Monday, May 5, 2008

One Down, Four to Go

Looking back over the first year of Nicolas Sarkozy's presidency, I see two fundamental errors.

Sarkozy was right to emphasize the need to work more, but his remedy was misdirected. He had learned from the economists to whom he listens--and they are among the best--that in order for the French welfare state ("the French social model") to sustain itself, the French would have to work more hours per capita. With a flair for translating dry economic statistics into inspirational narrative directed to the ear of the typical voter, he turned this into the famous slogan about working more in order to earn more. This was excellent for electioneering, but its translation into policy--essentially in the form of an elimination of taxes on overtime--proved inadequate, because it missed the real lesson that the economists were trying to teach, namely, that French working hours were low because too many people were voluntarily or involuntarily out of the work force. The problem was not failing to get up early in the morning and work hard; it was failure to find a job, failure to provide jobs for older workers, and frequent early exit from employment. So the remedy, costly as it was, failed to cure the disease. And while workers fortunate enough to be employed may be eager to earn more in any way possible, high productivity figures suggest that they are already working harder than many competitors, and press reports of widespread job-related stress suggest that they may be working too hard for their own good. Hence encouraging additional overtime may not ultimately prove beneficial even to its limited number of beneficiaries.

Thus the first mistake had to do with time; the second has to do with money. The detaxation of overtime was costly, and it was coupled with tax reductions that benefited the more affluent, such as the reduction of the fiscal shield, the wealth tax, and the estate tax. Again, these promises made electoral sense of a kind, but good use could have been made of the revenue forfeited.

A more coherent approach would have laid primary stress on providing incentives to work for people currently not working. The RSA, a truncated version of which Sarkozy recently promised to salvage, could have been the centerpiece of a well-funded set of labor-market activation policies, including not only incentives to work but also training, job-search assistance, relocation assistance, etc. Retirement reform should have been linked to programs to employ older workers as mentors to younger workers in order to encourage greater workforce participation among "pre-retirees." Indeed, there is a need to break down the prejudice, widespread in France, that people who work beyond the age of 55 are "taking jobs from the young." (Sarkozy effectively attacked the ideology of "work sharing" associated with the 35-hour week, but he did not touch the pervasive bias in favor of exceptionally early retirement, which France cannot afford--perhaps because older voters were an indispensable voting bloc; nevertheless, the dependency ratio is an economic statistic that deserves publicity along with the unemployment rate and inflation rate). The money to fund these efforts would have come from the money saved by refraining from misdirected tax cuts.

Had this approach been followed, Sarkozy would have laid the groundwork for a second year of his presidency that could have been devoted to overhaul of labor law, in particular, reaching agreement on a CDI with greater flexibility. Instead, labor law reform seems to have issued in a compromise that is neither fish nor fowl, providing for a new form of project-oriented CDD rather than a modernized CDI.

Sarkozy could have had a more successful first year, in short, if he had taken ouverture more seriously. He was well inspired to open his government to members of the opposition in the hope of establishing a presidency that would have been "above the parties," where the French presidency is intended to operate. But he then needed to take the next step, to place his government on the side of defense of the welfare state, to fulfill the promise of a "social liberalism" in which I think he intermittently believes as the Right's best hope, and one that might claim certain competitive advantages over the "liberal socialism" that the other side might find it profitable to offer to voters if it ever gets its act together.

But somewhere between the campaign, in which Sarkozy seemed to me to improve with time, and his last televised interview with the press, in which he seemed to me subpar, his imagination failed him, or perhaps in the end it was simply that he lacked enough people around him capable of translating campaign narrative into practical policy (it is telling, I think, that so many of the regime's "social" programs have been entrusted to Socialists). To be sure, part of the explanation for this failure is that there were constituencies that expected to be rewarded for their support. But Sarkozy if nothing else has always been a resourceful politician, capable of doling out rewards parsimoniously. He could have resisted, and if he still hopes to become a great president, he must resist. Lately he has been heard to mutter that he is not interested in a second term, that he intends only to "reform France" and then rest on his laurels and faire du pognon. If so, the next four years will prove even more disappointing than the first.

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