Why is it that so many French people would rather riot than
work?
For nearly a fortnight, French students repeatedly have taken to
the streets in protest of a modest labor reform proposed by Prime
Minister Dominique de Villepin. It seems that Villepin had the
audacity to suggest that companies hiring workers under the age of
26 have the ability to fire those workers in the first two years of
employment. Villepins far-from-Draconian reform is a reaction to
the countrys government-planned entitlement state, overregulated
labor laws, and sky-high jobless rate.
But French students apparently prefer their little workers
paradise just the way it is. The overall jobless rate in France
hovers around 10 percent, so-called youth unemployment is 23
percent, and in some of the Muslim-heavy suburbs, joblessness is
nearly 50 percent. Some paradise.
In France, you see, companies dont grow because its too
costly to hire while its against the law to fire. Hence, since
they rarely add jobs, French businesses under-perform,
under-produce, and under-employ. Think of it: Its awfully tough to
increase output without a growing workforce to produce
it.
The Villepin reform, of course, would make it a lot easier for
firms to hire since they would no longer have to lock-in high wages
and benefit costs without first confirming worker productivity, at
least for two years. But in response to this mild capitalist
reform, a reported 500,000 students have emerged in angry protest.
Theres now even a threat of a general strike, with government
unions, trade unions, and student unions possibly teaming together
to shut down the entire French economy (or whats left of
it).
Of course, it wasnt all that long ago that young Muslims rioted
and vandalized urban centers across France. Their beef was cultural
in nature, but it was also rooted in the fact that France is
anti-opportunity, anti-wealth, anti-jobs, anti-markets, anti-work,
and anti-capitalism.
Indeed, at the heart of the French problem is a statist-run
socialist economy that is massively overtaxed and overregulated.
Frances public government sector, for instance, accounts for more
than 50 percent of GDP. In other words, private business in France
is in the minority.
Added to this, Frances top personal tax rate is 48 percent, with a
VAT tax of nearly 20 percent. So that means French laborers face a
combined 68 percent tax rate on consumption and investment. No
wonder France has created less than 3 million jobs over the past
twenty years, compared to 31 million in the United States. Economic
growth in cowboy capitalist America has exceeded that of Frances
worker paradise by nearly 50 percent.
In a dramatic speech to the European Parliament last
summer, British Prime Minister Tony Blair hit the mark when he
criticized all Western European economies for their inability to
compete on an acceptable global level. Asked Blair, What type of
social model is it that has 20 million unemployed in Europe?
Productivity rates falling behind those of the USA? That, on any
relative index of a modern economy skills, R&D, patents,
information technology is going down, not up?
Financial Times international editor Olaf Gersemann blames
French and European unemployment on high minimum-wage requirements
and overly strict employment-protection laws. Gersemann,
who scathingly criticized Western Europe in his book Cowboy
Capitalism, says these labor-market regulations have created
millions of involuntary unemployed throughout Europe, affecting
immigrants in particular. He writes, Most French, German, and
Italian voters simply refuse to accept the necessity of a
Thatcher-Reagan style economic revolution. He notes that per
capita income in the U.S. now exceeds that of France by close to 40
percent, with Germany and Italy lagging even further behind.
All of this is reminiscent of the British disease of the 1960s and
70s. Back then, striking labor unions closed down the English
economy again and again, and it took until the early 1980s for
Margaret Thatcher to put an end to it. At one point, the Iron Lady
actually called in tanks and troops to stop the print unions from
shutting down Fleet Street. (This is what turned media-magnate
Rupert Murdoch into a pro-capitalist Thatcherite.)
Is there a Thatcher that can save Gaul? Perhaps. French Interior
Minister Nick Sarkozy is a strong law-and-order man. Hes the one
who ended the Muslim riots. More, he is reputed to be pro-market
and pro-American. The question is, can Sarkozy wake up this nation
of economic sleepwalkers and bring them into the 21st century? He
ought to take a big paddle to the collective French fanny. They
sure need it.
Larry Kudlow, NROs Economics Editor, is host of CNBCs Kudlow
& Company and author of the daily web blog, Kudlows Money
Politic$.
http://www.nationalreview.com/kudlow/kudlow200603251037.asp
