François Hollande’s victory in the French elections raises all sorts of interesting questions, not all of them related to France’s sovereign debt. Such as:
Will Carla stay married to Sarko? My guess is she probably won’t: she doesn’t look like a ‘for better or for worse’ kind of girl. It’s one thing for this ex-model to marry a President of France; quite another to stay married to a failed politician wearing elevator shoes when out and presumably elevator slippers when in.
Will Sarko’s rich friends stay his friends? Same answer. Rich people anywhere, and in France especially, seldom befriend politicians for disinterested reasons. Their admiration for the politician’s sterling personal qualities tends to diminish when he loses clout.
Will François marry his live-in girlfriend? Again, probably not: he lived with Ségolène Royal for 30 years and sired her four children without ever tying the knot. Unlike the thrice-married Sarko, he doesn’t seem to believe in the institution of marriage – or probably any other traditional institution either. He’s a socialist, isn’t he?
And what is it about both contestants’ women? One was serially attracted to pop ‘musicians’ and nude photo sessions, the other is a pugnacious feminist who throws punches in public. Both, in other words, are showy on the outside and rather vacuous inside. Come to think of it, the same can be said about their men’s policies.
It’s Hollande’s proposed policies that raise a more serious question: will he ever learn to think about economics without stumbling over one non sequitur after another? Take his views on growth and austerity. These, he evidently thinks, exist in inverse proportion: the more of one, the less of the other. That’s like saying that the more money one has, the less it rains. It’s not cabbages and kings; it’s apples and oranges.
Austerity and growth live on different planes: the former, in the public sector; the latter, in the private one. The two planes, however, defy Euclid and vindicate Lobachevsky in that they can intersect. And when they do, one notices that their relationship isn’t so much inverse as symbiotic.
As any serious economist will tell you, promiscuous government spending leads to huge debts, and huge debts lead to crises – especially in countries that aren’t free to set their exchange rates as they see fit. In the last quarter of last year, France’s national debt was €1,700 billion, 83 percent of her GDP. By comparison, her debt in 1985 was a dangerously high but still manageable 37.9 percent of GDP. The cost of servicing such a huge debt today must be similar to the country’s total budget in 1985.
François’s remedy? Dramatically increasing government spending, thus providing for growth – and damn the austerity. We, and obviously the French, are so conditioned to saluting whenever growth is run up the pole that we don’t distinguish good from bad growth. But it’s useful to remember that the private sector is like a muscle, and the public sector is like a malignant tumour. Either can grow, but with very different results.
Allow me to clarify. Let’s say a government borrows £100,000 and uses the money to hire an optimiser of facilitation. Then it borrows another £100,000 and hires a facilitator of optimisation. The country’s GDP has just grown by £200,000, but her economy has suffered serious fiscal damage, to say nothing of the moral kind. The muscle hasn’t grown; the tumour has.
It’s not as if France’s public sector needed beefing up. It already consumes 56 percent of the economy officially and considerably more unofficially, when you take into account all those supposedly private firms that wholly depend on government income. In Stalin’s Russia the corresponding figure was 80 percent, so the gap is closing. And we know what happens when égalité replaces libérté. Out of the window goes fratérnité.
I’m eagerly awaiting Angela’s reaction. She has staked her whole career on austerity, and her job prospects aren’t looking good. The Greeks appear likely to get a communist government (or as near as damn), something quite a few Englishmen died to prevent at the end of the big war. The Dutch are about to go the same way. Romania has had a change of government. So has Italy. So has Spain. And the French have elected François, thereby enlisting to fight his frankly idiotic ‘war on finance’.
I pity Angela. There she is, achieving with washing machines and toasters a feat the previous generation of Germans failed to achieve with tanks and Stukas. The eurozone countries can’t devalue their currency, which means they can’t compete against German goods on price. Competing on quality is the only way to stay afloat, and you know which way that’s going to go. They are in the doldrums, Germany rules, QED.
And now? She’ll fight tooth and polished nail to keep François et al from acting on their promises. But even if they succeed only partly, the euro will have to go, with the EU itself on its heels. Meanwhile, François et al will inflict the kind of misery on, among others, France that no austerity would. Really, while the EU with its open labour markets still exists, Dave should stand for office somewhere on the continent. Who knows, he might be taken for a statesman there.