FRANCE is still France – and that, tragically, is why that great country and its wonderful people are doomed to decline further this year, and why even more successful French business folk, entrepreneurs and professionals will move to London over the next 12 months. While many other countries are recovering strongly, France is sinking again, its economy shrinking at an accelerating rate. I was born and grew up in France and so feel especially strongly about its catastrophic misgovernment.
Its composite purchasing managers’ index (PMI) fell from 48.0 in November to just 47.3 in December (a number below 50 signals contraction; above that expansion). France’s key services sector’s activity index fell to a six-month low. By contrast, Spain is bouncing back, Germany is growing strongly, Ireland is buoyant and the Eurozone as a whole’s composite PMI increased from a reading of 51.7 in November to 52.1 in December. Of the big economies, only Italy and France are spiralling downwards again.
France’s economic sickness is primarily due to its overbearing state, horrendously high tax levels, insane regulations, absurd levels of inefficient public spending and generalised hatred of commerce, capitalism, success and hard work. The result of this infernal concoction can be summarised by three depressing stories.
First, boss-napping is making a comeback: two executives were yesterday taken hostage by members of a communist trade union at a Goodyear tyre plant in the north of the country. The quotes from the union extremists involved are utterly shocking. In a country bound by the rule of law and which respected property rights and classical liberal values, such a kidnapping would immediately trigger a major police response, with those detained freed and everybody responsible for their imprisonment arrested, tried and jailed. Not in France.
Why would any investor with any sense want to purchase assets and employ people in France? It is insanity – and a catastrophe for ordinary, law-abiding French workers condemned to sky-high levels of unemployment. Companies should not bother opening offices in France; there are plenty of better places for them to allocate their cash in today’s global economy.
Then consider the events on New Year’s eve: “just” 1,067 cars were torched, a number which the authorities welcomed as down by a tenth on the previous year. Horrendously, three people died.
Next, Francois Hollande has finally pushed through a version of his 75 per cent top tax rate; it will last two years and start at €1m in earnings. It will now supposedly be paid by the employer, and limited to five per cent of a firm’s turnover – but its economic effects will be almost as bad as the original plan. French firms have zero incentive to employ top talent; and successful people have zero incentive to work there. Hence the result increasingly reads as a script from one of Ayn Rand’s novels – and most notably Atlas Shrugged, where an oppressed business elite goes on strike in disgust.
In response, Hollande now claims that he wants to unveil a series of “reforms”, supposedly striking a deal with business to cut taxes in return for job-creation. But even if he were serious, there is no such thing as “business” – just lots of companies seeking to make a profit. You can’t sign a grand bargain with them; that is a hopelessly corporatist way of looking at the world. The only solution would be a revolutionary change of tack, a complete rhetorical U-turn, a rejection of Marxist terminology and culture, massive cuts to public spending, drastically lower taxes and a long-term commitment to supply-side policies that increase the private sector’s incentives to hire, invest, save and work. Will we see some small changes, borne out of desperation? Undoubtedly. But a real pro-capitalist shift? No chance.