Sarkozy's Latest Shenanigans (And I Don't Mean His Marriage to a Model/Rock Star)

I guess I'm not really surprised, but let's just say I'm getting ready to be either impressed or disappointed, depending on the outcome of a battle between Arcelor-Mittal and the French government.

Either French President Sarkozy is arm-wrestling with steel magnate Mr. Mittal, or he actually believes that the laying off of workers in a steel factory deserves state intervention a la Hugo Chavez.

In 2007, newly elected Mr. Sarkozy came along looking so very promising for France, saying things that would have been political suicide only a few years ago. He said he was going to reform France's heavily socialist policies once and for all, and he surprised everyone by persuading well over half the French population to go along with him, including many former socialists.

He started out well, moved fast, got a few things done. But then he began to make economic faux pas, like promising to sit down with the megastores to reason with them about their "unfair" price increases, and like persuading a few suppliers to freeze the prices of school supplies last September to "help out" struggling parents.

He also has started to emit protectionist statements about "keeping jobs in France," and he reprimands the European Central Bank for not allowing the euro to slip lower in support of the export sector, completely ignoring that the ECB doesn't have to pay him any mind, and probably won't. (He probably doesn't really care, realizing that in politics it's often the intention that counts.)

His latest display of bad economic taste is promising state investment in a French steel mill to save jobs. Or is this statist gesture just camouflage for something else?

The steel mill company, Arcelor-Mittal, is now run by an influential Indian who has bought up many steel resources. In 2006, Mr. Mittal acquired Arcelor, a European company with steel mills in a region of France among other places, making Arcelor-Mittal the biggest steel company in the world.

After about a year, two French senators began to call for state intervention for alleged mistreatment of minority shareholders. Apparently, the courts are not an option, for some reason, so they go crying to Daddy.


[Thanks to www.225.ca for the photo.]

Sarkozy, who likes to play Daddy and has involved himself in disputes of this sort on a few occasions already (especially when he can get face time in the French media shaking hands with factory workers), called Mr. Mittal into the Elysee Palace for a meeting. (Source.)

Mittal attended, but decided that he could still no longer afford to maintain all the workers at the French plant--a seeming about-face from his earlier enthusiasm. He declared that he would lay off hundreds of employees.

Sarkozy has now reacted by committing the latest in the economic faux-pas series. He has promised laid-off workers that the French government would work out some kind of deal involving state financial intervention. ["Soit nous arrivons à convaincre Lakshmi Mittal (le patron indien d'ArcelorMittal, de revenir sur son plan [note-de-la-redaction]) et nous investirons avec lui, soit nous trouvons un repreneur et nous investirons avec lui."]

Mittal did agree to freeze his lay-offs after their recent one-on-one meeting, so now the union involved will appoint an expert review of the situation. In March or April, Sarkozy intends to reunite union leaders, Mittal representatives, and the expert, to consider the alternatives. He promises the workers, "I'll come back to the factory to announce the solution we will have found."

Now I'm wondering: Is Sarkozy really making this faux pas innocently, or is he playing socialist hardball with capitalist Mittal? (i.e., "If you continue to threaten lay-offs, we'll nationalize you.")

A suivre. [To be continued.]

France's 35-Hour Work Week: A Mushroom by Any Other Name

That 35-hour work week--the very same one that caused the downfall of French President Sarkozy's top rival, Dominique De Villepin--will hit the dust at some point, to the dismay of French socialists.

In spite of Sarkozy's lack of economic sophistication, he is going to succeed where De Villepin failed. How will he do it? By using common language, a direct approach, and a popular mandate.

For example, instead of attacking the 35-hour week head-on, he nibbles away at it around the edges.


[Thanks to vagavalley.co.uk for the photo.]

De Villepin tried to break the will of the people, disdainfully and by force. Sarkozy, on the other hand, speaks softly, with respect, and seduces them with common sense.

The first thing he did was to offer workers the idea of working overtime tax-free. They seemed to understand that a vote for him would mean that if they gave him the power to change the system, they could actually get paid instead of being forced to accept time off in exchange for overtime hours, as was the case in certain companies up until now. They bought the argument without fear that their whole way of life was under attack.

Now that Sarkozy is firmly ensconced at the head of the government, we learn that all his posturing was not just for the vote. He has come through on his word and has now kicked the nibbling up a notch.

