By Ivan Eland
France, Europe, and the world breathed a sigh of relief after the French elections gave “centrist” Emmanuel Macron a resounding thirty-percentage point victory over “populist” Marine Le Pen, who hated unbridled capitalism and globalization and pledged to provide government protection for French industries, severely curtail immigration, and abandon the European Union. Yet France is not out of the woods yet.
Such “populism,” really proto-fascism in thin disguise, is fueled by economic stagnation. Although the French economy finally has shown a few signs of life after seven years of “recovery,” it still suffers from a high unemployment rate of greater than 10 percent and youth unemployment of almost 24 percent.
Macron’s program to spur the economy is much better than Le Pen’s plan, which might have sent France and Europe into depression, but it still has too much residual resemblance to that of his successor, Socialist Francois Hollande—over which Macron presided as Hollande’s economy minister. If Macron doesn’t goose France out its long economic sluggishness, Le Pen may come roaring back with a vengeance.
Macron’s economic plan, which his newly chosen prime minister will implement, calls for a corporate tax cut and the easing of France’s strangling 35-hour work restrictions. So far, so good. Yet Macron also flirts with Hollande/Obama-style policies of the left, which involve yet more government involvement in managing the economy and have not jolted France out of the economic doldrums. For example, Macron proposed a $55-billion stimulus plan that offers government rewards to businesses for hiring people from poor suburbs containing many immigrants and government-sponsored youth job training programs (both also presumably designed to attenuate the home-grown terrorist problem).
However, if Macron wants France’s economy to hum, thus helping to stanch the desire of its people to entertain the further isolation and right-wing socialism of Le Pen-style fascism, he must go further to reduce the massive role of the state sector in French society. Employers remain reluctant to hire new permanent employees, because they must pay heavy social security taxes of as much as half a new staff member’s salary.
Macron wants to lower the costs of hiring permanent employees to spur employment by making Hollande’s short-term payroll tax credit to hire permanent. Although this change would be progress, it’s not enough. Although Hollande made mild labor-market reforms, the massively complex French labor law, designed to make firing employees almost impossible, understandably causes employers’ reluctance to make new permanent hires (almost all new hires in France are only for the short-term at low pay) and must thus experience drastic deregulation. And this issue is just an example of France’s larger problem.
The state sector in France is much too large—a whopping 57 percent of the economy―thus making taxes horrendous. Diverting this much private money into the inefficient state sector is a severe drag on French prosperity. If he is serious about restoring economic sizzle and lessening the chance of a future Le Pen resurgence, Macron must take the politically difficult road of wholesale slaughter on the state sector. Either cutting back around the edges or creating even more government programs to give bonuses to hire in blighted areas or training people for jobs that don’t exist will not work. Other French presidents were unsuccessful at pruning the state sector, because it is more difficult to take even inefficient government programs away from people than it is to refrain from giving them the goodies in the first place—for example, Republicans in the United States are having difficulty repealing Obamacare healthcare without replacing it with something else.
The bottom line: To permanently nail the coffin of the Le Pen proto-fascist vampire, Macron must first drive in the stake of radical economic reforms to enable a much freer economy in France to flourish.
This article was published at Huffington Post and reprinted with permission.