The French political class is thoroughly frightened of the idea of structural reform that would call for going up against a fierce adversary who brandishes Excalibur, usually led by the senior labour union and the varied vested interests that follow it as the occasion demands. Fighting would contradict the modern French political tradition of fudging that has characterised the last three or four decades. During this period successive governments have seen unemployment rise from about 3 to about 11 per cent and economic growth turn into comatose stagnation. Nearly every non-trivial social or economic conflict has ended with the government of the Left or the Right capitulating and barely saving its face. In particular the two terms of the Chirac presidency (1995-2007) has made a virtue of fudging, with the president publicly declaring that “France is an old country not to be pushed around”.
Unemployment and stagnation are the main symptoms of the French sickness. For its deeper causes one must look further back. In 1945, the inner circle around De Gaulle was nationalist, statist, and corporatist. Looking at how it fixed the way the country was to go in the post-war years, one must try not to forget that Hitler and Mussolini did not win the war but lost it. Post-war France was to break with capitalism, have a planned economy, a monarchic presidency, and a society with all its corporations and interest groups having their assigned places in a harmonious society. Labour unions were to have a privileged role in exchange for keeping the peace. Their informal leader, the CGT (Confédération Générale du Travail, or General Confederation of Labor), was affiliated with the communist party and soon got tired of such a nice and peaceful role. It set out to build a reputation as a committed adversary, pulling along many smaller and weaker allies.
During the whole post-war period France never tired of constructing a welfare state that was financially bearable at the outset but became progressively more unbearable as it was equipped with ever more elaborate bells and whistles. Total central and government expenditure has risen to 57 per cent of GDP, way ahead of France’s European neighbours who lag behind with an average of 45 per cent. With the budget deficit pencilled in at over 4 per cent for the next couple of years, a state share of 60 per cent of GDP for France is already beckoning on the horizon. French public opinion continues to please itself by proudly calling this the French Social Model.
Meanwhile, the irrevocable commitment of the CGT and its camp followers to a social order which favoured them was taking shape. This commitment was advertised as their Excalibur, an invisible weapon that cuts steel with ease, a capacity due entirely to the belief people have in its legendary powers. Never mind that there is no such sword. However, what matters is not whether it really exists but whether it is believed to be at hand. In fact, short of suicide, a commitment is never irrevocable if the pressure against it is strong enough, but this is not the way adversaries usually see it. The CGT sincerely believes itself to be irrevocably committed. The government firmly shares this belief and has in fact done everything to make the CGT strong and capable of assuming credible commitments. Governments of either colour strove to be friends with the unions by habitually intervening on their side in industrial disputes and also binding them with ties of gratitude and interest ensuring their financial comfort with generous streams of mostly camouflaged subventions, thanks to which unions became independent of their member’s contributions. For instance, the state power utility EDF (électricité de France) is subsidising its Comite d’Entreprise (works council), in practice the CGT, for employee vacations and “cultural” activities to the tune of 480 million euros a year. Some of this is spent legitimately, the rest is questioned by the highest state audit, or simply disappears. The system of professional re-training of the unemployed is commonly referred to as the ATM (cash machine) of the unions. Its total expenditure is 37 billion euros a year, and the unions consume a significant part of it as the cost of their efforts in the matter of retraining. Money is also filtering from the government to the unions via a number of less conspicuous channels. As if to show that they will not be bought nor tamed by all this generosity the CGT and its allies have been displaying an ever tougher commitment not to yield on any of their past conquests, and governments seem ever more willing to take their unyielding commitment at face value.
It is clear to the union hierarchy that no matter how intransigent they become, no French government would risk punishing them by cutting off the rich flow of financial support. Their capacity to commit themselves to extreme positions and not yielding an inch is, if anything, increasing as the commitments become commonplace and the CGT habitually gets away with them. Above all, the labour code, incorporating rigorous job protection in a obese body of law rapidly approaching 4,000 pages and acting as the driver of inexorably rising unemployment, has reached a status of sacrosanctity that politicians regard as suicidal to call in to question.
In a sense, it is the body politic that has made the commitments of the CGT credible by handing it too many easy victories since the 1980s and treating much anti-business and pro-labour legislation since 1945 as untouchable. Public opinion with the passage of time has learnt to regard this as the normal state of affairs. Unions no longer need a rank and file membership and in fact have practically none outside the publicly owned industries such as the railways. Total union membership is only about 7 per cent of all employees, with nearly all in the public sector. Everywhere else, the unions are only present through their apparatchiks. Non-union members take their lead more easily than one would expect, placing their faith in the near invincibility of Excalibur, the famous credible commitment.
In particular no French government has gone toe to toe against the unions in such matters as the union veto on university faculty appointments, the non-selectivity of admissions, or the “progressiveness” of school curricula—never mind the holy of holies, the part of labour law that makes the dismissal of an employee a matter for the labour courts to accept or refuse depending on an elusive criterion of fairness. No government has admitted that by making the firing of labour very difficult and very expensive they make the hiring of labour very risky and very unattractive.
There is nothing a disillusioned observer can see that would give the French political class the courage it would need to make the unyielding commitment against reform yield after all—a courage that it has so conspicuously lacked for more than a generation. Failing this, the solution awaiting the “sick man of Europe” is to remain sick and muddle through in genteel decline.
Adapted from http://www.econlib.org/library/Columns/y2015/Jasaysickman.html