Chirac retreats on youth labor law

France will not survive.

Their economy's days are numbered.

"Heavy Metal" soundtrack, right?

"It's like the USA was in the 1950s."

It's not very different from the USA today.
Youth unemployment in France: 23%
Youth unemployment in America: 17%

Young minority unemployment in France: up to 50%.
Black youth unemployment in America: 44%.

Growth rate of the French economy in 2006: approx. 2%.
Growth rate of the US economy in 2006: approx 3%.

Certainly the US is more flexible, and therefore has better rates of return in upswings (on the other hand, the downswings in America tend to be more devastating than in France).

So, the question is whether or not France is willing to grow at a slower rate than the USA in order to preserve labor security, at the cost of some elevation in unemployment (which people, however, also have income security due to the national welfare programs).

The question is presented politically, by various people with an ideological axe to grind, as though France has the choice between adopting the American model or imploding.
But that is a false choice. France is growing at a stately pace: security has its price, but France IS growing, not in recession.

"But general unemployment of 11-12%"

Another quibble.
French unemployment is 9.6%, not 11-12%.
A 2.5% point difference would be akin to comparing "the US unemployment rate of 7.3% versus the French unemployment rate of 7.1%" (overstating the one by 2.5%, understating the other by 2.5%).

Without going into details of why the American unemployment rate of 4.8% is not directly comparable to the French unemployment rate of 9.6%, it is nevertheless necessary to keep the proper perspective. French unemployment is too high for comfort, almost in the double digits. But "almost" is still less than 10%, not 12%.

You are right that there is underinvestment in France, but this is primarily a cultural thing. The French are debt averse. They do not like heavy leverage, for anything, including the purchase of homes. There is a tendency in France to WAIT and have much more money down. Financial institutions like to see downpayments (on anything significant) of 30-40%. Lenders like to lend on assets, not future cash flows. Obviously, therefore, the French economy does not benefit from the "juice" that leverage pumps into the US economy.
On the downside of the economic cycle, France also does not experience as severe "bust" cycles as the US does, for the same reason.

Now, one could argue strenously with the French as to why they should change things to allow people to borrow for 30 or 40 years for a house, with 0% down, and why they should lend to businesses based on future cash flows, as opposed to having 10 year mortgages with 30% down, or lending to businesses based on asset values. But the French are not likely to want to risk money without greater security. They don't like debt.
There are people in America who don't like debt either. They pay off their mortgage as quickly as possible, and save their money and only buy things with cash instead of credit.
Usually we consider these people to be "frugal", not socially irresponsible. The whole French economy is like that, but we criticize it. Which is fine. What isn't fine is pretending that France is in a recession (a 2% growth rate is far from being a recession). Also, drawing sweeping policy conclusions like "France needs to go to Anglo-Saxon employment at will" is unjustified based on the facts.

France could, in theory, go to employment-at-will, but the French are quite politically and culturally averse to this idea. They see the potential for abuse in it, and abuse makes French people mad. Very, very mad. They build a system to prevent abuse.

But think about these massive protests in France that brought down the CPE, and imagine for a minute that GM was a company operating in France, and suddenly announced 30,000 layoffs. In France normally layoffs are foreseen months in advance, and debated out, and labor participates in the decision process. Imagine you had factories in France and you suddenly announced that 30,000 workers would be out of jobs. Now, remember, executive salaries and perks at GM are well known. So, you've got a company throwing 30,000 working people into misery, but leaving the obviously incompetent executives secure in their enormous salaries and perks. Imagine how the French are likely to respond to that. Violently. By burning down the factories or attacking the bosses or worse. French labor law, remember, was designed to create social peace and quell violence between people who had been Communist labor leaders and resistors during the Second World War, facing off against corporate executives many of whom had been Vichy collaborationists. Renault was nationalized because the company had worked so enthusiastically for the Germans.

