Uberising France

Macron’s challenge to French culture

Emmanuel Macron’s party La République en Marche yesterday won an overwhelming majority in the French National Assembly. With an estimated 355 MPs for REM and its allies, the president is free to implement his reform agenda.

The economic implications are all-important. Some may see the pragmatic nature of Macron’s proposals as a euphemism for right-wing policies. The reality is more nuanced.

As a force for transformative change, Macron has ‘uberised’ the French political system, seeing off hundreds of established politicians from all parties. This demonstrates his willingness to promote progress rather than keep things as they are. Macronism is much more than pragmatism; it is a form of ‘Schumpeterism’. Instead of fearing creative destruction, Macron incites us to spur it on and at the same time promote real equality.

Such ambitions lay down profound challenges to fundamental aspects of French culture.

French economic policy is traditionally based on four preferences that governments of left and right have not fundamentally questioned in the last 30 years. These preferences are for demand-driven economic policy, for the state, for equality and for status. The big question is whether Macron will challenge these traditions and, if he does, whether he will succeed.

In terms of demand-driven economic policy, domestic demand and consumption have been responsible, on average, for 2 percentage points of annual GDP growth since 1977. By contrast, the contribution of international trade has been negative since 2002. This preference for demand does not imply a high level of private indebtedness. French gross domestic savings as a percentage of GDP are among the highest in developed countries (21.8% on average since 1981). In absolute terms, these savings stand at €12tn, of which €8tn is invested in real estate. Despite this, fiscal transfers have supported domestic demand. These have been partly financed by external deficits.

The previous government had started to implement policy changes. Corporate tax revenue fell by a net €20bn and household tax revenue rose by €35bn in the past five years. Macron appears to wish to strike a balance between continuing to support businesses while introducing a soft rebalancing in favour of households. His proposals to cut housing taxes and, for those on low wages, reduce social security contributions are, in effect, traditional policies.

The second French preference is for the state. French economic policy is usually interventionist but not mercantilist. The public still considers it normal that the president should try to save a factory from closure. In parallel, a high level of trust in the French state led to a preference for law over flexible agreements. The country’s rigid labour laws give companies limited leeway to react to market conditions.

Macron supports fundamental changes here, favouring flexibility over regulation. His plans for labour market reform greatly enlarge the scope for flexible labour agreements at the company or sectoral level.

A third pillar of the French economy and indeed society is a belief in equality. Since 1991 public spending has never been lower than 50% of GDP. Fiscal transfers and social security make France, on the surface, one of the least unequal of developed countries. Yet providing equality of opportunity has been much more difficult. Just 1% of skilled workers’ children attend the ‘grandes écoles’, the elite higher education institutions that produce most of the country’s political and business leaders. In contrast, 20% of the offspring of the professional classes go to these establishments.

To try to provide opportunities for all, Macron proposes far-reaching change. Through education reforms, he wishes to attack the roots of inequality by prioritising nursery and primary schooling. If he succeeds, this would be a transformation. At present the emphasis in education is still for 80% of pupils to pass their ‘baccalauréat’, the academic qualification at the end of senior school. Since the target was introduced in 1985 it has been constantly achieved, but has done little to reduce social inequality.

The fourth great French preference is for status rather than competition. French society and the economy remain organised through a system of deeply rooted status, guaranteed by regulation – hopefully now more a function of merit than heritage.

Here, too, Macron could bring about comprehensive change. As economy minister in 2015 he oversaw ground-breaking reforms to enhance competition. He championed deregulation, Sunday working and freedom of competition in new sectors. In line with this approach, the new government intends investing €15bn educating workers to adapt to the new economy.

Yet there is a paradox in Macron’s practice of power. If Macronism is an agenda against what the sociologist Michel Crozier called the ‘société bloquée’ – the stalled society – his power remains essentially rooted in French tradition. When Macron launched his party, he wanted to renew the French political class by gathering supporters from the left and right, but building on the traditional institutional strength of the Fifth Republic.

Yesterday’s victory is a triumph for political ‘uberisation’, but it is based on existing institutions. As president, Macron has greater influence over his country that of other western leaders. We will now see how successful he is in wielding it.

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