FRANCE goes to the polls tomorrow to choose between the
beautiful and socialist Segolene Royal ('We need a just order'),
and the hawkish and conservative Nicholas Sarkozy ('We need justice
and order'), as its next president.
The choice is a stark one. Ms Royal is all for more state spending,
a higher minimum wage, higher state pensions, and keeping the
35-hour work week introduced by socialist prime minister Lionel
Jospin in 2000.
Her policies seem everything workers could wish for, except that to
pay for them the state will inevitably have to raise taxes - and
thereby undermine job creation.
Mr Sarkozy, who made headlines in 2005 for calling rioters 'scum',
is the opposite. He thinks the 35-hour work week is the worst
mistake France ever made. He believes in lower taxes (the top
personal income tax rate is still 40 per cent, after being slashed
last year from close to 50 per cent). He wants to reform pensions.
And he promises to break the destructive hold unions have.
'Mr Sarkozy is the only candidate who seems to have understood the
urgency of reform and to have the abrasiveness to stand a chance of
carrying it out,' says The Economist magazine.
Whether or not French voters eventually give him that chance, the
French case provides fascinating insights for Singapore.
You could say that France is the archetypal 'ordinary' country
implicit in Minister Mentor Lee Kuan Yew's recent remark, when he
said 'the biggest mistake any Singaporean can make is to believe
Singapore is an ordinary country and can behave like an ordinary
country...'
Mr Lee did not spell out what he meant by 'an ordinary country',
but because he was speaking in defence of Singapore's approach to
governance - tough-headed and going against popular opinion when it
is deemed in the best interest of the nation - he clearly meant one
which allows public opinion to override the public interest when
formulating and implementing policies.
France, unlike Singapore, has natural resources aplenty. It is the
second biggest country in continental Europe, and is blessed with
rich agricultural lands. It is the sixth largest economy in the
world, and at one time the seventh richest in per capita GDP.
In recent years however, the growth rate has stagnated at 2 per
cent. Unemployment is close to 10 per cent. Unhappy unemployed
youths were the chief cause of riots that broke out in Paris
suburbs two years.
What has gone wrong in this country that gave the world the famous
social theorist Alexis de Tocqueville, the TGV high-speed trains,
and numerous consumer delights like French wines and foie
gras?
The answer is simple: the traditional French resistance. This time,
to globalisation. France, after all, is home to Jose Bove, the
farmer who led demonstrations against McDonald's a few years ago.
(He was jailed, but released in time to be one of the 12 contenders
in the first round of the current presidential election. Four other
contenders were Marxists and Trotskyites.)
The French resistance to globalisation is institutionalised in
strong trade unions - that have been decreed by law, no less, to
bargain on behalf of fully 95 per cent of workers in France.
The World Economic Forum's Global Competitiveness Report puts
France in bottom place out of 125 countries surveyed, in the
category of 'cooperation in labour-employer relations'. France, it
says, has the most confrontational workplace environment in the
world.
'The class conflict view of things is very traditional in France,'
says economist Fabien Postel-Vinay in a BBC report. 'Trade unions
have been given a lot of bargaining power and they push this idea
that there is a conflict of interest between employers and
employees.'
The result? Confrontational unions, coupled with the 35-hour work
week, mean employers are reluctant to hire new, permanent staff.
Young workers bear the brunt of employer selectivity - 22 per cent
of the under-25s are unable to get a job.
In addition, even as European governments from Ireland to Macedonia
rush to change their laws and regulations to woo foreign investors,
France has stalled. Corporate tax remains at over 30 per cent.
There is also the highly unpopular wealth tax, a tax on the value
of assets like homes and shares.
French businessmen and professionals (including some 16,000
scientists), unhappy with the situation at home, have voted with
their feet. According to one estimate, two million out of the total
of 63 million live abroad, especially in next-door Britain which
has managed to get out of its own economic funk. (See 'The
Europeans who will not go home' by Anne Applebaum, in Review)
Where usually people move from poorer to richer countries, France
is one of the exceptions - a rich country grappling with a brain
drain. If France's next set of leaders fail to adopt the right
policies, it may not even remain rich for much longer. Already its
per capita GDP has slid from seventh to 17th place
internationally.
French business leaders have warned of more of France's best and
brightest leaving the country if the socialist Segolene Royal is
elected as the next president.
The irony about France is that while it has a strong
bureaucracy - like Singapore - it does not have the political
leadership to craft and guide policies in the right direction. What
is lacking is not knowledge, but nerve, the nerve to act.
Singapore's leadership has plenty of the latter.
Like Singapore, the state controls key assets such as power, public
transport and the defence industries. But unlike Singapore, they
are not subject to efficiency and productivity benchmarks, far less
'managed competition' of the Singapore kind. As one commentator
notes, 'there is a huge chunk of state-owned enterprises that go
through the motions without being particularly successful in the
market'.
Like Singapore, there is a strong emphasis on social equity, with
state spending on public health and welfare. Unlike Singapore, that
spending has not been well targeted. French public finances are
coming under strain from the pension system and rising health-care
costs. Singapore runs budget surpluses most years, even as it
subsidises health care, education and care for the
destitute.
Singapore has much to learn from France in many areas, such as
technology, culture and military affairs. In economic management,
the malaise that is afflicting the sick man of Europe also holds
lessons for Singapore, whoever wins the election tomorrow.
(STraits Times, 5 May)