American law privileges the master class, but the unspoken assumption of that is that the worker class, if fired, won't go and burn down the company and start burning down the bosses houses and shooting them down on the streets. Favor the master class in France the way the Americans do, and you are not likely to get an American economy. What you're going to get is an increasingly violent and revolutionary French social explosion.

There is a nice vignette that tells this tale.
The American sees a man go by in a limousine and dreams of the day that he too will ride in a limousine...even if the chances of that ever happening are extremely remote.
The Frenchman sees a man go by in a limousing and dreams of the day when he can rip the bastard out of the limousine and make him walk in the street with everyone else.

Another tale:
The American farmer had a goat which produced much more fine milk than a normal goat, and which produced baby goats that themselves had the trait. He became richer and richer because of this excess.
His neighbor saw this and prayed: "God, please give me a goat that is productive, like my neighbor's."

The French farmer also had a neighbor with a similar goat. And he prayed "God, please kill my neighbor's goat."

France has a history of 1900 years of a savagely enforced class system, nearly a noble caste system. To get free of that, a lot of blood had to flow. There are still plenty of people who would like to re-establish themselves not just as wealthy businessmen, as the Yankees do, but as Lords of the manor. And the rest of France will burn everything to the ground rather than let anybody set himself up as a Lord again. THAT is why employers cannot have the free and easy power to hire and fire the mere masses the way Americans can. It is not ultimately safe for France to distribute power that way. Now, the government sets the rules and when people become angry, they confront government and force a settlement. But if that power were in private hands, given the "to the wall" nature of human stubbornness, there are men who would not concede an inch to workers demands. And in the United States, they would win. And in France, there would be flames and bloodshed - if they will not yield, then those proud heads will be slashed off.
You can't graft the one system onto the other. Each land has its history.
French labor law is not MERELY a device for advancing the economic interests of the workers. It has always been a peace treaty between heretofore aggressively, violently opposed classes. Corporatists and Communists live peacefully, side by side, in the French Republic, even though the corporatists own the capital and have a lot more money, and even though the Communists have blocked the corporatists power to more fully exploit labor. Try to change that balance, and you're not going to make the French economy more productive. Countries with factories in flames and violent unrest all over the place are not prosperous.
It just hasn't been long enough, or anywhere near long enough. America has not settled its racial demons yet, and slavery was ended in the 1860s. France's last bout of Corporate supremacy ended in 1944, and militarist supremacy was not put down until the failed coup against deGaulle in the 1960s.
These things are within living memory.
Rigid labor law is not about economics.
It's a peace treaty.
Don't forget that in your analysis.
Economic analyses don't matter a hill of beans if stuff is randomly on fire and there's no physical security for people with money.
Rigid labor law channelled the ghosts of revolution and the animal spirits of Communism into a peaceful Fifth Republic. It's got to stay that way for the forseeable future.

Bump for later read.

Today in Marketplace, a show from leftwing public radio, I heard a French student who supported CPE said [in perfect English], "If Germany did it, why can't France?"

Then a European economic expert claimed that the rate of foreign investment has slowed down in France.

I have difficulty sorting out what is going on. You seem to point a rosier picture than even the leftwing pundits believe.

No, I do not have a rosy picture.
My picture is simply realistic.

France is going to continue as it has, with a growth rate in the 1-2% range, low inflation, high unemployment, and periodic unrest. There is nothing on the cards that looks likely to change this for a long time.

The country is a year away from a national election, and so everyone is jockeying for position and declaring crises, as in any other democracy.

I expect that Mme. Royal will be the next President, although if it is a man of the right, it will be Sarkozy and not Villepin.

France will muddle along.
That's not rosy, and it's not dire. It's the rank that France has always had, really. There is no reason to expect a change.

:') That would be another fortnight of auto burning by Moslem hoodlums.

De Villepin isolated with Chirac eager to end revolt
The Daily Telegraph | April 5, 2006 | Colin Randall
Posted on 04/05/2006 4:17:28 AM EDT by MadIvan
http://www.freerepublic.com/focus/f-news/1609441/posts