France: A last tango to economic disaster
Patrick L Young is CEO of niche crowdfunding platform HanzaTrade and an advisor to fund managers throughout the world. Born in Ireland, he is an active investor in the “New Europe” amongst other emerging markets and is an active Co Founder of grassroots startup group "Mission ToRun." Home Page: http://patricklyoung.net Twitter: @FrontierFinance
Watching any nation in long-term decline is always a painful experience. During the 20th century, Argentina blazed a trail from emerging market to become the world’s 10th-largest economy before the Great Depression began a process to send Argentina back to the emerging market leagues.
The ‘Argentine Paradox’ remains a tale of hubris and poor government leading to the current tragicomic Evita President Cristina Kirchner, who now presides over (mis)managed decline of lost opportunity. Kirchner’s role has merely been as a footnote to the ongoing 75-year economic malaise.
Across the Atlantic, the breathtakingly incapable President Hollande is similarly a bit part player. His failure to modernize France is only the latest chapter in 40 years of consistent budget deficits as Paris has become less relevant to business. The 5th Republic has barely begun to fall but the trajectory appears tragically defined.
Unemployment is stubbornly high, above 10 percent. with Hollande delivering record increases as his misguided socialist policies have backfired spectacularly. True it remains below the eurozone’s disgraceful 12 percent average, but France is double the rate of Germany.
Paris must now pay for decades expounding the Shangri-La journey of ‘third way’ economics. That path involved taxing with gusto, if not venom, and spending with even greater largesse. The end result has left French mired in stagnation, unable to grow post-recession.
With the French government accounting for 57.1 percent of economic activity, France is tumbling in Heritage Institute rankings for economic freedom, down to 70th place this year. Centralized state power is strangling innovation and enterprise, increasing stagnation. France remains the world’s 5th-largest economy, but this position is under threat as the old enemy, perfidious Albion, will surpass France again within a decade as south of the English Channel, the malaise continues.
The crazed socialist delusion of Hollande has merely been the last straw. Government economic perma-meddling with protectionist vigor, has driven investors away. The Wall Street Journal recently noted Foreign Direct Investment (FDI) in France has fallen by a staggering 95 percent during the past decade. Meanwhile, with youth unemployment soaring, France’s future generation has taken to working in London and other dynamic cities. Older generations may find solace in France’s famously restrictive employment laws, but job creation has reached an impasse.
This infantilization of economic debate, allied with an entrenched bureaucratic elite from the ‘grandécoles’, leaves France stagnant and scared of overdue reform - while expecting unsustainable public sector pensions, often from the age of 50! In this somewhat puerile void of economic understanding, the blamestorming, anti-immigrant National Front has proven popular. This rather nasty dose of protectionist socialism, allied with a mix of Nazi racism, equates to little more than ‘an aspirin to cure appendicitis’. Nowadays the French delude themselves they can eat cake.
Within the European Union, French stasis is already creating tensions. The central Franco-German axis as perceived economic equals is nowadays a sham. Efficient flexible German workers outperform their unionized French neighbors, making Berlin a booming powerhouse capital, while Paris is left behind as a large yet curiously parochial also-ran.
France sits on the precipice of further recession, while euro propagandists proclaim the EU is on the road to recovery. French Labour Minister Michel Sapin noted the ugly truth last year remarking that the government was bust. France is bound by its own straitjacket.
Government spending must be cut, hurting an economy which has expelled entrepreneurs to foreign climes while overseas investors are exhausted with meddling officials. As members of the euro, France has no safety valve to recalibrate economically through currency devaluation.
A lame duck economy waiting for the UK and China to surpass it, France sits economically becalmed, a wondrous tourist attraction (at least when the fanatically unionized train drivers and air-traffic controllers enable travel).
While visitors may enjoy the facade of past economic success, France’s trajectory is increasingly likely to resemble Argentina, a nation where tourists buy art deco antiques popular in the heyday of the nation. Argentina is now deemed an ‘emerging market’ thanks to its self-imposed isolation from the competitive world economy.
Both Paris and Buenos Aires have beautiful boulevards blighted by petty criminals. Sadly, many legitimate ways to make a living have been strangled by the clunking fist of delusional big government.
The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.