Sunday, September 21, 2014

Une semaine en France

I've been in France for a week and have somehow managed to avoid much discussion of politics. The country certainly looks less morose than it is said to be: the restaurants are full, the gardens are manicured, the shops look prosperous. Appearances are deceiving, to be sure, and the beautiful Indian summer surely helped, but the atmosphere is not charged with crisis. I did catch bits of the president's marathon news conference, Castro-like in length if not in passion. Hollande no doubt hoped it would reaffirm his authority or at least remind his countrymen that he exists. He failed. The headlines the next day were about the Scottish referendum and, more ominously for Hollande, Sarkozy's comeback.

Lying on my bed in a "hotel of charm" in the Vexin, I tried to fathom Hollande's problem as I faded in and out of sleep. His soporific effect is surely among his handicaps: he is one of the worst public speakers I can remember, numbing in his rhythms and utterly lacking in the ability to project affect or conviction. Whether the subject is computers in the classroom or waging war on ISIS, his tone never varies. The job is hard, he said several times. No one doubted him. He, too, was disappointed in the lack of results but full of confidence that relief was just around the corner. Something would turn up. Meanwhile, Paris Match (provided free with my Hertz rental) featured "Love Story in San Francisco," a gauzy spread on the new affair between ex-ministers Montebourg and Filipetti, no doubt arranged by Montebourg's media consultants as Step 2 in his Plan to Claim the Presidency in 2017--following the Sarkozy model of the coup d'éclat followed by the carefully photographed amourette.

On the right, the maneuvering has begun in earnest. Various knights-errant have pledged fealty to Sarkozy, while Juppé courts support more quietly and hopes that the courts and the judges will take care of Sarkozy. There is little policy discussion from any quarter of the political landscape. Le Point published a puff piece on Francois Rebsamen, who is charged with the revision of the labor code, but beyond keeping closer tabs on the unemployed, what he intends to do wasn't clear.

Friday, September 12, 2014

Antisemitism in France: A Strange Report from Le Monde

Le Monde today reports a "sharp increase in antisemitism" since the beginning of this year, but the accompanying graph paints a different picture:


A more balanced way of presenting the data would be to say that overt acts of antisemitism have decreased sharply since the early 2000s, with a mild uptick in the first half of this year. Frankly, these numbers are rather encouraging, since the last nine months have seen both the Dieudonné affair and the protests against the war in Gaza. Of course, counting overt acts of antisemitism (vandalism, attacks, etc.) does not tell the whole story, but these numbers give the lie to the assertion that there has been a marked deterioration in the situation in France in recent years. Quite the contrary.

