Thursday, April 19, 2012

Macroeconomics for the Eurozone

An excellent discussion of  what Eurozone macroeconomic policy should be, as opposed to what it is, by Simon Wren-Lewis, here. One can hope that the election of François Hollande will move European and especially German thinking on these questions. If Hollande, as promised, calls for renegotiation of the Merkozy agreement, Merkel, whose thinking may be evolving toward recognition of the need for structural rebalancing, could seize the opportunity, and Rajoy and Monti would probably welcome the opportunity. But German opposition to any suggestion that Germany must sacrifice in order to provide life support to the euro remains strong.

Prediction is hard, especially about the future, as Yogi Berra said, but if I had to guess, I would say that it will take a substantial scare to move the Germans away from the status quo. Perhaps the markets will overreact to Hollande's election and provide such a scare. The danger is that fear initiates a self-fulfilling prophecy, resulting in a downward spiral rather than progress toward a sustainable rebalancing. It's a Scylla and Charybdis moment, which may end on the rocks.

An Attack Video Deconstructed

By Rue89: here.

Campaign Finance

Sophie Meunier on French campaign financing:
Money is a good thing to have in a French electoral campaign, to be sure, but there is not that much money can buy: a good Web team; campaign posters; computers; t-shirts and gadgets; airfares; tolls and fuel for the cars of the party operatives who criss-cross the country; and the organization of campaign rallies -- some small, some massive -- such as Sarkozy's recent meeting on the Place de la Concorde and Hollande's big rally in Vincennes. That's about it.
And yet we keep hearing all these stories about kickbacks from Pakistan, money raised from fake invoices, no-show jobs to finance campaign staffers, suitcases full of cash from Qaddafi, etc. etc. Surely this doesn't all go to finance collections of Japanese prints, post-election fêtes at Fouquet's, or luxurious holidays. So where does the money go?

Looking Ahead to Sunday

Polling will soon be blacked out, so we are near our final glimpse at what the pollsters think the French will do on Sunday. The candidates fall neatly into four tiers: Hollande and Sarkozy virtually neck and neck at about 28 apiece, give or take a point; Mélenchon and Le Pen also neck and neck at around 15; Bayrou by himself in the third tier at 10; and a fourth tier comprising the rest of the field, who will split 4 or 5 percent of the vote among them, so they are non-factors.

So the serious cleavage this year is not between the right and the left but between the first and second tiers. The second-tier candidates both reject the status quo vis-à-vis globalization, Europe, the euro, financial capitalism, etc. They are resisters. The first-tier candidates, despite their differences of emphasis, are adapters. And Bayrou calls them all on dishonesty: he (rightly) insists that the first-tier candidates are not coming clean about their commitments while assailing the second-tier candidates for the irrealism of their proposals.

The fly in the ointment is the large number of undecided voters and self-declared abstainers who may in the end decide to go to the polls: as many as 32% of the the voters fall into this group, an unusually high figure for France, and if they change their minds and vote massively in favor of one candidate or another, Sunday could hold a surprise in store. But this seems unlikely. The abstainers are motivated, I think, by a general dislike of how things have gone over the past five years, so they're not likely to break massively for Sarkozy, and Hollande, with his low-profile campaign, has not given them a reason to think that his government will differ significantly from Sarkozy's except in style, in which respect it will mark a sharp break with current practice. But that's not likely to turn out the disaffected.

So I think that Sunday's result will put Sarkozy and Hollande into the second round, where current polling gives Hollande an almost insuperable advantage. The fear factor does not seem to be jelling into an anti-leftist backlash. Indeed, the Right's effort to portray Hollande as a weak-kneed milquetoast oddly undermines the simultaneous effort to revive fears of a "Socialo-Communist putsch" that will fill the place de la Concorde with workers carrying pikes and calling for the guillotine. A larger than expected Mélenchon vote might alarm a few excitable provincials, but the friends and colleagues of the Mélenchonistes know that most of them are schoolteachers and civil servants committed more to social justice than to hanging the last aristocrat from the nearest lamp post in the bowels of the last priest. Vive la France révolutionnaire et éternelle.

