France’s predictable turn to austerity

Anyone looking for an excellent example of the narrowness of the debate between “growth” and “austerity” need only look across the Channel.

Anyone remember the days not long ago when François Hollande, France’s socialist president since May, was seen as a powerful force against austerity? He was widely portrayed as a counterweight to the pro-austerity drive led by Angela Merkel, Germany’s chancellor, and supported in turn by Nicolas Sarkozy, Hollande’s conservative predecessor. Many supposed leftists celebrated the election of the new president on this basis while the right dreaded it.

Take for example, Owen Jones, a prominent left wing commentator, who declared in May that a “great revolt” had begun in Europe against austerity. He held up Hollande’s election as one of the main examples of this backlash. The Daily Telegraph also portrayed Hollande as a force against austerity but for the conservative newspaper it was a problematic development.

Both sides should have known, as the more astute commentators did, that Hollande was never against austerity. If confirmation were needed it should be clear after his comments on TF1, France’s most popular television channel, on September 9. He promised €30bn (£24bn) of tax hikes and spending cuts in a desperate bid to balance the budget.

It is true that at the same time Hollande confirmed his campaign promise to levy a 75 per cent tax on wealthy individuals but this move does not make him anti-austerity. On the contrary, it is a symbolic move designed to make austerity more acceptable to the public.

As I have previously argued in Fund Strategy this kind of populism is reminiscent of Barack Obama’s campaign for “shared sacrifice” in America. The idea is that everyone, including the rich, should be willing to accept their fair share of austerity.

The differences related mainly to words.  Obama based his 2008 election campaign on “hope” whereas Hollande preferred “change”. Obama talks of shared sacrifice whereas Hollande refers to social justice.

All of this illustrates the narrowness of the differences between the supposedly pro-austerity and pro-growth camps. To the extent there is a gap it mainly relates to the timing of a fiscal squeeze. The supposed opponents of austerity say it is necessary to wait a little whereas its supporters say now is the time. Evidently Hollande has shifted camps because he now believes France’s fiscal position is deteriorating.

There is also a slight difference in terminology. The supposedly more radical politicians typically prefer the language of social justice but this is to make austerity acceptable to the public rather than to oppose it.

Ultimately neither side has a solution to the economic challenges facing the West. They have no clue about how best to restructure the economy to achieve a new round of growth and prosperity.

Meanwhile, the prize for silliest comment on Hollande’s policy record so far goes to Philippe Marlière, a professor at University College London, who raged against the president taking to “the neoliberal sea”. The implication was that has Hollande adapted to right wing ideas in imposing austerity. Marlière’s comment says a lot about his own naivety and nothing about Hollande.

This post first appeared on the Fundweb site.