Monday, September 8, 2014

7 of 25 "Brightest Young Economists" Are French

According to the IMF

1. Nicholas Bloom, 41, British, Stanford University, uses quantitative research to measure and explain management practices across firms and countries. He also researches the causes and consequences of uncertainty and studies innovation and information technology.
2. Amy Finkelstein, 40, American, MIT, researches the impact of pub- lic policy on health care systems, government intervention in health insurance markets, and market failures.
3. Raj Chetty, 35, Indian and American, Harvard University, received his Ph.D. at age 23. He combines empirical evidence and economic theory to research how to improve government pol- icy decisions in areas such as tax policy, unemployment insurance, education, and equality of opportunity.
4. Melissa Dell, 31, American, Harvard, examines poverty and insecurity through the relationship between state and non-state actors and economic development, and studies how reforms such asgovernment crackdowns on drug violence can influence economic outcomes.
5. Kristin Forbes, 44, American, Bank of England and MIT, has held positions in both academia and the economic policy sphere, where she applies her research to policy questions related to international macroeconomics and finance.
6. Roland Fryer, 37, American, Harvard, focuses on the social and political economics of race and inequality in the United States. His research investigates economic disparity through the development of new economic theory and the implementation of randomized experiments.
7. Xavier Gabaix, 43, French, New York University (NYU), has researched behavioral economics,finance, and macro- economics, including corporate executives' compensation levels and asset pricing.
8. Gita Gopinath, 42, American and Indian, Harvard, studies international macroeconomics and trade with a focus on sovereign debt, the response of international prices to exchange rate movements, and the rapid shifts in relative value among world currencies.
9. Esther Duflo, 42, French and American, Massachusetts Institute of Technology (MIT) and the Jameel Poverty Action Lab, focuses on microeconomic issues in developing economies, including household behavior, education, access to finance, health, and policy evaluation.
10. Matthew Gentzkow, 39, American, University of Chicago, applies micro- economic empirical methods to the economics of the news media, including the economic forces driving the creation of media products, the media and the digital environment, and the media's effect on education and civic engagement.
11. Emmanuel Farhi, 35, French, Harvard, is a macroeconomist who focuses on monetary economics, international economics, finance and public finance, including research on global imbalances, monetary and fiscal policy, and taxation.
12. Oleg Itskhoki, 31, Russian, Princeton University, specializes in macroeconomics and international economics with a focus on globalization, inequality and labor market out- comes, international relative prices and exchange rates, and macroeconomic policy in open economies.
13. Hélène Rey, 44, French, London Business School, focuses on the determinants and consequences of external trade and financial imbalances, the theory of financial crises, and the organization of the international monetary system.
14. Emmanuel Saez, 41, French and American, University of California, Berkeley, is recognized for using both theoretical and empirical approaches to income inequality and tax policy.
15. Jonathan Levin, 41, American, Stanford, is an expert on industrial organization and microeconomic theory, specifically on the economics of contracting, organizations, and market design.
16. Atif Mian, 39, Pakistani and American, Princeton, studies the connections between finance and the macro economy. He is coauthor of the critically acclaimed House of Debt, which builds on powerful new data to describe how debt precipitated the Great Recession and continues to threaten the global economy.
17. Emi Nakamura, 33, Canadian and American, Columbia University, is a macroeconomist whose fields of research include monetary and fiscal policy, business cycles, finance, exchange rates, and macreconomic measurement.
18. Nathan Nunn, 40, Canadian, Harvard, focuses his research on economic history, economic development, political econ- omy and international trade. Of particular interest is the long-term impact of historic events such as slave trade and colonial rule on economic development.
19. Parag Pathak, 34, American, MIT, played a role in apply- ing engineering approaches to microeconomics. His research focuses on market design, education and urban economics.
20. Thomas Philippon, 40, French, NYU, studies the interactions of finance and macroeconomics: risk premia and corporate investment, financial crisis and systemic risk, and the evolution of financial intermediation.
21. Amit Seru, 40, Indian, University of Chicago, researches financial intermediation and regulation as well as issues related to corporate finance, including resource allocation within and between firms, and organizational incentives.
22. Amir Sufi, 37, American, University of Chicago, is coauthor of House of Debt. He studies links between finance and the macro economy, including the effect of house prices on spending and the effect of corporate finance on investment.
23. Iván Werning, 40, Argentine, MIT, is a macroeconomist who aims to improve tax and unemployment insurance policies via theoretical economic models. As well as optimal taxation, he studies stabilization and monetary policy, including macroprudential policy.
24. Justin Wolfers, 41, Australian and American, Peterson Institute for International Economics and University of Michigan (on leave), studies labor economics, macroeconomics, political economy, law and economics, social policy, and behavioral economics. In addition to his research, Wolfers is a columnist for The New York Times.
25. Thomas Piketty, 43, French, Paris School of Economics, is known for his research, with Emmanuel Saez, on the distribution of income and wealth. His bestseller, Capital in the Twenty-First Century, argues that global inequality will increase because the rate of capital return in developed economies is higher than the rate of economic growth, exacerbating wealth inequality..

Tax Refund Scam

A few minutes ago I posted a copy of an e-mail purportedly from the French fisc offering me a tax refund. As I should have realized at once, the e-mail was a phishing scam, and the links in it should not be clicked. I've taken the post down, but some of you may have received a copy through a subscription service. Don't click on the links.

The French Economy

Le Monde has an intelligent and balanced discussion today of the state of the French economy.\


Friday, September 5, 2014

Thirteen Percent

It didn't seem possible that things could get worse for François Hollande, but they have. A new poll has his approval rating at 13 percent. The new secretary for--get this for incoherence--foreign trade, tourism, and French living abroad apparently doesn't like to pay income tax and was forced to resign after 9 days on the job, when the ethics police caught up with him. Prime Minister Valls, whose popularity was supposed to boost the president's baleful numbers, lost 14 points in his own approval rating, which plunged to 30%. The most "approved" party in the country is the Greens (which doesn't mean that those who approve of it will vote for it, of course), after Hollande booted its leader, Cécile Duflot, and Valls trashed (not without reason) her signature act as minister of housing. The mood in Paris is grim.

And speaking of income tax, my fellow blogger Arun Kapil informs me that his income tax bill just doubled. The middle class was already groaning last year about tax increases under the Socialists, and now this, just as payroll taxes paid by firms are being reduced (again, not without reason).

On the vie privée front, as everyone surely knows by now, the ex-soi-disant Première Dame published her secrets d'alcôve yesterday, alleging that, yes, the president did drive her to a suicide attempt, and what's more, he was contemptuous toward the poor he is supposed to represent, allegedly referring to them as "toothless." In response, French journalism yesterday discovered the dental problems of the bottom decile of the French income distribution (apparently they have 15% fewer teeth on average than the rich--a distributional marker that Thomas Piketty somehow missed).

