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.

Monday, August 25, 2014

Hollande's Terrible, Horrible, No Good, Very Bad Week

I write it up at The American Prospect.

Awaiting the Purge

On the chopping block?

Se pose ensuite la question du sort de la ministre de la culture, Aurélie Filippetti, qui a toujours affiché une proximité avec le ministre de l'économie, et de celui de la ministre de la justice, Christiane Taubira. Selon une journaliste de BFM, la ministre de la justice a en effet envoyé durant le week-end un message de soutien à Arnaud Montebourg et à Benoît Hamon.

Sunday Night Massacre

Manuel Valls has responded true to form to Montebourg's provocation. If Montebourg is le beau parleur, Valls remains the Decider, and he acted decisively, firing not just Montebourg but the entire government. Those who are rehired or reshuffled will presumably take a loyalty oath: "I will not emulate Montebourg, Hamon, or Duflot." And then the new government will limp on.

For how long? The breach in the Socialist Party, formerly barely covert, is now an open, bleeding wound. Les députés frondeurs smell the blood and may well balk at approving the reworked Responsibility Pact. And then what? The Right will be calling ever more loudly for Hollande--now at 17% in the polls--to resign. Quelle mascarade! as de Gaulle would have said. And to make the farce still more farcical, Sarkozy is expected to announce in the next week or so whether he intends to return to politics, in the wake of Juppé's declaration that he will be a candidate for the presidency of the UMP.

I expect to enjoy my upcoming trip to France immensely.

Sunday, August 24, 2014

Showdown

I watched Montebourg and Hamon on TV tonight at Montebourg's Fête de la Rose. Both seemed slightly inebriated and full of swagger. They're not trying to conceal the fact that they've thrown a dagger directly at the president. And Valls' office says that they've crossed "une ligne jaune." So, de deux choses l'une: tomorrow they will be fired, and the government will be plunged into a deep crisis, or they will be let off with a reprimand, and Hollande will lose whatever semblance of authority he has left. Either way, Hollande loses, and Montebourg probably steps out ahead of Valls in the polls as the most likely to succeed.

What happens between now and the next election is anybody's guess. A full-blown fronde in the Socialist ranks could make it difficult for Hollande to enact the revised Responsibility Pact or do much of anything else. A modus vivendi between the frondeurs and the Hollande-Valls axis is difficult to envision. If Montebourg goes, who will replace him? Moscovici could be recalled from disgrace; Sapin or Rebsamen could be tapped (both have been mentioned for the job in the past); or Hollande might strike a bargain with Aubry, who may retain enough credibility with the party's left wing to calm things down. But at the moment things are looking quite bleak for Hollande.

Hollande Down Again in Polls, Valls Falling Rapidly As Well

Quoting poll results is not the most thrilling duty of the blogger, but every once in a while I feel it necessary to record for posterity just how bad things have gotten for François Hollande:

Deux records à noter dans le baromètre mensuel du JDD. Et non des moindres. L'enquête menée par l'Ifop pour le quotidien dominical place François Hollande à son plus bas historique. Quant à son Premier ministre, il enregistre la plus forte chute de popularité depuis sa nomination à Matignon.
Le président de la République bat ainsi son propre record d'impopularité. Il perd un point, à 17 %, tandis que le Premier ministre voit sa cote dégringoler de 9 points pour s'établir à 36 %,selon le baromètre Ifop pour le Journal du dimanch

Hamon Joins Montebourg in "Near-Fronde"

"Arnaud et moi ne sommes pas loin des frondeurs." So reads the headline in Le Monde. Hollande, as is his wont, is trying to minimize the difference between him and his ministers: everybody wants growth, he says in essence, and the entire government is trying to convince our European partners of its importance. Well, of course, if you put it that way ...

The disagreement, of course, is over how to get that desired growth, how much of existing policy dogma can be jettisoned to achieve it, and exactly what screws can be put to Germany to make it happen. Hollande may be right that there's not really much difference between him and the dynamic duo when it comes to actually taking risks rather than flapping their jaws. Montebourg and Hamon, the two most likely présidentiables of what remains of the Socialist Party's left wing, are doing what anyone would expect them to do to stake out their positions in advanced of 2017. The problem is that 2017 remains--if my clock is accurate--still some time in the future, and meanwhile the country has to be governed.

There is somewhere in Tocqueville a remark to the effect that every presidential election plunges a democratic polity into such a frenzy that one must take care to ensure that elections don't happen too often, lest the country fall into the grip of a permanent madness. It may be that the reduction of the presidential term from 7 to 5 years was too much for France, since the electoral frenzy seems to have become more or less permanent. Hollande's weakness exacerbates the phenomenon. It would be worse if he hadn't himself moved to the right since the 2011 primaries, when Valls was the candidate of the party's right wing and Hollande appeared to his left. But now you couldn't slip a cigarette paper between Hollande and Valls, to judge by their public statements.

Is there anything of substance beneath this public positioning, however? Hamon and Montebourg converge on the "left" rhetorical holding position, while Valls and Hollande converge on the symmetrical "right" message. In both instances, however, there is more verbiage than analysis. Does either camp offer a plausible strategy for building either domestic or foreign support for its position?

