Politics & Policy

French Despair

Mr. Jean-Philippe Cotis is the chief economist of the OECD — the Organization for Economic Cooperation and Development. His views, as one would expect, have been solicited in the matter of the extraordinary French paralysis that has resulted from the passage, by the Villepin government, of what they call the “CPE” — which translates loosely as the First Employment Contract. What this reform says is that people hired in France who are under 26 years old can be dismissed by their employers within two years. For specific causes? No, for any cause. There are laws in France, as in the United States, which prohibit a refusal to hire, or a decision to fire, based on religious, ethnic, or sexual prejudice. But CPE says that, those prohibitions to one side, the McDonald’s hamburger stand can dismiss a (young) employee without the need to file encyclopedic papers with various French ministries.

Everyone knows what then happened. A strike. At first, it was hoped that it would be a localized strike, young people contingently affected by the new law demanding protection from it. But oh no, the French these days like to strike on a grand scale. In 1968, one of those strikes immobilized the great Charles de Gaulle, and though he survived the immediate event, he was so weakened by it that not much later he resigned his office. President Chirac is already so weakened by policy confusion and personal corruption as to be something on the order of a lame-duck president. The principal political figure today is Prime Minister Dominique de Villepin, who plans to succeed Chirac in 2007, unless Interior Minister Nicolas Sarkozy, the tough challenger, beats him in a primary fight.

What the OECD chief economist said was that the embattled CPE law would actually benefit the majority of French workers because it would lend stability to the sickly French economy. Mr. Cotis announced grandly that he hoped that French unemployment would reduce from 9.6 percent to something under that, but that such an improvement would depend on fortifying the structural economic scene in France. To do this, one needs to give the market a freer play than it has when tied down by regulations that prevent production from adjusting to seasonal demands. Cotis pointed out what one would hope would have been acknowledged intuitively, namely that inflexible employment contracts diminish productivity and augment genuine insecurity, especially for workers temporarily needed, who are not being hired because prospective employers can’t make commitments that would jeopardize the future.

A staggering thirty percent of French are inactive. This is outré welfarism. It is not diplomatic to make comparison with the United States, but Cotis did so, advising his European constituency that there are two models that work, the first being the U.S. model, where firing is easy and where “spontaneous” return-to-work is achieved. By that is meant that an American who loses his job finds another job within a reasonable length of time. In 1982, during the U.S. economic slowdown, President Reagan professed dissatisfaction with the weekly reports he was being given by the Labor Department. He was being told, let us say, that 1.2 million people were out of work. He instructed his staff that he wished to be advised how many people, in the period under observation, had been hired. If 1.2 million have been out of work for six months, the picture is dire. If the figures for the month reveal that 100,000 lost their jobs and 100,000 were hired, then the question to ask is: How long were the afflicted without employment? A vigorous economy will accept losses if compensated by hirings. As the gross situation improves, periods of joblessness diminish.

The second model cited by Cotis is the “Nordic” model, which leaps in when workers lose a job and helps them find another job. Cotis, without saying so in as many words, was arguing the benefits of the U.S. model.

A striking observation on the entire question was made by a student leader. He said, with reference to the flexibility factor that the CPE reform sought to achieve, that he had no interest whatever in economic flexibility: and went back to express himself on the streets with his picket sign.

There is little economic impact on Americans from French economic lethargy. Granted that nations less wealthy than they might otherwise be generate less demand — including demand for exported U.S. products. But that is small time, under the aspect of the heavens. What is big time is the sheer ignorance by a civilized nation of the rudiments of free and wealth-generating economic policies. Resorting to a strike in order to protest fundamental economic reform taxes the intellectual and spiritual vitality of freedom.

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