In foreign policy, Hollande yesterday was compelled to reverse his decision on the 2 Mistral amphibious assault vessels that France had been scheduled to deliver to Russia. With Russia on the march in Ukraine, the pressure from NATO to scotch the deal was too much. Again, it was the right decision, but it came only months after Hollande and his foreign minister Fabius had forthrightly stated that a deal was a deal, that international law forbade them to prevent delivery just because Russia was making menacing gestures, etc. So Hollande looks weak for standing strong.

To top it all off, the European Court of Justice ruled that a state subsidy to the semi-private ferry company SNCM was illegal, a decision that will likely drive the firm into bankruptcy. The illegal subsidy was paid by the previous government, but the current one will be left holding the bag when the firm collapses, throwing 2,000 people out of work. Hollande just can't catch a break.

This government is the Gang that Couldn't Shoot Straight, Les Pieds Nickelés, the Keystone Cops, and The Three Stooges all rolled into one. It would be amusing if it weren't so alarming. The loss of legitimacy has been precipitous. Disgust is mounting, as is unemployment, while deflation looms to the point where Mario Draghi was forced to take unprecedented action yesterday, dropping central bank rates to an historic low and commencing purchases of asset-backed securities, hitherto taboo in Europe. And meanwhile Europeans are worrying about whether they will be asked to "die for Donetsk," and a million Ukrainians have been displaced from their homes in a proxy war between Moscow and Kiev. And the specter of ISIS fighters returning from Iraq and Syria to wage jihad in infidel Europe is also weighing on people's minds. Dark times.

Thursday, August 28, 2014

Wednesday, August 27, 2014

Valls Find His Audience--at the MEDEF Summer School

I can't help but feel a certain admiration for Manuel Valls. Here he is at the MEDEF Summer School, receiving a standing ovation from the captains of French industry a day after purging his government of 3 recalcitrant soi-disant gauchistes. He is the opposite of François Hollande, at whose pleasure he serves. Instead of seeking a soft consensus, he divides to conquer. He has made his choice, and now he will run with it. And since, unlike Hollande, he recognizes that a government held up du bout des lèvres cannot stand, he has sought more tangible support where he knows he can find it: with the interests his policies will serve. His choice may not be socialist, but it's forthright and openly assumed.

On the other hand, Valls isn't really my kind of guy. I felt that last night ever so strongly as I watched him bat away David Pujadas's softball questions on the evening news. He is in a perpetual state of dyspepsia. He's a man in too much of a hurry to tarry with doubt, or even thought. He's all instinct, a Spanish toreador who knows that everyone has come to see how close he can get to the bull's horns without getting himself gored. To worry about the details of policy he's got people like Macron. His job is to embody the political world as will; the idea (pace Schopenhauer) is left to the énarque.

I've long thought the future of the Socialist Party was in the center, but Valls seems to have leaped over the center to plant his flag on one of the main bastions of the right. The alacrity with which Gattaz et cie. have embraced him is arresting. It's as if they've utterly lost confidence in their own camp since the Copé fiasco, and as if they've judged Sarkozy too heavily burdened with legal handicaps to run another race. It's an alliance that makes a certain kind of sense. Valls can deliver a lot in the short term, and if he flags in the longer race, the MEDEF can easily switch its bets. But for now he's their man, and they are his constituency, for want of any other, unless it's the vaguely progressive middle, the cadres and the jeunes loups and the bankers and the bobos, the electorate of the US Democratic Party without the minorities. That's nowhere near a majority, but in France, you don't need a majority to make it to Round 2 of the presidential election, you need 25-30 percent of the vote, and it's not out of the question that Valls could get that much even if he cedes the entire working class to Le Pen and peels off 5 percent or so of the UMP's social liberal wing. It could just work, with a little help from the gods (although Paul Krugman promises to tell us in tomorrow's column why the gods won't be smiling on France anytime soon). In any case, it's the only game left in town on the left side of the screen--if the distinction between "left" and "right" still means anything.

At least he's not Hollande, the sight of whom fills me with pity. And would we be here, I can't help asking myself, if DSK hadn't gone to the Sofitel that night? What's that you say about Cleopatra's nose?

Two more takes: Ron Tiersky and Arun Kapil.

