THE REAL LESSON OF THE FRENCH ELECTION
It is easy, perhaps too easy, to blame the French people in the recent election for staging a self-pitying and self-destructive backlash against the global economy and European integration. Certainly, they take longer vacations, work fewer hours per week, and receive more government benefits than their American and Asian counterparts. Surely, their culture of complaint against modern economic life, from "Anglo-Saxon" laissez-faire capitalism to Japanese willing to live in rabbit hutches, is both annoying and misplaced. Clearly, their romance with job sharing and state-owned enterprises is an example of museum thinking right out of the Louvre. But in their rejection of the policies of the past two years, the French electorate is being rational in opposing the antigrowth, austerity measures force-fed to Europe by an arrogant political and bureaucratic elite sitting in Bonn, Paris, and Brussels (page 48).
European integration, in recent years, has been driven by twin fantasies. Chancellor Helmut Kohl, in tying Germany tightly to Europe, is driven by fear of war that few believe is even remotely possible anymore. President Jacques Chirac rants on about the need for a common European currency to counter the supposed power of the U.S. dollar. The tough debt and deficit policies needed for the creation of a strong euro have not been accompanied by pro-growth policies. Thanks to a combination of union pressure, government fear, and management failure, austerity has meant all pain and no gain for the French. Given the chance by a naive Chirac, no wonder they voted against it. Give Germans the same chance, and they would probably vote against it, too.
Companies in France and German share the blame. One-third of all U.S. economic growth in the past two years has come from technology. The spread of information technologies has allowed U.S. companies to increase profits and employment without raising prices. German and French companies, focusing on cutting costs by cutting employees and moving factories to Eastern Europe, the U.S., or Asia, are behind the curve in introducing productivity-boosting technology. This is especially bizarre in the case of France, which created the Minitel network that digitally linked most French households years before the Internet. German companies fare a bit better. And both German and French companies often use connections rather than competition to sell abroad. Taking write-offs for bribery overseas is still tax-deductible in Germany, although under U.S. pressure it ends in 1998.
The French vote should be a wake-up call for European elites to provide opportunity as well as austerity. The French Socialists have a point in calling for more stimulative government policies, especially with inflation down to 3%. But if they want to get to a One Europe world, the Socialists should also cut taxes, deregulate markets, and privatize state companies. Above all, France and Germany should postpone their mad race for introducing the euro by 1999. Without growth and jobs, the people of Europe aren't going to buy into the concept of One Europe. Nor should they.