His advisers are putting legislation in place so that firms can now negotiate with their employees for higher pay and more hours, and they can offer Sunday work at double the pay, whereas Sunday hours used to be illegal, which was a huge drag on consumption and hence GDP growth, jobs, and pay. (In economics, what goes around, comes around, and it's an upward spiral.)

So in fact, what he has done is call this work-week problem by a different name. People are now able to understand that their whole cultural fabric is not under attack; but rather that he would simply like to improve their purchasing power and take-home pay. He does not try to force rehabilitation and capitulation down their throats; he simply points out the specific home-economic advantages of job suppleness, how it improves one's condition, not destroys it as they feared.

You can sense that the "ruse" hasn't worked on everyone, to wit the following reactions from all over the map of French media:

"Sarkozy opens the way to dismantling the 35-hour week" - from right-wing Le Monde

"The assault on the 35-hour week" - at leftist Liberation

"The end of the shackles of the 35-hour week" - in the government-friendly Le Figaro

(Source at Reuters.)

This French president has got a knack. He's getting done what no government before him has managed to do. The 35-hour work week is no longer the enemy, because he has changed its name, encroached upon it from the edges. Even the usual blackmailing thrust of the massive strikes that were going to paralyze the country petered out after a few days.

The reason for his success: Of course Sarkozy's popular mandate, but also his style--in fact, mostly his style.

Although he sometimes comes off as a bit of a spoiled brat, when you really listen to him you can't help but like the guy--unless you're some wacko who hates everybody that doesn't agree with you.

He is wily, yet he talks with frankness, and you feel his wiliness is on your side. His experience and intelligence serve him well, but he seems like a likable ordinary fellow. He is smart, but understandable. He is self-effacing in his public appearances, instead of haughty and overbearing as his socialist rivals tend to be. Most important, you feel like he's bringing you into his plan, instead of imposing it upon you. You have a choice in the matter. You are a part of the solution, not the problem.

Not only that, but he's chosen people like himself to hold the most important positions in the nation. His justice minister is a down-to-earth young woman of North African descent who seems capable, yet quite sensitive and human. His education minister is a young woman who is eloquent, persuasive, non-confrontational, and who absolutely blew a socialist detractor out the window night before last on TV5 television, by proving that she was as well-read as he.

My hopes are up for the future of France. Now, if we can only teach Sarkozy a thing or two about economics, before he embarrasses himself by trying to impose price controls to manage inflation. (He intends to sit down with the CEOs of the big megastores to discuss the issue. Let's hope this time it's just for show.)

Big Day Ahead Tomorrow for France

Just when I thought I had the latest news about Velib (France's new public transit system, consisting of bicycles you can use all around Paris, Lyon and other cities, for a monthly fee and a small usage charge), I now learn that Velib personnel may go on strike with the rest of France tomorrow, according to Les Echos.


[Thanks to assoc.orange.fr for the photo.]

I'm exaggerating; not all of France will be on strike. In fact, according to the polls, 55% of the country is against this one, and only 45% for it, especially because it involves transportation and will immobilize everyone in the main cities. It's a real nuisance. Trains, subways, and buses are all stopping tomorrow.

President Sarkozy's election and platform have riled the unions, because it makes them Public Enemy Number One, and rightly so. The unions control much of the public sector and are able to blackmail the country every time the government even thinks about taking away some of their unrealistic privileges (early retirement, fantastic pensions and benefits, etc.)

Sarkozy tried to sit the leaders down for a reasonable discussion back in the spring, but that didn't work; so this summer he upheld his promise and pushed through some badly needed legislation that will put a crimp in their style.

On August 21, 2007, the Parliament passed a law with the following terms (see the original French write-up):

1. Reinforcement of dialogue between the parties. Employers and union members must negotiate before a strike may be declared. The unions have until the end of 2007 to draw up the terms of any such future negotiations.

2. Minimum guaranteed service. Local transport authorities will determine what minimum transportation services must be provided during any strike. Employees that wish to strike must declare their intention at least two days before; and after eight days of strike, striking workers must have the option of voting by secret ballot whether or not to continue.

3. Notice. The law provides that a transport company must inform customers of any forthcoming strike, and the company may be held liable for reimbursement to customers if an "adapted transportation plan" is not put in place (whatever that is).

4. End of workers' indemnification. Days of strike will no longer be paid. (Can you believe that strikers are paid a daily stipend in France?)

This pretty much puts an end to the abuse of the striking privilege by French labor unions.

Tomorrow will be the big day. Watch the news. I wonder how Sarkozy will handle it. It's his first and biggest test. If he wins this one, he can do anything.

