… or the Betrayal of the French Social Model

[I probably will not be around much in the next 36 hours (am currently in the airport lounge) but will reply tomorrow might when I am back.]

1. The Referendum and the French Political and Social Context

One of the essential reasons why the "non" vote on the European constitution is so strong in France is that the economic outlook in France these days is not so great, with persistent unemployment, insufficient growth, and a general restlessness. And especially, there is a lot of resentment against Chirac.

A lot of that general disaffection is linked to how the most recent elections played out. As you may remember, Chirac was reelected in 2002 with 82% of the votes in the second round because he was facing Jean-Maris Le Pen, the extreme right-wing populist, instead of Lionel Jospin, the socialist candidate, which came third (because he ran a boring campaign, because the left dispersed its votes on too many candidates, because Chirac ran a nasty campaign on fear of crime and insecurity). Chirac was elected with the lowest ever tally in the first round for an incumbent (less than 20% of voters, less than 14% of potential voters) and was then voted in with as many votes from the left as from the right, and promptly ignored that extraordinary situation by choosing a hard right Prime Minister, Jean-Pierre Raffarin, and then leading on a hard rightist policy, focusing on reducing taxes, undoing the social laws of the previous Jospin government (such as the infamous 35 hour week), and trying to reform the pensions system. In late 2002 and 2003, the international situation allowed Chirac to strut on the world stage playing statesman by opposing Bushco and to take the attention away from the dire domestic situation, where unemployment was increasing once again.

In 2004, local elections took place, and the right of Chirac and Raffarin took a trouncing, losing all the regions they controlled, except one, and having one of their lowest percentage of votes ever. What did Chirac do? Ignore the votes again and keep Raffarin as Prime Minister. Then came the decision on how to ratify the EU Constitution. It was widely expected to be done via a parliamentary vote, which would have yielded an overwhelming majority, both the majority UMP and the Socialists being in favor. Then the socialists started to split on the issue, with a vocal hard-left faction leading the combat against the "libéral" Constitution and asking for a referendum (as were, more traditionally, the sovereigntists on the right). Chirac, seeing a good opportunity to splinter the left opposition, decided to have a referendum. Then something strange happened: François Hollande, the not very charismatic leader of the socialists, launched an internal debate and started an internal vote on what the official position of the party should be. He was widely mocked, and expected to lose, but, defying expectations, he got 60% of socialist party members to vote in favor of the "oui", with a very strong turnout. Chirac then decided to use the momentum of that vote to get the referendum quickly. The "non" partisans amongst the socialists, despite having lost that internal vote, and showing a lot of respect for that democratic procedure, decided to keep on campaigning for the "non" and to surf on the otherwise growing restlessness and unhappiness about Chirac. Suddenly, all the ills of the French economy and society were caused by Europe, and this was repeated on and on with increasingly outrageous claims about supposed European rules or regressive decisions…

2. The French Model

Now I’d like to step back and bring some perspective on the current situation in France.

The French economic model has been built on quite different bases than the anglo-saxon capitalist version. To keep it simple, you could call it a "competent paternalistic State". The State plays an overwhelming role in France, and it is strongly centralized. Thus all decisions can be taken by a smallish group of top civil servants and politicians often coming from the same backgrounds. The State runs the economy, either directly through a big public sector, or through explicit or implicit guidance on the private sector. strategic sectors like energy, military or banking were very directly run by the State or its representatives.

The French State took decisions for all, based on what the small elite group saw as the long term interests of the country. The counterpart to this overwhelming power is that the State provides for everybody – decent wages, pensions, access to public services (with an extensive definition of that), with strong representation for unions, able to fight for workers so long as they adhered to the culture of progress and technical excellence pushed for by the leadership. This arrangement worked because it delivered the goods for a long time, and it worked, among others, because, in a virtuous circle for the State, it was prestigious to work for it and thus it had the pick of the best minds of each generation (selected through the entrance exams to a few elite universities like ENA (for administrators) and Polytechnique (for engineers – full disclosure, I am an alumni of that school). Such arrangements brought to life the high speed trains, the nuclear program, Airbus, and industrial groups like Total (the only non anglo-saxon oil major), Renault (the car maker that now controls Nissan). it also built the European Commission to its model. The workers were proud of what they did and were decently treated, and their commitment to technical excellence and the duties of public service (like 24/7 availability of electricity or trains, typically) provided good value for society.

