After 12 years in power, it is hard to credit him with a single memorable achievement.
Not so Tony Blair, who leaves office around the same time with a record in the history books. Blair was able to walk tall because he delivered the most robust period of economic growth and wealth creation seen in Britain in a century—lending him a stature rivaling that of France’s beloved de Gaulle. But the French tend to forget the real secret of Gaullist success—sustained economic growth. Throughout the 1960s and ’70s, the French economy grew two to three times faster than Britain’s. It prospered under a strong currency, low inflation and a succession of liberalizers like Valéry Giscard d’Estaing and the banker Georges Pompidou who rose to perpetuate their mentor’s take-charge economic policies.
Now comes a new French president. What should he or she do? Look across the Rhine, the Pyrenees or the Channel, for starters. While France runs U.S.-style trade deficits, Germany is re-emerging as the growth champion of Europe, thanks to a relaxation of working hours and tough wage controls. The socialist government of Spain, building on the liberal labor-market reforms of its conservative predecessors, continues to rack up average economic growth of 3.3 percent a year.
In his book “Témoignage,” Nicolas Sarkozy asks why Britain today is 10 percent richer than France, after trailing for so many decades. He needn’t cast about for an answer: Blair’s wisdom was to avoid precisely the kind of anti-business, protectionist, EU-bashing language that both Sarkozy and his rival Ségolène Royal have indulged in during their campaigns.
François Mitterrand once asked Margaret Thatcher why she got such good press. Her reply: “Easy. I cut the taxes journalists pay.” Go on, Nicolas or Ségolène. Try an age-old fix and leave more money in the pockets of your citizens. Thatcher may be remembered as a radical, but in fact her success was based on caution. She changed outmoded British social laws one by one, not in a big flurry. Sarkozy could do the same. One of his best ideas is to skirt the restrictions of the 35-hour week by making hours worked above that tax-free. Not only would those who wish to make more money be free to do so, they would have an extra incentive as well.
Of such small steps are economic miracles made. French citizens who buy and sell property or try to raise business start-up loans against their homes are routinely ripped off by notaires—paralegal professionals who are little better than a medieval craft guild that controls the housing market and charges sky-high fees for property transactions. Getting rid of this parasitic ancien régime would energize France’s housing market. Pension funds in the Netherlands are worth 115 percent of annual Dutch GDP. In Canada, the figure is 50 percent. In France, pension funds are worth a laughable 5.8 percent of French GDP. Changing the law to encourage the French to save instead of waiting passively for the state to provide would bring new energy to France’s capital markets and begin to wean citizens off a crippling dependence on welfare.
France has some of the world’s best economists, bankers, managers, scientists and researchers. The trouble is, they are more often found in London or California than in France. Sarkozy and Royal rage against délocalisation—French firms moving out of France. Like modern Canutes, sweeping at the tides of globalization, they want to enact new rules that keep firms in France against their economic best judgment. Ideally, their goal should be relocalisation—bringing French and foreign capital (as well as French brains) back home as Europe’s best country to do business in.
Can this happen? Most French say no. Yet in its past, France was able to change direction dramatically. It needs to do so again. Nothing short of an economic revolution will suffice. Only a France that can sign checks rather than threaten U.N. vetoes can be a respected world player.