Krugman and Wren-Lewis on Draghi at Jackson Hole

The bottom line:

The point is that even if Draghi is, as I believe he is, a good man and a good economist who gets the situation, the combination of the euro’s structure and the intransigence of the austerians means that the situation remains very grim.
Wren-Lewis agrees, sort of, with a key caveat:

Should we celebrate the fact that Draghi is now changing the ECB’s tune, and calling for fiscal expansion? The answer is of course yes, because it may begin to break the hold of balanced-budget fundamentalism on the rest of the policy making elite in the Eurozone. However we also need to recognise its limitations and dangers. As the third sentence of the quote above indicates, Draghi is only talking about flexibility within the Stability and Growth Pact rules, and these rules are the big problem.
Emphasis added.

And throw another Nobel laureate into the mix:

With unemployment at near-record heights in many depressed European economies, it is “totally indefensible” to argue that stimulus policies are not needed to get the jobless back to work, according to Peter Diamond, the MIT professor who won his Nobel prize in economics in 2010 for his work on labour-market mismatch. Professor Diamond’s work has been extremely influential in shaping the approach of the European Commission and many EU governments to tackling unemployment, which focuses on “active labour-market policies”, such as job retraining and other help in matching workers to vacancies. But such is the shortfall of demand in Europe, and to a lesser extent the United States, that there is plenty of labour-market slack that better matching of workers to jobs cannot hope to reduce.

Saturday, August 23, 2014

Inside the Tent Pissing In

Apparently I wasn't the only one rankled by Hollande's complacent interview last week. "Steady as she goes," commanded le capitaine de pédalo (J.-L. Mélenchon, the man who so dubbed the president, resigned this week as head of the Front de Gauche). Arnaud Montebourg was also irritated. In an interview with Le Monde, he effectively declares his independence from an economic policy of which, as minister of the economy, he is nominally in charge. Will this lead to his ouster from the government? It's not impossible, although Montebourg may remain Hollande's only tie to about 3/4 of his electoral base--tenuous as that tie is.

What does ambitious Arnaud want, beyond the 2017 presidential nomination? In the absence of any big stick with which to beat the Germans, he counsels speaking loudly, which has always been his strong suit:
Il faut hausser le ton. L'Allemagne est prise au piège de la politique austéritaire qu'elle a imposée à toute l'Europe. Quand je dis l'Allemagne, je veux parler de la droite allemande qui soutient Angela Merkel. La France n'a pas vocation à s'aligner sur les axiomes idéologiques de la droite allemande. Je ne peux que remercier Sigmar Gabriel, mon homologue socialiste à l'économie, qui pousse dans le même sens que nous.
That's good for starters. What then? Bring up the heavy rhetorical artillery:
Ce n'est pas mon constat, c'est le diagnostic posé par les institutions financières du monde entier, à commencer par le Fonds monétaire international qui, par la voix de sa directrice, Christine Lagarde, met en garde les dirigeants européens contre un excès de consolidation budgétaire. Paul Krugman, Prix Nobel d'économie, a encore déclaré le 13 août : « Le scénario du cauchemar en Europe n'est pas hypothétique. La nouvelle de la production industrielle en panne fait craindre une nouvelle entrée en récession en Europe, la première raison, c'est l'austérité. » Ces alertes sont également lancées par les dirigeants des grandes puissances mondiales, dont Barack Obama.
He's not entirely just with the ECB, on which he tries to fob off the blame for what he sees as tight monetary policy. But the ECB is doing more than any government. The tightness is on the fiscal side, as Montebourg well knows, and in the capital-strapped banking system. Then he draws the political conclusion of France's docility vis-à-vis Germany:
Mais nous ne pouvons plus nous laisser faire. Si nous devions nous aligner sur l'orthodoxie la plus extrémiste de la droite allemande, cela voudrait dire que le vote des Français n'a aucune légitimité et que les alternances ne comptent plus. Cela signifierait que, même quand les Français votent pour la gauche française, en vérité ils voteraient pour l'application du programme de la droite allemande ! Nous ne pouvons l'accepter.
 C'est ce qui se passe ?
 C'est une des raisons pour lesquelles nous avons une poussée du Front national, avec le risque que les Français se détournent de l'Europe. Nous devons apporter des solutions alternatives.

And there's the rub. For two years, he says, he's been "tirelessly" trying to persuade his colleagues in the government to change course and adopt his unspecified "alternative solutions," without success. The president has just announced that there will be no change of course. And still Montebourg tells us that he's "trying." Will he be allowed to keep trying, now that he has loudly and publicly denounced his masters?

Probably. Hollande seems to have taken to heart Lyndon Johnson's dictum that it's better to have one's enemies "inside the tent pissing out than outside the tent pissing in." Only he neglected one important thing: inside the tent pissing in is the worst of all possible worlds, and that seems to be the stance Montebourg has chosen.