That model has been threatened by two things in the past 30 years: the choice made by France to go through the crisis of the 70s by tolerating unemployment and compensating unemployed people at a high level instead of making the labor market more flexible and authorizing lower paid and less stable jobs, and the relentless pressure of the dominating Anglo-American capitalist model, with its focus on the exclusively monetary short term expression of economic performance.

3. The Black Stain of Unemployment

Unemployment has had the terrible effect of destroying the social contract for a number of people. As it was hard to leave the working world, it was correspondingly hard to join it, so if you left it, you fell out of the system. Companies started creating a less protected sector in parallel to their core employment: all new hires would be temporary or otherwise unprotected (internships, foreign subsidiaries under different rules) and these would bear the brunt of any downturn when these would come. So, contrary to all beliefs, the French economy is not less flexible than others, but the flexibility is borne by a much smaller portion of the overall working population, basically the young (who take years to get a "real" job"), the old (who were encouraged to leave early, in the best case for an early retirement, in the worst case, for irreversible layoffs) and other more vulnerable populations like immigrants or women. Meanwhile, the "core", still heavily  protected, sees what happens to those that drop out, to their kids or parents, and they fight even harder to keep what they have (especially if they have to care for less lucky members of their family) – creating that impression of overall rigidity of the economy, making it impossible to find a global solution, and making it painfully obvious to all the the French economy was not functioning on the soundest basis. The fact that the "core" workers are, for a large part, in the public or quasi public sector or in the still-well unionized large companies has made them an attractive target for right wing ideologues. and in the meantime, French companies regularly beat productivity records, as they tend to avoid to hire, invest in machinery or other efficiency-enhancing processes, and get more output per unit of labor than in other economies.

Politicians have never acknowledged that early "strategic choice", and never explained it, presumably initially hoping that unemployment was temporary and that growth would solve the problem eventually. As it did not, it became a permanent stain on the social fabric, encouraging, among other things, the protest vote à la Le Pen, an accessible solution for people who feel that they have been abandoned and that the "system", represented by the main stream parties of the left and the right which have been in power in turns, has failed them and needs " a kick in the balls". That has been a strong trend in all elections in the past 20 years.

But politicians have tried solutions to bring back flexibility to the labor market to try and solve unemployment. The problem is that these solutions have never been really explained as such, and have always been partial, and hidden. Thus precarity was introduced into work contracts, temporary and unstable jobs were encouraged, thus creating a new category of working poor but not solving unemployment as companies have gotten used to functioning with less labor, and still see that the "official" line is to not tolerate layoffs and punish them politically for any adjustment they may need to make to their "core" work force – so they limit the number of real hirings they do.

Unemployment is the big black stain on France’s otherwise pretty good economic performance, and it has discredited the elites which were previously trusted to run the economy with limited outside interference.

4. The Terrible Temptation of Money

The pressure of laisser-faire ideology has been as relentless on France, and it has worked in two ways:

one is the permanent pressure of  the English-language press, which is always happy to write bad news about France, especially on the economic performance front, or in their also-permanent war against the European Union, which they widely associate as a French plot. With English the dominant language of world business, all the horrible "truths" about France propagated by the British press become the common wisdom of the worldwide business world, and these opinions seep through into France, where we slowly convince ourselves that we have a rigid, archaic, hopelessly static, etc… country. When peaceful demonstrations are systematically called "riots" in the British press, unions and labor action are reconsidered and seen exclusively through the lens of "a pampered few" fighting for their extravagant privileges… That relentless barrage does have an effect. I find myself defending France (like now) and explaining basic things whereas I am usually a lot more critical…

the other effect has been to seduce the elites with promises of plenty of money, to replace the social recognition that they received in their jobs in France. Those that left to the private sector set a tempting model for those that stayed; thus reducing slowly the quality of the civil servants that do stay on as the best ones are attracted to the private sector;

a more devious effect has been the temptation by the elites to use "market constraints" and market discipline to impose additional efforts on the workforce of the big French companies in the name of efficiency and profitability, thus introducing a nasty imbalance in the French model, as workers were asked to make new sacrifices with no obvious gift in return. The worst part is that such efforts were supposedly "forced" upon them by outside forces (the "markets", "Europe") when it was a decision of the elites to push for reform but hide it behind such outside forces. It was an easy target, as French workers do have "privileges" and advantages that look extravagant from the perspective of the capitalist model of enterprise, but made sense in the French context. However, that French model was NOT sold outside of France as a full package, or only in a partial way that made it look like French leaders were fighting a rear guard action for obsolete privileges. And of course, French workers, and the unions that represent them, did see through that smokescreen as invoking "Europe" to force changes upon them. Quite clearly, the French elites were hoping to have their cake and eat it too, i.e. have French levels or productivity and work quality without paying for these as they did before.