The New French Government: A Jeremiad

How does the new French government differ from the old? The answer is contained in a single name: Emmanuel Macron, the new minister of the economy. Macron is a familiar type to anyone who follows French politics: the brilliant student who, by the age of 36, has succeeded in more careers than the average mortal will experience in a lifetime. He is a graduate of the Lycée Henri IV, of course, of the Ecole Normale Supérieure, of course, and of the Ecole Nationale d'Administration, of course. Before the ENA he served as Paul Ricoeur's assistant on the strength of a series of brilliant (of course) dissertations on the general interest, Hegel, and Machiavelli (of course), and after the ENA (from which he graduated no. 5 in his class, of course) he joined the most prestigious of the French corps d'élite, the Inspection des Finances (of course). But because he "values his independence," he left public service for a few years to join the Banque Rothschild (of course). He is said to exercise a strong seductive power on elder statesmen, and it was one of them, Jean-Pierre Jouyet, Jospin's Mr. Europe before becoming Sarkozy's Mr. Europe and now secretary-general of the Elysée, who persuaded (of course) the young meteor to take a 90% salary cut to join Hollande's staff. For that strategic decision he now reaps the reward of a ministerial portfolio, replacing the mercurial Arnaud Montebourg.

So what does this portend for French economic policy? The conventional wisdom is that it consummates the victory of the "social liberal" wing of the Socialist Party: free-market economics combined with whatever (little) can be salvaged of the welfare state. Of Hollande it has been said frequently in the last 24 hours that il assume son choix néolibéral, as if that tells us anything. In fact, Macron in his former job worked closely with the ousted Montebourg, particularly on implementing the recommendations of the Attali and Gallois reports to increase competitiveness. But for the most part it was small-bore incrementalism: reducing the fees charged by huissiers and notaires and chauffeurs de taxi may be long overdue in France but is hardly the stuff of a Thatcherian overhaul of the economy, nor is it the thin end of the German Ordoliberal wedge or the mainmise of the Banque Rothschild. Soyons sérieux. Montebourg spoke loudly and carried a small stick. Macron speaks softly and will carry a small stick. The heavy lifting remains, and will no doubt be avoided as long as Hollande is president.

There is no doubt that the French economy is much in need of structural reform. The problem is that structural reform requires political finesse as well as a strong will, and Macron, for all his bourgeois discreet charm, embodies the congenital defect of post-Mitterrand socialism in France. Mitterrand surrounded himself with bright énarques who could get things done elegantly and efficiently. At some point, however, the énarques ceased to be content with being mere exécutants and developed a taste for political legitimacy, encouraged to do so by le Florentin himself. Jospin and Hollande are perfect examples. They were able to win office but without developing the political instincts, the flair, the networks below the elite level that are necessary to facilitate action and communicate les doléances du peuple back to the palace. They became les intendants of the Fifth Republic, a caste of royal officials utterly divorced from the society they purport to govern. One after another, we have seen brilliant young men (and some women), of whom Macron is the latest, rise to power, greeted by journalistic trumpets such as the Libération article I cited above. And with each new appointment, le pouvoir grows more out of touch and less capable of responding to the groans from below. The rise of the Front National is only one sign of the resulting malaise.

Does the ouster of Montebourg represent a real change of economic policy? Surely not. Macron would no doubt like to see a softening of the German heart as dearly as Montebourg did, but if he ever alludes to his feelings on the matter, it will be with an ironic smile and sotto voce. Montebourg was at bottom no more of a politician than Macron: he was a lawyer, playing on the emotions of the jury and courtroom with his elaborate effets de manche and a not always well-calculated mise en scène. Montebourg's error was to think that Angela Merkel might be moved by his stagecraft. But he was no Racine and no Sarah Bernhardt, and in any case Merkel doesn't speak French. Macron's error will be to think that Merkel and her counselors will respond to his very French-style elitist brillance maligne. In fact, Merkel will continue to attend to German interests, and the best Macron, Sapin, Valls, and Hollande will be able to do will be to demonstrate that the German economy, too, is being sandbagged by German policy. It will be a slog.

One other comment on yesterday's change of government. In my Twitter feed yesterday a rather ugly note popped up from Laurent Wauquiez, another bright normalien of the Macron type who is one of the fair hopes of the Right and who seems lately to be pursuing his ambitions by playing to the Hard Right contingent in the UMP. Wauquiez's tweet read: "@ChTaubira maintenue, l'ultra pro-gender @najatvb à l'Education. Un gouvernement entre tragi-comédie et provocation contre les familles." The reference to justice minister Taubira, who was "symbolically" retained by Hollande despite her overt support for Montebourg, is Wauquiez's bid to curry favor with the racists in his party who applauded the photos of Taubira with an ape and the child who tried to hand her a bunch of bananas, while the reference to Najat Vallaud-Belkacem, now elevated to minister of education (replacing frondeur Benoît Hamon) attempts to capitalize on the extremist fear-mongering about the Socialists' alleged (but non-existent) promotion of "gender studies" in French elementary schools, which Wauquiez pretends to construe as a "provocation against families." He knows better but apparently has decided that, despite being a normalien, his best shot at power is to pretend to be a yahoo ignoramus in the Sarah Palin mold. (h/t Arun Kapil)

In recent months I have been tempted to believe that French politics could sink no lower, but life is full of surprises.