Ten years ago, the The Economist created possibly the only front-page of the magazine that the République will never forget. “What France needs – France is in a similar funk to Britain in the 1970s: a Madame Thatcher could restore its confidence.” The cover showed Margaret Thatcher with the French flag as a background. It’s 2016 now and it’s really, really about time.
Whenever something becomes a word, you know it’s a major phenomenon that requires a specific term to describe it. “Gréviculture” is the French word for “the habit of unions to use strikes as a regular method of negotiation.” This is ironically indicative of what is profoundly wrong with France: having a word for a problem but not a solution. So whose fault is it that France is not working?
For the trade unions, protesting for laws is not about the actual substance of these laws – it’s a demonstration of their power. And power they have.France has five big trade unions, of which the biggest one is the CGT (Confédération du Travail / General Confederation of Labour). All of them compete for the membership of workers, which makes it a competition of who can blow off the most steam, and of who can have the most influence.
But is France not already the most union-friendly country in Europe? In 2015, 43% of the general population viewed the trade unions as favourable for their workers' rights, and the younger the surveyed people were, the more that number increased (32% for 65+, 54% for 25 and under). Here’s a demonstration of just how influential the French unions are: in 2012, there were 2.4 times as many companies in France with 49 employees, than with 50. This is not out of employers’ love for uneven numbers, but rather because many of the restrictions in the French Labour Code come into effect as soon as a company passes the number of 50 employees. Union representatives then get to sit on boards, have daily meetings with executives, and co-decide on pretty much everything from contracts to rearranging the furniture.
This year, the CGT has been protesting the new French labour law – a spineless project that has no effect in loosening the tough labour regulations – for several weeks. Streets of major cities were routinely blocked for protests and violent groups attacked police officers, which resulted in conservative (opposition) politicians and trade union representatives accusing each other of violence.
The exact same thing happened last year when Minister of Economy Emmanuel Macron liberalised the inter-city bus industry and allowed more businesses to open on Sundays. For the trade unions, it’s not about the actual substance of these laws – it’s a demonstration of their power. And power they have.
The Dramatic Dilemma of the Socialist Party
When François Hollande ran for president against Nicolas Sarkozy in 2012, he set a newborn French Left agenda: declaring war on big financial institutions, and protecting French labour rights as they are. Unfortunately for the Socialist party, ideals met reality and the party had to recognise that France’s level of taxation and labour protection, together with a bloated public sector, would ultimately lead to its transformation to the next Greece. The controversial 75% tax on individuals making over 1 million euros a year got scrapped after a year. His change in rhetoric and legislative priorities made Hollande lose support of the Green Party and created numerous rebellious elements (of which many sit in parliament) in his own majority.
The favourability ratings of François Hollande are at a record low: recent polls now show him being beaten by both the eventual conservative candidate and the far-right Marine Le Pen in the upcoming presidential elections next year. His own party members are now suing the party so that primaries for these elections will be organised, which could very likely be the end of Hollande’s political career. The government lacks all cohesion. We’re now in the fourth restructuring of ministerial positions, since Hollande’s own members of government repeatedly quit and later joined the government again, if they believed that would help them to be reelected. Hollande and his government cannot give in to the unions, as giving in to the far left now would mean their decline. It’s all about surviving until 2017 at this point.
France’s Problem with Taxation and Regulation
In the Heritage Foundation Business Freedom Index, France is ranked as being "moderately free," a devastating regional ranking for Europe as 32nd out of 44. Comparing its overall score to the United Kingdom easily visualises the situation, since France barely manages to keep itself above the global average (with all the incredible unfree countries that includes).
It’s not starting a business that keeps French people away from becoming entrepreneurs (according to the World Bank doing so only takes four days), but much rather maintaining it. The corporate tax rate is at a staggering 33.3% as of this year (8+% over the OECD average and 11+% over the EU average). If you then add the strong trade union presence, strikes, and workers’ protections that can get you prosecuted for years to come if you lay them off, making your living in the République does not seem too appealing.
Margaret Thatcher’s Legacy
What France needs is someone like Margaret Thatcher, and it needs it soon. In the late 1970s, the United Kingdom was practically a third world country. Waste stacked up in the streets and electricity shortages were a daily experience as trade unions paralyzed the country with strikes. Just as in France today, politicians seemed unwilling to stand up to the unions and enable the so-needed reforms.
Thatcher led a strong course of free trade and free markets. Thoroughly inspired by Austrian economist Friedrich August von Hayek, she knew that subsidizing industries with taxpayers' money would ultimately lead to the country's decline. Thatcher lead massive privatization, weakened the influence of the trade unions via legislation, cut income tax, and loosened up labour regulations. From 1983 on, the United Kingdom saw its unemployment rate transform from being the highest to becoming the lowest one of the developed countries. Even today, Thatcher’s legacy still lives on.
France needs to get its act together and change course before it’s too late.
Vive la France.