, with their new opportunities to migrate throughout the EU, will choose other destinations. The French right will get what it wanted, but at a cost to France's future as an innovator.
?
These consequences will not be obvious right away, since they have more to do with what France will miss out on in the future. Soon, though, the French economy will inevitably begin to lag.
?
Furthermore, if France's fit of pique continues into the longer term, its consequences will multiply. Some of the EU's other members may not look so kindly on the heavy agricultural subsidies France receives - at their expense - if the country becomes an obstacle to their economic progress.
?
In all of these ways, France may become isolated from the rest of Europe. Because the forces that united to reject the European constitution in France cannot seem to agree on anything else, the country will gain little from having to solve its problems alone. And it seems unlikely that a xenophobic nation clinging to a quasi-socialist system will succeed for long in an ever-more-competitive Europe.
?
For pause, France might do well to consider these comments made in advance of another major step towards European integration, "If some countries are looking for reasons and alibis for postponing the treaty and its implementation, it may well be that others will take the lead." The thought continued: "It is a possibility we cannot rule out. Some countries may conclude that with the challenges we have to take up, they need to move forward sooner rather than later."
?
Jacques Delors, the former president of the European Commission, spoke those words in September 1992, before the institution of the Maastricht treaty. He warned that if countries like Britain dragged their feet, a core group of Germany, France, the Netherlands, Belgium and Luxembourg would stride ahead toward a closely knit economic union.
?
The chaussure, so to speak, is now firmly on the other pied.
?
?
This week the French were out in the streets again, nostalgically recalling their most glorious moments of anti-establishment uprising. But those who celebrated France's rejection of the European Union constitution may live to rue the day.
?
The constitution was far from a perfect document - something the Dutch, who rejected it for fairly different reasons this week, also realized. Non-Europeans who have lived for centuries under other constitutions probably wondered why this one had to be so long, or so detailed. Many of its 450 pages had little to do with core principles. Fittingly for France, the principles of those who opposed the constitution will surely become more important than the document itself.
?
Among the motivations for the no vote, two are especially worrisome for the French economy. The first is a leftist impulse to protect the French social model by maintaining heavy-handed regulation of labor markets and businesses. The second is a rightist combination of xenophobia and nationalism, manifested as a fear of immigration and cultural exchange.
?
The phrase "social model" may be unfamiliar to people living outside of Western Europe who were born in the past few decades. It implies that society can be planned and kept within certain boundaries, presumably by the government.
?
To the French left, the social model specifically implies, among other things, rules that make hiring and firing extremely difficult, limit working hours, offer generous benefits to the unemployed, curtail competition in the service sector and keep major industries under at least partial control of the government. In other words, social model is a synonym for quasi-socialist economy.
?
Quasi-socialist economies have not made the best of showings in the past century. In France, the quasi-socialist system has resulted in a prolonged period of high unemployment, by the standards of wealthy countries. Indeed, most of the rules contribute directly to that unemployment by restraining free enterprise or making unemployment seem more attractive. (Notably, the French seem unwilling to concede that a social safety net may coexist with free markets.)
?
Many French no voters seemed to think that they might lose their jobs if their country opened itself to competition from the other 24 members of the EU and relaxed some of the social model's rules. Some of them may have been right. But in this case, social model has another synonym: status quo. Keeping the social model may lock in comfortable jobs for millions of French people, but its inflexibility will also keep millions of others out of work.
?
The rightist fears are equally shortsighted. Cutting France off from the rest of Europe would hamper the exchange of talent and ideas, as well as hurting French companies' ability to expand into new markets. In addition, France will need new immigrants paying into its pension system to finance benefits for retiring workers. At the moment, the population aged 60 to 64 is just two-thirds the size of the next six five-year cohorts. And that's not because a third of 59-year-olds die every year.
?
It's not hard to predict what will happen if France continues to act on these dual impulses. First, its most entrepreneurial citizens will simply relocate. At the moment, the prognosis for new businesses in France could hardly be worse. Almost all of the country's neighbors offer a less antagonistic atmosphere, as well as looser policies on employment and establishment.
?
Second, foreign entrepreneurs and professionals will avoid France. The most able-bodied people from the 10 new member states, with their new opportunities to migrate throughout the EU, will choose other destinations. The French right will get what it wanted, but at a cost to France's future as an innovator.
?
These consequences will not be obvious right away, since they have more to do with what France will miss out on in the future. Soon, though, the French economy will inevitably begin to lag.
?
Furthermore, if France's fit of pique continues into the longer term, its consequences will multiply. Some of the EU's other members may not look so kindly on the heavy agricultural subsidies France receives - at their expense - if the country becomes an obstacle to their economic progress.
?
In all of these ways, France may become isolated from the rest of Europe. Because the forces that united to reject the European constitution in France cannot seem to agree on anything else, the country will gain little from having to solve its problems alone. And it seems unlikely that a xenophobic nation clinging to a quasi-socialist system will succeed for long in an ever-more-competitive Europe.
?
For pause, France might do well to consider these comments made in advance of another major step towards European integration, "If some countries are looking for reasons and alibis for postponing the treaty and its implementation, it may well be that others will take the lead." The thought continued: "It is a possibility we cannot rule out. Some countries may conclude that with the challenges we have to take up, they need to move forward sooner rather than later."
?
Jacques Delors, the former president of the European Commission, spoke those words in September 1992, before the institution of the Maastricht treaty. He warned that if countries like Britain dragged their feet, a core group of Germany, France, the Netherlands, Belgium and Luxembourg would stride ahead toward a closely knit economic union.
?
The chaussure, so to speak, is now firmly on the other pied. |
