Macroneconomics

téléchargementThe arrival of Emmanuel Macron to the new Socialist government could have simply been a symbolic gesture, rather than signalling real change.

Macron, who has been an economic advisor to President Hollande for much of the past two years, is an unelected technocrat who is widely liked and respected by the political and journalistic class.  He has also managed to establish cordial relations with trade unions, despite being a former Rothschild banker.  Predictably, employers’ groups love him.

With the ejection (although he has skillfully painted it in the media as a resignation) of Arnaud Montebourg, Macron is the new Economy Minister (the UK equivalent would be the Business Secretary).  Gone is the clunky “Productive Recovery” label, and the pompous invective of Montebourg.  Gone too is any vestige of the left of the Socialist Party from economic policy.

The World According to Emmanuel

A disciple of Jacques Attali, a political thinker who was advisor to former President François Mitterrand, Macron has been quickly judged by the press, the unions and the hard left because of his past.  Olivier Besancenot described him as the “union rep for big business”, and the unions certainly don’t view him as the potential (although in the end, ineffective) ally that they had in Montebourg.

An interview given by Macron only hours before becoming Minister (which either shows that he had no idea that he would soon be in cabinet, or that he is an arch negotiator setting out his stall) is making headlines, due to his call to open up working time rules to employer-employee negotiation.  This idea, hardly revolutionary to foreign ears, is a totem of the left that has long considered the 35 hour working week to be untouchable.  The Prime Minister swiftly quashed it, thus allowing Valls to appear a little less liberal than he did last week when the far left reeled from his speech to the employers’ federation, the Medef.

From his interview, and from other snippets, we can surmise the following: Macron is a Blairist centre-left liberal, whose gut instinct is to question to imposition of rules or taxes in any sector of the economy.  In a regulatory and tax environment laden with red-tape, this is a welcome change – for too long in France, the answer to a problem from the left or the right has been to create a new rule book and impose a special tax.

Now Just Do It

Whether he will manage to clear away any of the thicket of French regulation is another matter.  His cabinet colleagues will be broadly supportive, although his colleague at the Finance Ministry, Michel Sapin, often tends to be more conservative, and the Prime Minister will back him if it means he can sell it as a business friendly-measure (particularly small businesses, often cruelly forgotten by legislators) or, even better, a tax cut.

The first test will be the (somewhat absurdly) titled Growth and Purchasing Power Bill.  This was to be Arnaud Montebourg’s flagship legislation, and will now be pushed through by Macron, who is hastily rewriting it.  What the Bill will cover is the subject of fervent speculation.  Deregulating a range of closed professions, from pharmacists to notaries, following the wealth of suggestions prepared by the National Tax Office in 2013, seems likely.  Simplification of building codes to speed up housing construction projects is also likely.

The issue of Sunday trading is back too, with the government wanting to finally move to “free up” (again, how exactly is not clear) opening up shops and businesses on Sundays.  The government can again rely on a wealth of reports and proposals on this issue to draw up something.  The unions have knashed their teeth (they view the subject as being one that should be reserved for the social dialogue) but the government seems determined here, even to resorting to using ordinances, which bypass the normal parliamentary process, to speed up legislation.

Making it Work

Arnaud Montebourg, with his usual bombast, announced in July that such measures would give back 6 billion euros to the French people.  That is a brave claim in light of the fact that little was known about the concrete measures then, and arguably now.  If Macron can however put together simple, effective measures, there is a chance that increased competition in various services’ sectors will bring down prices.  But timing is of the essence, and there is no chance that prices will drop noticeably over the next two years – instead the benefits (if any) will be seen in perhaps five years’ time.

The Bill’s success may however be more in its symbolic value – it will be arguably the first piece of meaningful economic deregulation since the liberal-lite Jospin government of 1997-2002 and may give Macron a springboard toward more reforms.  If the Bill acts as a precursor for a new approach to regulating the economy, with a light touch approach where clunking rules are an unnecessary restraint, a culture change in France will have begun, and not before time.

 

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One thought on “Macroneconomics

  1. Pingback: A Very Long Year | Your Critical Friend

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