Hollande’s Socialist Wonderland

 

Everything’s an Emergency

If memory serves, France remains in a state of emergency on account of the terror attack in Paris in last November. As terrible as terror attacks are, they are a statistically insignificant cause of death and injury in developed nations. It is also worth noting that the countries that seem most prone to suffering terror attacks are the ones that are most active in intervening militarily in foreign countries. This is probably no coincidence. Just saying.

 

hollandeFrançois Hollande puts on his emergency frown.

Photo credit: Kenzo Tribouillard / AFP

 

 

We also imagine that a state of emergency is a costly exercise (France’s government immediately exempted itself from meeting the Maastricht deficit target in the wake of the attack, so we can conclude this by inference). Moreover, the recurrence of such attacks shows that ubiquitous snooping on everybody’s digital communications is a wasted effort, if the goal is indeed to keep such attacks from happening (which is doubtful, but that is a topic for another day).

France is in fact one of the world’s top snoopers, but appears to have ignored information and warnings from Turkey’s secret service – information which reportedly was obtained by traditional investigative means and turned out to be correct.

Now there is another emergency, this time an economic one. Mr. Hollande (a.k.a. “the welfare state incarnate”, h/t Gaspard Koenig) has just declared that his government will pull out all stops in terms of labor market intervention, so as finally stop the inexorable rise in French unemployment. His main motive seems to be saving his own job, as Mish notes.

Apparently Hollande made a vague promise that he would step down if unemployment failed to decline this year. Given the persistence of the trend and the inability and/or unwillingness of France’s government to institute meaningful reform, it seemed a slam dunk that it would keep failing to do so.

 

france-unemployment-rate@2xFrance’s unemployment rate. If this were a stock, we’d be inclined to buy it on technical grounds – click to enlarge.

 

Back when Mr. Hollande’s approval rating fell to the reciprocal of Mr. Putin’s (namely 13%), we briefly gave him the benefit of the doubt, on account of the fact that he evidently had nothing to lose (see “Mission Impossible?”). Nothing much has happened since then – what has happened, was essentially of the too little too late variety.

 

Statistical Deception

So what master plan have the president and his advisors come up with? As one observer remarked, it is mainly an exercise in increasing government spending in favor of unions, as they control the vocational training schemes that are at the heart of the proposal. These schemes have been tried before, and have repeatedly failed.

Specifically, in addition to the 600,000 unemployed people already enrolled in vocational training, another 500,000 are to be added (funded by the government, natch). Moreover, enterprises are to receive a subsidy of EUR 2,000 for every youth or unemployed person they hire for a period exceeding six months.

What few people outside of France probably know: as soon as a person registered as unemployed is enrolled in one of these training schemes, they are reclassified from “category A” to “category D”, upon which they are no longer counted as unemployed. It is a great way of manipulating the statistics at enormous cost to taxpayers, while pleasing union bosses at the same time. Nothing of practical value will be achieved (for society at large, that is).

 

France workThe French are said to have a complicated attitude toward work – the etymological root of the French term for work – travail – is equivalent to the old French (12th century) term travail, which at the time meant “suffering or painful effort”, resp. travaillier, which meant “to torture”. This term is in turn likely based on the late Latin word trepalium, “an instrument of torture”.

Cartoon by Chappatte

 

If even a single entrepreneur is enticed by the EUR 2,000 subsidy – they’ll take it if they happen to employ someone, but they won’t employ anyone because of it – we will eat our hat. France’s byzantine labor legislation is, in a word, insane (the more than 3,000 pages long “code du travail” – see “France’s Sacred Labor Code” for some of the hair-raising details).

For many companies not even ten times this subsidy may be a sufficient inducement to hire someone – especially if they already have close to 50 employees. This peculiar threshold is quite important: Once a French company has at least 50 employees, management must create three worker councils, introduce profit sharing, and submit restructuring plans to the councils if the company decides to fire workers for economic reasons.

Anyway, the upshot of the “emergency measures” is that for a little while, the French government will be able to produce deceptive unemployment statistics and if Mr. Hollande is lucky, he won’t have to keep his promise.

 

CAC 40The CAC 40 index in Paris. In spite of the practically parabolic euro area money supply inflation since 2000, the index remains well below the highs achieved more than 15 years ago. That must have taken some doing – click to enlarge.

 

Conclusion

Socialist ideas remain extremely popular, especially in Europe. One only needs to consider the rise of leftist parties in a number of European countries in the wake of the debt crisis. It is not quite clear to us what the reason for this is – probably most people’s attention span isn’t as great as one would hope. Moreover, the false belief that the State has access to a limitless cornucopia of riches that only needs to be properly distributed remains stubbornly entrenched.

As Ludwig von Mises said:

 

“An essential point in the social philosophy of interventionism is the existence of an inexhaustible fund which can be squeezed forever. The whole doctrine of interventionism collapses when this fountain is drained off. The Santa Claus principle liquidates itself.”

 

Generally, even the socialists themselves have stopped arguing that their ideology will increase prosperity or improve anyone’s standard of living. By now, too many profound failures attest to this fact. Nowadays they are trying to sell socialism on “moral grounds” most of the time (which is in many ways even more bizarre).

One thing is absolutely certain though: it still doesn’t work, and never will. Mr. Hollande and his government serve as regular reminders.

 

Charts by: TradingEconomics, BigCharts

 

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