Friday, July 20, 2012

Euro Falling Again

The markets are not happy with the Spanish bailout:

And the euro is falling again:

Interview with Doug Henwood

Doug Henwood, the perspicacious mind behind the Left Business Observer, interviewed me the other day for his radio program. You can find a recording here. I'm the first guest for the July 19 broadcast.

The Montebourg Enigma

Arnaud Montebourg: grande gueule and showboat, as his detractors say, or pourfendeur des patrons et protecteur des veuves et des orphelins, as Audrey Pulvar no doubt imagines him? Perhaps a little of both. The two are hardly incompatible. In any case, the omnipresent Arnaud has riled up the Peugeot family, Copé, and perhaps a few Socialists a little jealous of his Sarkozyesque flair for putting himself in front of cameras and microphones at every turn. The real question, however, is not whether Montebourg is too theatrical--of course he is--but whether theatrics can be more effective this time than when, say, Eric Besson, with similar effets de manche, called in the CEO of PSA to jawbone him out of outsourcing some productive functions to Eastern Europe. Because you can't simultaneously fault Peugeot for its failure to develop a winning business strategy and for its failure to face down the previous government when a business strategy that might have proved effective ran counter to the government's wishes.

To be sure, Montebourg's specific charges include an excessive withdrawal of capital from the firm by family interests, which arranged to pay themselves too much in dividends rather than plow the cash back into a failing company. But let's face it: a Socialist government trying to manage a neoliberal economy is frequently going to find itself hoist by its own petard. Outsiders who watch the shadowboxing exhibitions mounted for the diversion of the public can't really form a clear picture of what's going on. Montebourg might have some idea, but then again he might not. He might give himself a better shot at acquiring a clear idea if he adopted a less aggressive public line, if he sought to reconcile company executives, union representatives, suppliers, and other interested parties for the purpose of reaching a consensus as to what a viable strategy might be. This would be the German approach, but neocorporatism wasn't built in a day, and it may not be compatible with French mores. So what alternative does Montebourg have, realistically speaking? If he finds the right combination, he may be destined for great things. If, as is more likely, he doesn't, he may find himself the first ex-minister of the Ayrault government.

UPDATE: Apparently there will be subsidies to manufacturers for producing the "right" kinds of cars:

Ce plan passera par un "soutien massif" aux véhicules "innovants et propres",mais le gouvernement exigera des "contreparties" des constructeurs, selon le ministre du redressement productif. "Nous écartons la prime à la casse et nous nous dirigeons vers des formes de soutien massif vers les véhicules (...) hybrides et électriques", avait expliqué M. Montebourg. "Nous sommes très tentés d'accentuer les mesures liées au bonus malus écologique", avait-il ajouté.
Renault a fait de l'électrique un axe majeur de son développement, tandis que PSA Peugeot Citroën privilégie l'hybride. "Nous souhaitons pousser cet avantage, donc finalement favoriser les constructeurs qui travaillent sur le territoire français", avait déclaré M. Montebourg.
Is this the "right" strategy? Without knowing more about where the research & development efforts of the respective companies stand at the moment, it's hard to say. Competitive new technologies cannot be put in place overnight. PSA's partnership with GM may be key here, but what PSA has in mind does not appear to be a Euro version of the Chevy Volt. If it is going hybrid, it will be competing directly with Honda and Toyota, which have a substantial advance. Unless PSA has a winning product up its sleeve, one might question the wisdom of this choice.

The New ISF in Images

Under the Socialists, the rich will pay more in wealth tax, more in income tax, and more in the CSG. In short, the entire fiscal program of Nicolas Sarkozy has effectively been repealed. The image shows the increase in wealth tax for various levels of wealth.