The current bad mood has been magnified by two things: the acrimony surrounding the Cahuzac affair and the social cleavage revealed by the gay marriage bill. Neither of these will have today's prominence a year from now. Both are distractions from the central issue, which is Hollande's embrace of the European Troika's view that austerity and structural reform will yield growth. It has become increasingly difficult to deny that this proposition is false. Hollande nevertheless feels he has no alternative. Grunberg backs him up:
Le PS soutient de moins en moins le « sérieux budgétaire » pourtant nécessaire prôné par le chef du gouvernement. L’idée, certes floue et peu fondée, d’une autre politique, refait surface à gauche, mettant en danger à terme l’euro et la solidité du couple franco-allemand.This is a succinct statement of the conventional wisdom. But is it true? Hollande's approval rating yesterday was 26%, the lowest ever recorded in the Fifth Republic, and still sinking toward the teens. If ever there were a political reason to break with the conventional wisdom of those whom Paul Krugman calls Very Serious People, this is it. If Hollande continues on his present course, and if IMF forecasts of low European growth for the next two years are correct, the Left will be in a very weak position as new elections approach. Meanwhile, it is being challenged by displaced workers, hundreds of whom recently disrupted a party meeting. Many who voted for the PS are badly disillusioned with Hollande's betrayal of his promise to buck austerity.
So why won't he try something different? He could, for instance, announce a major stimulus program for the next two years coupled with structural reforms intended to encourage investment in growth sectors rather than defensive subventions to declining ones. The great fear, of course, is that the bond markets would then turn against France, as they did against Italy and Spain. The ECB could of course deter bond speculators if it chose, as Mario Draghi promised, to do "whatever it takes" to preserve the euro. But the ECB has shown itself willing to support only those countries that toe the line on austerity and structural reform. Would it defend France if France chose "Keynesianism in one country?" There is no certainty, but I believe that it would. And is it certain that bond speculators would reject the rejection of austerity? Not necessarily: Bill Gross of Pimco, the world's largest bond fund, yesterday attacked austerity in the EU and UK (h/t Henry Farrell). Of course, Gross has been wrong in the past, spectacularly so about the direction of US sovereign debt prices, and it is by no means certain that his fellow traders would follow his lead (they haven't always). But here is yet another sign that a bold move might be rewarded rather than punished.
I favor such a move, but I have serious doubts that Hollande will attempt it. He, like many of the older heads in the PS, remembers the 1981-83 debacle all too well. He may feel that it is now too late in his presidency, and his popularity is at too low an ebb, to risk such a dramatic departure from the line he has set to date. But for most French people, that line is now so vague and fluctuating that he arguably suffers more from trying to hold to such an uncertain course than he would from setting a more definite one in a different direction. But I think he must make a move soon if he hopes to wrest his presidency from events beyond his control. If I were Hollande, I would seek to form a new government, a government of national unity, including politicians from the Right who might be willing to defy the Troika. Surely there are some (or some who could be enticed by the opportunity to run a ministry). And then I would stake my all on an active rhetoric of hope: we can get out of this crisis, if only we look at it as we should have looked at it from the beginning: as a crisis not of governmental excess but of private sector irresponsibility for which government has assumed responsibility without acknowledging the true source and nature of the crisis, or the validity of a Keynesian remedy if coupled with a new strategic vision of active industrial policy.