And so François Hollande will become the next president of France without having spelled out very precisely what he intends to do about the most serious immediate problem, the euro crisis, or the most serious long-term problems, restoring French growth and competitiveness and integrating a society whose centrifugal tendencies have become increasingly evident. A 30% anti-Establishment vote is a serious problem for any society, but I think John Vinocur is a bit hyperbolic. Compare France and the US: if you estimate the strength of the Tea Party at 30% and the left-wing critics who think Obama is a Republican in disguise at 25%, you have a much larger "Rejectionist Front" in the US than in France.

The IMF Is Worried

The IMF's annual Global Financial Stability Report is entirely devoted to the parlous state of European finances and particularly to the weakness of European banks. According to the report, those banks will be obliged to "deleverage," that is, reduce the ratio of loans to equity, by €2.6 trillion over the coming year, a bit more than the GDP of France. They will do this by selling assets and reducing lending, and how they go about this will determine how much of a brake on European economic activity will be applied. The combination of reduced lending with reduced spending by governments enforced by the Sarkozy-Merkel agreement is a recipe for a fairly severe recession. It is therefore imperative to rethink the Merkozy accord before it is too late. François Hollande's election could provide an impetus for this, but it is difficult to assess whether Germany is prepared to change course. We shall see, but I fear that, even though German thinking is evolving, change is coming too slowly to avert disaster.

If you don't have the patience to read the report, see the executive summary here.

Back in the Saddle

I am back at my keyboard for the next few days after a very pleasant excursion to Nevada, where I lectured on French politics at the University of Nevada at Las Vegas. I want to thank my host, Prof. Greg Brown, whom I came to know through this blog. Indeed, the connections I've made through the blog have been one of the most rewarding aspects of this activity, and one that I did not anticipate when I began writing on French politics for the Internet five years ago. I also want to take this opportunity to welcome any new Las Vegas-based readers who may have discovered the blog through my visit there. I'm glad to have you with us. And it was instructive to visit your city, a reminder for this life-long Eurocentric Easterner of the diversity of American ways of life. Let a hundred flowers bloom, including the flowers of the desert!

"Ordinary People"

I was struck by this observation by Arun Kapil on his evening among the Le Penistes:
One reason to attend an FN event is to look at the people and talk with a few. There is a long held, widespread view on the left that FN rallies are frequented mainly by neo-Nazi skinheads or other lowlifes and that one risks physical aggression, if not worse. Lefties seem to think that the FN is a French version of the Ku Klux Klan. Even yesterday, before going, an academic friend (and centrist in her political views) wondered if I would have problems taking photos, that I would be met with hostility. But what strikes one almost immediately at an FN event is how ordinary the people are. They’re just regular French people—des Français moyens—, who one crosses on the street and encounters every day. And they’re no less polite or civil than anyone else. They’re mostly middle class, petit bourgeois and even bourgeois. They are utterly non-threatening. [italics added]
Indeed. This was perhaps the most striking thing to me when I once attended an FN rally in Paris. How sedate they seemed, for the most part. Nothing like the venomous mobs that one saw in Mississippi--or Boston, for that matter--during the civil rights struggles in the United States. And certainly far less colorful and vociferous than a Tea Party rally today. Ordinary Frenchmen--and Frenchwomen: I was also struck by the number of women who attended.

But of course the very phrase "ordinary Frenchmen" reminds us of Christopher Browning's "Ordinary Men," a book about a German police battalion involved in the killing of Jews in Eastern Europe. This is an odious amalgame, to be sure. Indeed, the point of Browning's book is that one doesn't need to be an ideologue motivated by racial animosity to become a perpetrator of crimes against humanity. So it's quite mistaken to believe that Marine Le Pen's adherents, who cheer her diatribes against the "immigrant invaders," are dangerous people. The danger is political, not individual. It arises when a faction motivated by ethnic hatred gains control of a state with a monopoly of the means of violence. The discipline imposed by that state can then turn the most of ordinary of men into the systematic killers that Browning describes.

It begins, however, with the different sort of  "ordinary people" whom Arum observed at the Zénith, many of them apparently having come straight from the office, as he remarks, still clad in their workday attire. Many of the men are in suits and ties. These are not marginals, lowlifes, or the dregs of French society. This should give us pause, as similar right-wing populist parties gain adherents across Europe in response to the seriousness of the economic crisis and the seeming inability of national governments to devise a credible way out.

"Ordinary people," when not well-served by governing elites, can become the instruments of the most extraordinary of political regimes.