The French Idea of Combatting Inflation

I had a good laugh at this one (in French).


[Thanks to tf1.fr for the photo.]

Xavier Darcos, the French Education Minister, is all smiles as he tells the public that he's reached an agreement with the largest distributers of school supplies to freeze the price of the bare necessities to, at most, the same figures as last year, and in some cases actual cost.

Forget the free market; France's political class feels the need to protect their electorate by deal-making, rather than inflation-fighting.

Obviously, the distributers will make up the difference by increasing the price of other necessities sold in their stores, but that fact is not important to the governing class.

Of course, they announce this today, August 29th, when French schools open on Monday. Most families have already done their shopping for school, so at best, these measures will only help the laggards. Realizing their error, the government has extended the special prices until mid-September. (They were supposed to expire at the end of next week.)

Parent associations had already been complaining that supplies had increased in price about 2.06 percent. And we mustn't forget the Terrible TVA, the Value Added Tax that weighs upon most purchases--including school supplies--to the tune of 19.6 percent.

Ah, Vive la France and what the French are fond of labeling their "Cartesian" mindset. This is a reference to one of their most famous home boys, 17th century mathematician and philosopher Rene Descartes, whose sense of logic brought us "I think, therefore I am", and also afforded us so much food for this chicken-and-egg-style debate thereafter. (For the latest among these, see my reading recommendation in the right column for Antonio Damasio's fantastic work, Descartes' Error.)

I would love to be able to write that new French president Sarkozy has his work cut out for him; but his free-market rhetoric is only skin deep. He has little understanding of economics, by his own admission. What a pity, because if anyone could persuade the public to follow him on a path to freedom, he's the fellow.

France's Hope - France's Fear

Sarkozy has won this presidential election. As we all feared, a little less than half of the country is undergoing a mix of feelings ranging from disappointment to outright hatred.

So far, 730 cars have been burned and 592 people have been arrested in what everyone was expecting: An outburst of rage from the urban underprivileged who identify Sarkozy's announced anti-illegal immigration policy with Hitler's "ethnic cleansing."

Keep in mind that France has to put up with hundreds of burned vehicles even on a good day like New Year's Eve, so it is no surprise that this time the reaction has been a little more violent than usual. (Source: La Liberation.)


[Thanks to lelombrik.net for the photo, not from the scene.]

This is the kind of pressure Sarkozy will face over the next five years. France's dangerous illegal immigration problem, its economic woes, and its excessively-well-girded workers' unions will be part of the more than a little inertia he must overcome. This is no benign "change of party direction."

Segolene Royal, his Socialist rival, already announced in a pre-election last-ditch effort that a Sarkozy win would plunge the nation into violence. We all knew she was right; but to cede to this kind of pressure would be to imitate Spain's about-face after the Madrid train bombings. It would be a cowardly response to blackmail.

Hopefully, France will not be so easily intimidated, and Sarkozy will have a chance to attempt to bring France up out of its present Fantasyland Socialism into the 21st Century.

Now, if only America doesn't cross them going the other way.

Looks Like a Sarkozy-Royal Dual in France

The first numbers are in. The "right wing" UMP (does France have a true and viable small-government, free-market party?) represented by Sarkozy is up to 30%, and the big-government socialists' Royal is around 25%.





[Thanks to viewimages.com for this link to Segolene Royal, and thanks to The Economist for Sarkozy.]

Bayrou is down around 18.3%, and Le Pen is floundering at 11.5%.

More as news filters in.

Once again, a nation's politics are very closely related to economics, in the sense that if the politics are not propitious, good economics cannot prosper.

Excellent Analysis for French Voters

Anyone who is faced with the quandary of choosing the next President of France should profit from taking a gander at a series of analyses offered up by Liberte Cherie, my favorite French political group. These people (and they're all very young) really understand economics, better than most older and supposedly wiser Ph.D.s.


[Thanks to liberte-cherie.com for the photo of their original masthead, Sabine Herold.]

The above photo reminds me of that famous Delacroix painting of Liberty, which I offer you below. And it's not just the pose.


[Thanks to artunframed.com for the image.]

You will find:

1. Here an amalgam of the best proposals from all four major candidates;

2. Here a discussion of why Liberte Cherie does not endorse any one candidate, but rather supports the free-market ideas of each;

3. A detailed analysis of each platform, separating the wheat from the chaff -- and there is a bit of both in each of them:

Here for Sarkozy,
here for Royal,
here for Bayrou, and
here for Le Pen.

