Monday, November 12, 2012
Munchau: France Has Misdiagnosed Its Problem
Wolfgang Munchau thinks that France has misdiagnosed its labor market problem by analyzing in terms of competitiveness. He argues that the success of the German model, also misunderstood, is the reason for France's misunderstanding of its own situation. For Munchau, the problem in France is one not of wages but of total factor productivity. In other words, France needs to rejigger its product mix and move up the value chain in the composition of its output. I have taken a similar line in previous posts, but the point needs to be substantiated with a good deal more argument than Munchau provides here (or than I have provided). Munchau further clouds the issue by introducing youth unemployment, which is indeed a major problem but a separate issue from TFP.