The most amazing thing is how far the elites have been able to push this, which shows how much they used to be trusted in France: when they invoked the "greater interests of France", and invoked the requirements to be competitive, they were followed, and the French workforce has made tremendous efforts, which come through in the fact that France has world-class companies in many sectors of activity, has great infrastructure and work productivity, and is an attractive place to do business (you’d never believe from all the press that France is consistently in the top 3 destinations of foreign direct investment, along with China or the US).

But that "march forward" has taken its toll as the French population sees that it is making all the efforts, while the elites get stock options or cushy government jobs and blithely talk about competitiveness while betraying them by not defending enough the French system in Brussels or elsewhere (or defending in an inefficient way, making noise about "acquis sociaux" but not fighting for a coherent whole), and instead using Europe to distort the existing model.

Of course, this is a slight exaggeration, and there still are many dedicated civil servant and executives fully aware of what the French social model is, and defending it a smart way internally and externally. But the 20 years of unemployment and the growing size of the working poor sector have created strains which are impossible to paper over, and many people feel that the sacrifices made by the French were not worth it, and worse, were not fairly shared. Thus the reaction of the protected sector to keep in place what’s still there, and the skepticism against the elites which broke the old social pact for no good reason and at their personal profit.

5. Chirac is the Embodiment of All That’s Wrong Today

So where does Chirac fit in there? Well, he has been instrumental in the drift of the French elites that I described above. He is the master of show over substance, and has been a great specialist at making noise over issues instead of solving the underlying problems. He has been the specialist at fighting rearguard, delaying fights that piss off France’s partners for a temporary result (see typically his fight over the agricultural subsidies); in France he has never had any long term policy, always acting in emergency mode when protests get too loud, and thus making short term fixes to the symptoms and never working on the causes of problems.

He is the quintessential politician, always running for the job but never actually doing it. You’d never guess that he has been President for 10 years from hearing him, he’s still playing the underdog, promising things that he will do in the near future instead of actually doing them, playing public opinion with short term populist language.

His relentlessness to get the job made him sympathique, and people felt that it was "his turn" in 1995, but he has always disappointed people after 2 years; his talent has been to make people forget his past episodes in power, and reincarnate himself into a new Chirac, who has learned and talks about the real problems of the French – except that he has no solutions, and that he has been instrumental in the betrayal of the elites I described above:

he is the symbol of the elite making money off their public position. He has literally stolen millions. People have known it for a long time, and felt in earlier days that it was part of politics as usual, but by 2001, this was really dragging him down, and only 9/11 and his own focus on international affairs and his blatant campaign on domestic insecurity and crime allowed him (with the complicity of tamed TV networks) to make that issue disappear

as a politician, he has been an adept at using "Europe" as the scapegoat for policies requiring sacrifices, but this has begun to ring hollow now, and people are increasingly seeing through this fluff. People realize that reforms are necessary, and that changes need to be made (to fight unemployment), but they don’t accept anymore that sacrifices must be borne by the same people again and again, and Chirac’s easy fixes, calling for sacrifice imposed by "globalization", don’t work anymore;

blinded by the apparent success of market capitalism as sold by the Americans and Brits, he has not tried to sell the French model as a whole, only trying to defend the apparent privileges of the French workers because they were there and not as an important part of a coherent whole, thus leaving that defense open to the criticism that he was only fighting for outdated (and damaging privileges) – see for instance that Financial Times editorial today on that topic that typically smashes him for that.

He has not used his 10 years for any real reforms, and for any coherent policy to adapt the French model to new times, and in his half baked efforts, he has not sold the French model as an attractive model (only as a pain in the ass for others, trying to scrounge off stuff off the backs of others), he has wasted France’s credibility and standing within European institutions and on the world scene, and he has allowed the drift of the elites who take advantage of the capitalist system and of the existing French infrastructure for their personal gain.

Shame on him, and shame on us for tolerating him for so long.