October 23, 2010
Forty Million Losers
"Seen from a distance, we are just forty million losers." So wrote French political journalist René Étiemble just after Allied troops drove the Nazis from his country during World War II. Such candor is rare for a French political writer, especially one from the left, but a dose of candor might be just what France needs today.
At a time when France faces double-digit fiscal deficits and when its neighbors, the British and the Germans, are making serious efforts to restrain and even cut spending, French workers and students are taking to the streets, protesting an increase in the retirement age from 60 to 62. Fuel supplies have been curtailed nationwide; shops have been closed down, cars torched; garbage is piling up along the chic Parisian boulevards.
Protests have reached the point where Marseille's airport, the second-largest in the country, has been blocked. The U.S. Embassy, fresh from issuing alerts about possible new terrorist attacks in France, is now warning Americans about the possibility of violent labor protests. To add insult to injury, Lady Gaga canceled her planned concert in Paris due to the transport disruption. In response, President Sarkozy has asked the French Senate to press for immediate passage of the proposed pension reform bill.
A candid assessment might convince the protestors to accept changes in the retirement age and a reduction of other benefits. Those benefits include a guaranteed paid five-week vacation, virtual lifetime job security, and the equivalent of a four-day work week. But French unions, including the Confédération Française Démocratique du Travail (CFDT), are still debating how to block reform.
The obvious fact that France cannot afford such benefits as universal early retirement and an abbreviated work week seems to make little impression on the unions, especially public-sector unions and those more radical than the CFDT. The question of who pays for the lavish benefits of unionized workers never enters into the equation.
It is, of course, the French people who pay. According to recent estimates by the World Bank, the French living standard (as measured by "purchasing power parity") in 2009 was over 38% beneath that of the United States. At that level, the average French citizen enjoys little in the way of discretionary income beyond what he must spend on food, housing, transportation -- and most of all, taxes.
Most American families, with an average income of over $50,000, can afford a pleasant suburban dwelling, two cars, and a home entertainment center and still save for their retirement through a 401(k) account. Millions of French workers live in aging little apartments, ride public transportation to work, and depend entirely on government for their future needs. A marginal difference in real income of 38% affects everything from the quality of housing to the ability to travel, and everything in between.
How do the French unions intend to address this disparity? By increasing it.
Given free rein, the leftists who dominate the unions would bring the French economy to its knees. Saddled with similar levels of debt, Britain's Conservative government has proposed bold measures to cut spending by $127 billion over four years. Cutting the expenditure of government by 20% is a serious response to Britain's debt problems. If successful, it will restore the sort of credibility that will enable future growth in the economy. Meanwhile, Germany has moved to raise its retirement age to 67, a measure that makes the French look like a nation not just of losers, but of slackers as well. With no reform of its pension scheme and other worker benefits, France will become less and less globally competitive.
As in America, France's retirement system faces ever-increasing deficits as fewer workers support ever larger numbers of retirees. Without reform, including an increase in the retirement age, future deficits (currently nearly $45 billion annually) will surely increase. The unions' answer to this deficit situation is to raise taxes on businesses, thus making them even less competitive, and to raise taxes on the public as well.
Raising taxes would be devastating for companies and individuals who already pay some of the highest tax rates in the world. Another alternative, doing nothing (the California plan), would be equally destructive. For one thing, it would undermine global confidence in the French economy, creating a situation similar to that in Greece. A potential lowering of the French credit rating would lead to higher borrowing costs and thus less funding available for pensions and for everything else. It would also put pressure on the euro and on France's relations with its more provident neighbor, Germany. Finally, it would add to inflation, a stealth tax that affects everyone.
Oddly enough, the ever-so-tolerant French people thus far have shown themselves sympathetic to the strikes that have shut down transportation, deprived them of gasoline, and closed 10% of the nation's schools. By some, this may be taken as further evidence that the French are indeed a nation of losers. It may, however, be that the garbage has just not piled up high enough. Or perhaps the French actually enjoy walking all those miles to work.
Jeffrey Folks is author of many books and articles on American culture and politics.