Friday, August 10, 2007

Riot Benefits

Some interesting testimony from a resident of Clichy-sous-Bois regarding tangible benefits that she attributes directly to the aftermath of the 2005 riots: night bus service, a new bus line, new construction, new jobs, and just plain more attention by government officials to local problems.

Liquidity Crisis

For those who wish to ponder how the liquidity crisis now roiling world financial markets might relate to French politics, I suggest the following articles: Setser, WSJ1, WSJ2, DeLong, Setser2. Note particularly this line from Setser2: "The PBoC [People's Bank of China] is still accumulating reserves, and funds that don’t flow into American MBS [mortgage-backed securities] have to go somewhere, whether into euros or 'safe' Treasuries" (italics added). Chinese diversification out of the dollar and into euros could have tremendous implications.

Image-Making Across the Rhine

That paragon of journalistic virtue, Bild, has published a picture of Angela Merkel doing her own shopping. An editorial contrasts the humble virtues of the German chancellor with the profligate ways of the French president, who allows his wealthy friends to treat him to expensive vacations.

Meanwhile, a Bild editorialist observes that there "is a right to strike." This is in reference to the decision of a German court forbidding German locomotive engineers from striking during the summer's high season on grounds of "public utility." It's good to know that the mouthpiece of Axel Springer has the working man's interests at heart. Perhaps the French unions will want to call on Bild and Merkel for support when they make their case before the Conseil Constitutionnel that the minimum service law abrogates the right to strike.

Coup de Cafard

Doc Gynéco is depressed. He obtained a doctor's note certifying his depression to release him from an obligation to perform in the Var. The cause of his depression is said to be a mini-riot that obliged him to halt a performance in Geneva on August 2. Objects were thrown at him, and he was jeered for having supported Sarkozy in the election campaign: shouts of "Sarko facho, Gynéco collabo" were heard. In Geneva.

Supporting Sarkozy has been costly to some, and clearly the president's wooing of minorities has some way to go.

Alpha on Heures Sup

The Alpha Group, which advises unions on economic matters, has released a new study of the likely effects of eliminating taxes on supplementary hours. The report concludes that the government has underestimated the costs of the measure and overestimated the benefits. On the other hand, the incentive to substitute overtime for new hires has been overstated by some analysts, according to the report. Most firms will prefer to hire new employees. Furthermore, the fraud incentive has also been overstated, the authors conclude.

Bottom line: a costly measure that will accomplish little but probably won't make things worse. Encore un effort, Nicolas.

The Galland Law

One can easily imagine the Galland Law being assigned as a homework problem in Economics 101. "Calculate the loss in social utility from this interference with market pricing." Yet the law, you will recall, was passed in 1996, under the government of Alain Juppé, who at the time was extolling the wisdsom of Margaret Thatcher and Friedrich Hayek, and his minister of the economy was ... Nicolas Sarkozy. French "neo-liberals" have always put water in their wine.

Since then, the Galland Law has been reformed, and stage two of the reform is about to go into effect. Large retail outlets will now be allowed to take advantage of volume discounts from suppliers to reduce their prices. The detrimental effect on small retailers--boutiques maman et papa?--that the law had diminished (a political necessity to prevent the defection of small shopkeepers) will now be unmitigated, and one can expect the Mammouths and Auchans to gobble up still more of the retail market share. Ainsi va le monde. The secretary of state for consumption (yes, there really is such an official) foresees a price decrease of 3 to 7 percent on major brands. Thus the "defense of purchasing power" will be served, though the consumer may have to burn a little gas to get from the center of his lovely ville fleurie to the hideous hypermarché on the outskirts, where the aesthetic values that make old-style French commerce such a treat for tourists' eyes are sacrificed on the altar of efficiency.

China Dogs No Longer

Goodbye sugar maple, hello Abbé Suger. Sarkozy abandoned New Hampshire today for Notre-Dame to pay homage to Cardinal Lustiger, the Jewish cardinal. The Church permitted Hebrew prayers, but--no less symbolically important--Sarkozy's trans-Atlantic gesture was one more sign of a rapprochement between church and state. The Dominican friar Philippe Verdin commented that "he wants to turn the page on the Third Republic. Church and state are no longer obliged to se regarder en chiens de faïence," to stare at each other like china dogs (the expression is explained here). Verdin collaborated with Sarkozy on a book on religion that appeared in 2003 (Ron Tiersky will review it here next month).

The same Figaro article notes another Sarkozyan symbolic gesture of rapprochement with the Church that I had missed. During the Bastille Day ceremonies, Sarko asked Les Petits Chanteurs à la Croix de Bois to sing La Marseillaise after the military parades. Sacrebleu! Emile Combes is no doubt turning over in his grave.

(Many more delightful Combes caricatures here.)

The State and the Market

Two articles appearing today cast new light on Sarkozy's recent negotiations with Libya and remind us once again that states and markets are not opposed but complementary. In the wake of a recent accord with the United States, India is now free to purchase nuclear power technology from abroad, and the (partially state-owned) French firm Areva is a top competitor. At the same time, increased reliance on nuclear power around the world has driven up the price of uranium. France obtains all its uranium from abroad and is itself heavily dependent on nuclear-generated electricity. One of the objectives of Sarkozy's negotiations with Libya was to secure access to the Libyan reserve of 1,600 tons of uranium.

The government's interest in Areva is, it should be noted, not a matter of picking a national champion to create domestic employment and boost prestige. It is good market logic. France has a powerful comparative advantage in nuclear technology, owing to its strong domestic market, technical expertise, and long experience. The company is successful and expanding. But nuclear technology is inherently of interest to the state because of its security implications and global dependencies. India has 6 reactors under construction and 19 in the planning stages, Russia 7 and 25, China 4 under construction and a mind-boggling 111 on the drawing board.