I apologize for the non-French-speaking readers who could benefit from and who would love to be able to read these articles. At some point, I may do a consolidated version of it all, because many of the points are relevant to the American elections coming up in 2008.

And for you economists and economics afficionados, economics is merely the blood that runs through the veins of the body politic. Without an unencumbered circuitry, the market flow becomes thick, and risks arise: Clots, heart attacks, strokes and other debilitating or fatal diseases. That is why I spend some time on a subject that I otherwise would eschew out of distaste.

The Economist Mag and I Agree About Nicholas Sarkozy: He's France's Best of the Bunch for President

The Economist has endorsed him, finally, but only after much internal debate according to this article at The Figaro (French newspaper) and to this interview with Sophie Pedder, Director of The Economist's French office.

As she carefully points out, TE's editors find that he has the economic program most capable of raising France's living standards, but they hesitated for two reasons:

1. The candidate has a protectionist past;

2. He is making an embarrassingly obvious play for the followers of Le Pen, the extreme right candidate who is presently fourth in line according to the polls (position probably due to his reputed dislike of France's evolving immigrant population, and to rising social unrest.)

I agree that Sarkozy is the only candidate who might do a better job than the others of clearing out a few of the cumbersome socialist cobwebs that have been fettering France's economy for the last 35 years; but as The Economist says, "in the absence of a better choice," he is only "the best of the lot." Hardly high praise.


[Thanks to kitten.cardio.ru for the image. Who is the tallest dwarf?]

I've also heard Sarkozy make Global Warming noises -- probably just another attempt to seduce the Greenies. He is indeed somewhat windmill in style; but on top of that, his efforts as Minister of the Interior, in charge of national security and police forces, have been populist in direction but heavy-handed in style (almost frighteningly fascist in style, in fact) -- not the best way to make friends and influence people.

For example, there were two incidents recently, probably timed with precision before the elections to show his political courage, where the police forces came out in an excessive show of might. One involved an illegal immigrant who refused to show his metro ticket. The bullet-proof vests arrived rapidly, creating havoc on the scene and turning many of the onlookers against the "forces de l'ordre" and for the harried illegal.

The second involved another foreigner (a Chinese, I believe) who came to a school to pick up his child. Somehow, another disproportionate scuffle occurred between this man and an excessively enthusiastic swarm of armed forces, bringing out the enmity of the crowd, not against the perpetrator of the unknown crime, but against Sarkozy's own overzealous army.

His poll numbers keep improving in spite of the fact that Le Canard Enchaine (a newspaper noted for its accurate sleuthing of political scandal) recently reported his involvement in a plan calculated to permit present-President Chirac to avoid legal proceedings once he leaves office. (Legal authorities suspect his involvement in illegal activity that took place many years ago, and he has been protected by presidential immunity all these years.) The charge is that Sarkozy or his people schemed to slip this clause imperceptibly into another legislative bill, for the express purpose of obtaining Chirac's endorsement, which in fact Sarkozy did finally and grudgingly receive only a few days ago. Of course, Sarkozy denies the report.

In the meantime, I've heard that a number of France's more industrious and/or wealthy citizens have already begun to prepare their departure from the country should the elections veer to the left. Companies are setting up temporary offices in Switzerland and elsewhere, and private parties have planned their exodus with finances in tow, just in case.

In other words, the smarter rats are preparing to abandon ship if she leans too far portside.

Here's a Nice Summary of the French Elections

For those who want to bring themselves up to date for the French presidential elections that will take place at the end of the month, here at Angus Reid Global Monitor is a nice summary.


[Thanks to news.yahoo.com/Reuters for the photo montage.]

The results of these elections will be critical to the French economy and social life. If the left is voted in, you can be sure more capital will flee the country and certain stocks will take a plunge. (Not all: See this comment at Seeking Alpha about which industries will be hurt and which will be helped.) On the other hand, if the right wins, there will be unrest in the streets.

Keep your eyes and ears open on April 22, when the first round of voting takes place. I'm betting on Sarkozy (right) at the moment; but you never know with French politics. It's pretty sure we'll get two finalists, but who they will be is still uncertain. Maybe Sarkozy and Bayrou (right and center), or Sarkozy and Royal (right and left), and I suppose there's a chance of a Sarkozy/Le Pen situation (right and far right.) And who knows, maybe we'll get a Royal/Bayrou or Royal/Le Pen. From there on in, it's anyone's guess.