Friday, March 21, 2008

Imbalances

Lionel Jospin, hoping perhaps to plant subliminally the notion that France is ruled by an "unbalanced" president, makes "imbalance" the leitmotif of his op-ed in today's Le Monde. It's an insipid exercise: on "economic imbalances," for example, we learn that "the best solution would be for the government to change its economic orientations," while "the opposition must develop ... the broad outline of an alternative economic policy." Is it worth putting pen to paper to deliver oneself of such banalities?

When we come, three-quarters of the way through this morass, to the "imbalances on the left," however, there is a flicker of interest. The Socialist Party "is dominant [on the left] and no longer has powerful allies." It would have been quicker to say that the PCF is dead as a doornail, but bluntness is not Jospin's forte. Yet he does manage in the next sentence to stick a finger in the eye of his former Trotskyite comrades: the PS "remains confronted with an extreme left without a 'culture of government' (sans culture du pouvoir) that sterilizes its electorate." Sterilizes: an interesting choice of word. How are we meant to take it? Does the extreme left kill the germs of gauchisme and render them inocuous? Or does it geld the working class and prevent it from reproducing itself? But Jospin does not develop the point. He proceeds to pronounce a pox on this sterilized electorate, whose votes he could have used in 2002. His next subject is the imbalance between the success of the PS locally and its repeated failure nationally. "Some say that certain party leaders are pleased with this disparity, because their oppositional status with respect to the central government seems to help them when it comes to winning locally." Interesting. One wonders whom he has in mind. He doesn't say of course. That wouldn't be his style. He prefers to drop another thumping banality: the party "must regain a national destiny."

So it must. To make a start on the project, perhaps its leaders could begin to say something, anything, rather than this nothing.

Keep 'Em Guessing

Before meeting with John McCain, Sarkozy will launch Le Terrible, a new nuclear submarine, in Cherbourg and deliver a speech on French nuclear doctrine. Instead of listing French vital interests that might justify the recourse to nuclear weapons, as Chirac did, Sarko is returning to the traditional ambiguity. Yet he will also indulge in one of his favorite pastimes, la fuite en avant, or perhaps it would be more accurate to say la surenchère (though one doesn't like to think of "escalation" and nuclear weapons in the same breath): dissuasion is soooooo 1950s, whereas "total planetary disarmament" does "the vision thing" in spades and is sufficiently utopian that the failure to deliver is a foregone conclusion rather than a potential disappointment, unlike the failure to deliver on, say, the reduction in the size of the bureaucracy or the increase in purchasing power. So the speech will emphasize what Le Figaro calls the "pacific" aspect of things. It's always best, when launching a vessel with the potential to obliterate 16 cities, to divert attention to more cheerful things.

For Econ Geeks

I have a friend--she and I are the last remaining American Francophiles, she says--who tells me, "I love your blog, Art, except for all those posts about economics. Is that stuff really important?" Well, who knows what's really important? In the long run, we're all dead. But in the short run we watch our portfolios wax and wane, and governments, when they're not diverting themselves with such lofty matters as "civilization," spend a lot of their effort trying to influence the direction of the economy. Yet even Paul Krugman warns the readers of his blog off some of his posts by attaching the label "seriously wonkish." Non-geeks may therefore wish to tune out at this point.

The topic of the day is interest rates, since the Fed has once again reduced its Fed funds rate, while the European Central Bank holds its key rate steady, and the exchange rate at this instant is 1.5694 (according to Google). Citgroup economists predict that the Fed funds rate will continue to fall from the current 2.25 to 1 percent by mid-year, while even the ECB will be obliged to cut from the current 4 to 3 by early next year. Meanwhile, the Fed has adopted a number of emergency policies that involve swapping Treasury debt for mortgage-backed securities (MBS), expanding the Fed portfolio by a considerable amount and altering its composition in terms of debt quality and maturity. The reason for this is not simply that adjustment of the very short-term interest rate may be ineffective in the current situation. The MBS market has frozen up, freezing much of the rest of the credit market, and the Fed wants to loosen things up. But there is a literature on manipulation of the central bank's balance sheet as a policy tool, and it is a particularly pertinent literature because Ben Bernanke is prominent among its authors. So we can gain an idea of how Bernanke thinks about the problem and what analytical tools he brings to bear by looking at his papers, even if they evolved in a rather different context (when the fear was of deflation). A catalog of relevant papers can be found here. The first one is particularly interesting for its analysis of the term structure of the central bank portfolio, which Bernanke et al. see as a useful tool when overnight rates are at or near the zero lower bound (we're not there yet, but there are reasons--beyond the emergency reasons--to initiate the cb portfolio policy now because long-term rates are not responding as desired to the reduction of short-term rates).

Lies, Damn Lies, and Statistics

The labor ministry has released final figures for wages in 2007, showing an average increase over the year of 2.8 percent. The price index increased by 2.5 percent over the same period. So, if you believe the statistics, purchasing power increased in France last year. Note, however, that in the last quarter of 2007, wages increased only 0.3 percent, while prices rose 1.2 percent. So is all the clamor about falling purchasing power a matter of "what have you done for me lately?" Or are the statistics failing to capture the lived reality of many people? Perhaps a bit of both.

Autonomy, or Ontogeny Recapitulates Phylogeny?

Today's Libé has been turned over to students in France's universities in honor of the March 22 Movement, named for the day on which the University of Nanterre was occupied, inaugurating the "events" collectively referred to as "May '68" (it was a long month, which began in March and ended sometime in the mid-1970s). Several students conduct an interview with higher-ed secretary Valérie Pécresse. She is asked about the proposal by the board of the University of Paris-Dauphine to charge a "registration fee" of 800 euros--something one would have thought the board entitled to do as an autonomous entity under the new university reform law (LRU, also known as the Loi Pécresse). Apparently, "autonomy" doesn't mean actual autonomy, however. Listen to Pécresse:

Dauphine is not subject to the LRU. It is a major institution of higher education subsidized by the state. It must award a majority of national diplomas, or else it will not receive its state subsidy. At the time the law was voted on, I pledged that registration fees would continue to be set by the state within the framework of autonomy.


But that's not how the president of Dauphine understands "autonomy." Read his editorial on the subject. As befits a university dedicated to, among other things, instruction in business management, he acknowledges the virtues of "diversity" and assumes that universities will compete to attract students on the basis of their course offerings and the rewards to be expected from investment in a particular area of study. If Dauphine's business majors expect their future earnings to be enhanced, they will find it worth their while to pay the registration fee, the proceeds of which Dauphine can then use as it sees fit, but presumably to make its program even more attractive to students. If students prefer not to pay the registration fee, Dauphine's enrollment will decline, and its board will have to revise its decision. One may approve or disapprove of the fee, but it would seem well within the prerogative of a truly "autonomous" university.

But apparently I misunderstand the LRU, or, as Pécresse puts it, the LRU does not apply to Dauphine. But why? I'm sure someone can enlighten me on this point. Because if autonomous universities are actually tightly controlled by the ministry of education, I don't understand what the LRU is supposed to have changed, and if the concept of "national diploma" remains as a weapon with which to beat university boards into submission, then the true power to run the universities remains with the ministry, despite the façade of "autonomy." So where is la rupture?