Thursday, August 21, 2014

Accelerating Into the Wall

John Maynard Keynes was once asked about a change in his position. "When the facts change, sir, I change my mind. What do you do?" In this as in other respects François Hollande is evidently not a Keynesian. In an interview with Le Monde, he said:

je réponds que toute godille ou tout zigzag rendrait incompréhensible notre politique et ne produirait pas de résultats
Heaven forbid that he should tack or zigzag, because that "would make our policy incomprehensible." As things are, of course, that policy is a model of limpid clarity. The fact that it is not producing any results to be proud of does not preclude the possibility that it will produce results tomorrow. The fact that the government has already tacked and zigzagged on a hundred points, most recently after the Constitutional Council struck down a key component of its Responsibility Pact, must not be confused with the kinds of tacks and zigzags proposed by its critics, which would only confuse matters by moving in a different direction. And that would be a disaster, because the remedy for all the government's failures to date is to "accelerate the reform." When a wall looms in the path of an onrushing vehicle, acceleration may not be the best strategy, but Hollande le Mou has evidently been advised by his media counselors to emphasize his firmness, and, by golly, he has mastered the art of repeating ad nauseam "I will not change course."

Sigh.

Thursday, August 14, 2014

France Stagnates

The government has been preparing people for the bad news for weeks now, but the numbers are finally in: growth in the last quarter was zero, and France is on the verge of deflation. Yet Jens Weidmann, the Bundesbank's stern flagellator-in-chief, castigated France yesterday for its lackadaisical approach to the reforms he believes are necessary: hors de soi-même, point de salut. In other words, "Don't expect us to bail you out." When asked whether France is "the sick man of Europe," Weidmann said he didn't like to use that phrase but went on to prescribe a course of heavy-duty austerotherapy nevertheless.

Of course, German growth has flagged as well, and that indeed is part of the problem. Austerity has dried up trade, and the Ukrainian mess has cut into German trade with its eastern neighbors. If a deflationary spiral really sets in in the Eurozone, we are in for a very bad time indeed. Meanwhile, the French government has not given so much as a glimmer of a hint of an answer to its quandary. The Responsibility Pact has to be redrafted in the wake of the Constitutional Council decision. Taxes cannot be raised any further, because the population is already groaning under the weight of increases from the first two years of the Hollande era. Cutting spending is not an art that Hollande has mastered, even with the change from Ayrault to Valls. Tax receipts are dwindling as prices fall (the price of a cup of coffee in France is down 3% in the past year, or so says INSEE, if not le garçon de café).

Not good times.

Thursday, August 7, 2014

France to Support Kurds against IS

Looks like France will be the first country to support the Kurds in combating the self-declared Islamic State. Hollande can't do anything at home; might as well go abroad. Cynicism aside, I'm glad someone's coming to the defense of the Kurds.

The Conseil Constitutionnel and the Pacte de Responsabilité

François Hollande managed to impose his Pacte de Responsabilité on a recalcitrant majority but apparently not on the Conseil Constitutionnel, which, while approving the cut in corporate social charges, rejected the accompanying reduction in social charges on lower-paid employees, which was supposed to sweeten the bitter pill. The CC argues that the skewing of rates to favor less well-off workers violates "the principle of equality," although one might equally well argue that it was intended to support that principle. But the law is as the law does, and the government must now live with the CC's obtuse interpretation of equality, which is likely to make a measure already unpopular (to put it mildly) with its electoral base even more repellent.

The Responsibility Pact makes a certain amount of economic sense, even if one can argue about its likely effectiveness. But the government must now find another sweetener for its package or risk even further erosion of its support.

Sarkozy Woos New Allies

Nicolas Sarkozy has reportedly concluded that he needs new allies if he is to succeed in his effort to reclaim the UMP. The old guard--Balkany, Morano, Hortefeux--no longer suffices. And former key lieutenants such as Patrick Buisson and Claude Guéant have become taboo. So he is allegedly wooing ambitious younger politicians such as Laurent Wauquiez and Nathalie Kosciusko-Morizet in addition the denizens of la Droite forte, who have been only too eager to support him.

The conjunction of the names Wauquiez and NKM is interesting, in that the two had seemed to take opposite tacks in response to Sarkozy's attempted droitisation of the party in the run-up to 2012. Wauquiez appeared to embrace the more xenophobic line, while NKM forthrightly attacked the Front National. But both are smart and ambitious and calculating, so they know that they need to attract some of Sarkozy's rank-and-file support if they wish to position themselves as future présidentiables.

Of course, being wooed is not the same thing as getting married, and precisely because Wauquiez and NKM are smart, they're likely to play one suitor off against another. It's interesting that the name of Bruno Le Maire does not appear in the Le Monde article. He's part of the same group of ambitious wannabes. Perhaps he's already pushed too far in touting his own candidacy for the party leadership, so that Sarkozy views him as a rival rather than an ally, while LW and NKM are prepared to back Sarkozy as a maneuver to outflank Le Maire. The UMP contest is interesting from a purely tactical point of view, if nevertheless quite disappointing with respect to any actual new thinking about issues. But one takes one's entertainment where one finds it.