The French Election: More on Elite Myopia and the Untruths of Neoliberalism

     The mainstream media has characterized Emmanuel Macron’s victory in yesterday’s French election as a resounding defeat of right wing authoritarian populism. Macron, heading up a new political party called En Marche! (Forward!), won 65 percent of the popular vote against right wing populist Marine Le Pen’s 34 percent. Despite the rise of populist authoritarian movements in an increasing number of countries, global elites continue to laud the unquestionable benefits of free trade and other features of the neoliberal policy prescription. 

Elite Myopia

 Marine Le Pen

Marine Le Pen

     Marine Le Pen’s support of one-third of valid votes, combined with the fact that voters destroyed an estimated 12 percent of ballots cast, suggests that the deep disillusionment of a considerable portion of the French public does not portend well for French politics. The vote for Macron is not an endorsement of his policy positions. French society remains deeply divided and this will not change since the new President is unlikely to address the roots of that profound division. As I noted in my previous post, while Macron was not a candidate of the either of the established parties, his policies are in fact mainstream neoliberal prescriptions. He supports the EU as currently constituted, and he sees free trade, further reforms to the labor code, and a reduction in corporate taxes as the policies that will produce economic growth and employment. This policy prescription has coincided with de-industrialization, rising unemployment (particularly high among youth), and the sharp regional divide that is now reflected in the French voting patterns where Le Pen won support from areas of low wages and high unemployment while Macron dominated in areas of high economic growth, particularly the major cities.  

Neoliberal Myths

     If authoritarian populism is to recede, it is of critical importance that traditional elites and their business allies recognize in pronouncements, policy and practice the following points. 

     1. Trade liberalization is not by definition a stimulus to equitable inclusive economic growth (or even economic growth). Trade deals do not arise from a neutral process; they are mightily shaped by power differentials. The national representatives involved in the negotiation process, the extent to which they are committed to the defense of regional interests and vulnerable social groups, will shape the extent to which inclusive economic growth arises from trade agreements. Labor interests, as we know, have not been well represented in trade deals everywhere. The NAFTA negotiations abandoned Mexican peasants to highly subsidized and powerful U.S. agribusiness interests, an outcome that points to the combined impact of asymmetry in power among countries and within-nation power differentials. 

     2. Protection is not always bad. In some cases, in some sectors, it might well be acceptable (at least in the short and immediate term) and desirable in the long term, even if it has some detrimental implications for growth. Further, economic growth should not be the only goal of public policy. It is important to weigh the benefits of growth stimulated by trade liberalization against other national values. The centrality of corn to Mexican indigenous culture, sacrificed on the altar of trade liberalization, is a case in point. 

     3. When there are losers in trade deals, governments must provide sufficient compensation. The market will not magically lift all boats. Compensation should not only take the form of social and educational programs but should also involve regional development initiatives that include support for the creation of new employment opportunities. The role of automation in the decline in employment in the industrialized north should not be used as an excuse to ignore this issue—to accept increasing unemployment as inevitable. As I noted in an earlier post, a sense of inclusion in society involves work in the real world even if the state provides a basic income. Such policies are not “wasteful” of government resources. Rather, they are essential to stem the political fallout (in the form of authoritarian populism) that will surely make economic growth and prosperity problematic. 

 Labor protest, France, 2016

Labor protest, France, 2016

     4. Labor flexibilization (revisions to labor law making it easier to hire and fire among other things) does not stimulate employment expansion. There is absolutely no evidence that it does, and plenty of evidence that it creates more layoffs and a sharp rise in precarious employment. Uncertainty and fear, stemming from economic insecurity, whether it involves actual layoffs or fear of loss of income, is instrumental in the appeal of authoritarian populism. Business will argue that failure to flexibilize labor regimes will render their business less internationally competitive. This is precisely why there needs to be a new global consensus involving a major rethinking of labor policy—a rethinking that takes into account issues of political fallout. 

     5. Tax reductions, absent direct ties to employment expansion, are unlikely to produce more jobs. At the same time, high profits and concentrated wealth, a key driver of populist unrest, need to be taxed sufficiently to ensure a fair distribution of the wealth generated by growth. Again, traditional elites and business interests are likely to see a more redistributive direction in tax policy as counterproductive to capitalist growth. The fallout from authoritarian populism will have worse consequences. 

     6. Conventional wisdom has now rejected fiscal austerity, long regarded by traditional elites to be an essential ingredient of sound economic policy, as an effective tool for economy recovery. Austerity invariably increases job losses. Nevertheless, this policy prescription survives, most notably in Emmanuel Macron’s economic program.

The Need for a New International Consensus

     While this post has focused on policies at the national level, we also need the parallel development of a new international consensus on what constitutes sound and inclusive economic policy. Policies of multilateral organizations shape national policy. Private capitalist interests have lobbied and influenced these organizations in ways that have served short-term business interests. National and international global leaders need to make a strong and concerted effort to mitigate the power of capital and make a convincing case that everyone’s interests are best served by capitalist growth that is equitable and fair.