Tuesday, July 24, 2007

Back to Economics

The last few posts have been about social issues. Now, while I'm eating lunch, let me get back to economics (on the theory that there is no such thing as a free lunch). In a number of posts I've alluded to Sarkozy's differences with Merkel and many Euroland finance ministers over the independence of the central bank. Sarko wants intervention on the matter of exchange rates. The others feel that any intervention in currency matters diminishes the ECB's credible commitment to price stability. I've said that this difference reflects in part a traditional split between Germany, which for historical reasons fears inflation above all else, and France, which for historical reasons of its own has a certain obsession with exchange rates (though traditionally the French wanted a "strong franc"; now they want a weaker euro) .

But the difference is more than one of ideology or psychology. Sarko's concern about the euro is twofold: against the yuan and other Asian currencies, and against the dollar. The concern about the Chinese is shared with the United States, but the concern about the United States is probably more intense in France than anywhere else--and, again, for structural, not ideological/psychological reasons.

Consider the following (I take the figures from a lecture by MIT economist Olivier Blanchard: pdf of PowerPoint here, see slide 13--but the whole lecture is worth perusing). The figures compare the composition of exports for Germany and France:

Share in high-tech exports (in percent):




Precision inst

Transport equipmt











Both countries are doing reasonably well in their production for export and enjoy a comfortable trade balance. But note the lack of diversification in the French export portfolio, the heavy reliance on transport equipment (such as high-speed trains and jet airliners). Germany exports a lot of high-quality goods for which there are no substitutes. France is heavily dependent on the export of, say, Airbuses, which compete directly with American products. The strong euro means higher prices for jet airplanes, and this is a direct threat to sales on which France relies for its trade balance. True, the strong euro also decreases energy costs, but the transport equipment manufacturers and their subcontractors employ large numbers of skilled workers, so Sarko is particularly sensitive to anything the threatens cutbacks in that sector. A weaker euro would lower Airbus prices relative to Boeing's prices and help to compensate for the sales lost through mismanagement at EADS.


I had high hopes when I learned this morning that Libé had gone into the suburbs and housing projects in the company of young journalists from a publication of the suburbs called Fumigène to take a look at Sarkozy's first two months from the point of view of the excluded. The articles proved disappointing, however. You can judge for yourself: here, here, here, and here.

Nevertheless, it is interesting to learn that in the Zone Urbain Sensible (ZUS) of Hérouville, a suburb of Caen, the unemployment rate is 30 percent and half the households fall below the poverty line. These are painful numbers to contemplate, and particularly painful to me as a translator of Tocqueville, because Hérouville is the family name of the current occupant of the Château Tocqueville, a great-nephew (I think) of Alexis (that's him in the photo--click to enlarge, on the right, standing inside the castle dovecote, at once not far yet worlds away from the ZUS of which he is the namesake). Alexis, I'm sure, would have been distressed to think that a place bearing the name of his kinsman had become so alienated from Parisian opinion that a leading newspaper would have to mount an expedition, as to some exotic isle, to inquire about what life might be like there; that it would have to ally itself with native informants in order to do so; and that it could return with so little insight into the mores of the inhabitants. He would have been distressed that the government of France should want to shield itself from the realities of life in such a place by resorting to an empty abstraction, a euphemistic acronym, to describe it. He would have noted the irony of that acronym, of the application of the name ZUS to a place incapable of hurling the least thunderbolt and about as far from Olympus as can be imagined.

But perhaps he would have taken heart from the story of the young delinquent who has found a new vocation as a Socialist militant. "The party is tired," says Kader. "We've got to commit ourselves to change it from within." The local party elected a deputy and is now setting its sights on city hall. A small ray of hope, perhaps, though it might be spoiled for Tocqueville by the degree of enmity toward the government and its chief evident in the young man's language. The conception of politics as a war between friend and foe, so congenial to Carl Schmitt, is not one that a civic republican can embrace, but Tocqueville, who was at heart as much a civic republican as an aristocrat, would have wondered whether a Republic can secrete in its bosom a place like Hérouville and still survive.

The Cuckoo Strategy

Can the Socialist Party find more ways to shoot itself in the foot? The Bulgarian nurses are released, all Europe is rejoicing, Cécilia, having gone toe-to-toe with Khadafi in negotiations her husband termed "tough," returns home in triumph, Sarko grandly declares "elles étaient françaises." And what do we hear from the PS? Benoît Hamon says that the Sarkozys "wanted to steal the success of the EU because Mme Sarkozy needed to be able to graze in the fields of the Republic," while Pierre Moscovici, ordinarily a serious, intelligent man, says, "Sarkozy, through his wife and Claude Guéant, is in the process of conducting what you might call the cuckoo strategy. You know, laying your egg in somebody else's nest."

OK, they said those things yesterday, before the release. It might have seemed like a good idea at the time to bitch and carp. But I said to myself, What if the coup d'éclat works? I almost blogged on it. And now it has worked. And what if Sarko did lay his egg in the EU's nest? He showed that he cared in a matter of grave injustice (and of course maximal publicity). What's more, it's a diplomatic success that is simple, clear, and takes no sophistication to understand. The PS comes off as curmudgeonly or worse. And its representatives seem to imply that there's something unfair about seizing an opportunity that was there for the taking. Does it matter that the EU laid the groundwork? Sarko engaged himself personally, deeply, and risked failure. For his troubles he was rewarded with success--disproportionately, perhaps, but then again, perhaps not. It seems that Sarko had been laying some groundwork of his own. But most of all his direct engagement--and that of his wife, whose credit card on the Republic and failure to vote for her husband will now be forever forgotten--showed that he understands what grabs voters in their hearts and guts. Hamon and Moscovici, by contrast, look heartless and gutless. So which is the cuckoo strategy?

There are times when the Socialists' ineptness at the art of politics drives me to despair.

LATE ADDENDUM: Read Jean Quatremer on the importance of Sarko's personal involvement.