Comments

1. 

   jp dumas

   November 26, 2016 at 11:37

   "can Fillon defeat opposition to sweeping neoliberal measures that will cut public spending, shrink the welfare state and reduce the weight of the public sector?" This is the good question to raise. First the fact that he puts the issue so bodly on the table in a country as France is something new and exceptional. The Fillon’s stunning victory (47% of the vote at the primary of the right) is important for the future of France. François Fillon since the beginning of the campaign fought for libéralisme (French meaning), this is absolutely new for France. Traditionally the French are interventionist, public-sector oriented, confuse the status of “fonctionnaires” with social values. Fillon proposes a supply-side economic policy based on a reduction of tax on labour and enterprises, on a more flexible labour market and on professional training. He does not propose a traditional French Keynesian programme, which consists to solve political strife through a permanent increase in public expenditure. Keynesian policy does not work in France for four reasons: 1) France has the highest expenditure ratio in the world (57% of GDP) against 40% in the UK. Public expenditures are increasing every year higher than the value of GDP. Such a level of public expenditure has a crowding out effect on the private sector, which is generally the factor of employment. 2) This public expenditure ratio is sticky, it never declines because it is not due to an increase in public investment but to an increase in recurrent expenditure (salary and transfers) which are permanent. 3) Therefore the tax ratio of France is commensurate with this expenditure ratio, in addition its structure is biased against growth and employment, it is based on labour and profit (the French social model is based on tax on wages). Never in the French history, a candidate from the right (and a fortiori from the left) had the courage to say that France should reduce the weight of the State in the economy, which is the French binding constraint. 4) The public-debt ratio is too high to allow for a supplementary increase in debt (France does not borrow in its own currency) and if interest rates are extremely low today, they are likely to increase in the near future with a risk of financial panic. Fillon was not afraid to compare his economic programme to Madam Thatcher; who, whatever the Brits may think, restarted the UK economy after disastrous socialist Governments. If Fillon succeeds to be President and applies his economic programme (even half of it), it will be a case study about the relevance of supply-side economic policies in a country crippled by bureaucracies and a renaissance for France within the EC. jpdumas