What Blair Could Teach Sarkozy

As Britain's longstanding Prime Minister steps down, there are a few things he could teach France's new President about building a vibrant economy

Editor's Note: On May 10, in an emotional speech to party stalwarts in his Sedgefield constituency in northern England, Tony Blair announced that he would be standing down as Prime Minister. Blair will stay on until June 27 while the Labour Party elects a new leader. Blair's successor is expected to be his longtime political partner and rival, the Chancellor of the Exchequer Gordon Brown. While the Conservatives are demanding a new election, Brown doesn't need to call a vote until 2010.

As Tony Blair prepares to leave 10 Downing St. and Nicolas Sarkozy plans his move into the Elysée Palace, the French President-elect may be looking wistfully at the big changes across the English Channel in recent years. Sure, when Blair steps down this summer, he'll do so under a cloud, largely because of his support for the U.S. in Iraq. But the Prime Minister also leaves behind a Britain that has been transformed over the past two decades into a top economic performer. More important, perhaps, Blair has helped create a political culture that is Europe's healthiest.

Both ends of Britain's political spectrum generally agree that the country is headed in the right direction. The Tories and Labour may not see exactly eye to eye. No one who has witnessed the raucous questions to the Prime Minister in Parliament every Wednesday would think confrontation is a thing of the past. But both sides agree on the fundamentals: a free-market economy, minimal regulation, and the need to unleash entrepreneurial activity. Blair "kicked ideology out," says Peter Kellner, president of pollster YouGov.

In France, by contrast, the conservative Sarkozy and his Socialist rival, Ségolène Royal, fought bitterly over their country's direction. Now, Sarkozy must forge a political consensus for reform. His victory may have given Sarkozy momentum to push through changes such as relaxing the 35-hour workweek and cutting taxes. But the changes France needs most of all, namely downsizing the public sector, overhauling costly health care and pension systems, and relaxing its tough labor laws, will still be a hard sell with the Socialists and even with some voters who supported Sarkozy.

Britain's relative harmony has led to unprecedented prosperity. Since Blair took office 10 years ago, the country hasn't had a single quarter of negative growth. The average price of a house has tripled, to $350,000, a windfall for Britain's millions of homeowners. Unemployment, long a chronic problem, is now just 5.4% compared with 7.1% in Germany and 8.8% in France.

Blair didn't fix the economy single-handedly, but he set the tone. It's easy to forget that back in the mid-1990s the business community fretted that a Labour victory would mean a backlash against Margaret Thatcher's free-market reforms. Blair quickly eased those fears, vowing on the day after his election that there would be no return to the leftist dogma that had kept Labour out of power for 18 years. Perhaps the greatest testimony to Blair's legacy is that the new Conservative leader, 40-year-old David Cameron, has adopted many Labour positions, such as the importance of improving the state-run national health system and tackling global warming.

If anything, Blair has made Labour even more friendly to business than the Tories are. In the past decade, the City, as London's financial industry is known, has come into its own as a global powerhouse that rivals New York. Despite grumbling about the excesses of private equity and hedge funds, the City's spectacular dealmaking showers wealth across the country. "The deregulation of the financial markets largely explains the success of the British economy," says Eric Chaney, Europe economist at Morgan Stanley (MS).

Blair's probable successor, Chancellor of the Exchequer Gordon Brown, isn't likely to turn back the clock. Brown may be a curmudgeonly Scottish socialist, but he's too shrewd a political tactician to do anything that would jeopardize growth. The major dangers for the British economy are not from the politicians but from the same risks stalking the U.S. It is possible that Britain, too, could be hurt by a crunch in house prices, growing debt, and high budget deficits.

Sarkozy has shown his admiration for Britain's reforms, even holding a campaign rally with French expatriates in London. And there's no question that he has proved himself a smart, tenacious fighter. But he has also been a deeply polarizing figure for France. Now, as his friend Blair did, he needs to set a new tone to bring his countrymen together.

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