Bastiat he's not

As the prattle in France about consumers’ perceived loss of purchasing power reveals, discredited Keynesian and Marxist economic fallacies die hard in old Europe. Das Kapital still wields more influence than The Law, Frederic Bastiat's classic of liberty written about the same time. This being querulous France, consumers and their media proxies have been bitterly complaining for some time about increases in food prices that are reportedly putting staples like meat, milk and bread beyond the reach of too many pocketbooks.

This being statist France, Mr. Sarkozy’s government took the initiative and ceremoniously convened management representatives and labor unions to a grand conference held on the issue in Paris on October 23.

This being “intellectual-struck” France, the disquisitions had augustly been expected to produce groundbreaking, epoch-making alleviations.

This being socialist France, however, the placebo that eventually hogged the limelight in the media has been that old central-planning chestnut, boosting wages by fiat.

Two things about the whole brouhaha stand out. One is the government’s conflicting signals on the issue of higher wages and its mutually exclusive societal aspirations. The other is the stubborn refusal of self-styled French elites to even consider free-market insights in framing the debate, let alone legislation.

Take productivity. As Mr. Sarkozy rightly pointed out in his presidential campaign earlier this year, the only way for people to earn more money and be able to spend more is to increase their productivity and work longer hours. Sound economics. The snag is that Mr. Sarkozy himself has ruled out abolishing the 35-hour work week, the infamous piece of labor-market legislation that has come to symbolize France’s Malthusian instincts and accounted for stagnant wages since its enactment by a socialist government ten years ago.

There is no denying the fact that the French president has delivered on his campaign pledge to encourage people to work more by implementing his plans for tax-free overtime. However the scheme is so convoluted both technically and bureaucratically that it has so far produced only mixed results. Moreover, as the center-right Le Figaro newspaper explained in a recent editorial, although the government is no longer in the business of setting wages across the board, the impression conveyed by its rhetoric is that it still is.

In the wake of Mr. Sarkozy’s earlier tax cuts aimed at boosting investment and job creation, the whole debate has regrettably been conducted against the ideological backdrop of class antagonisms and worker exploitation. Because of the government’s reluctance to further ruffle union feathers at a time of union opposition to pension reform, one relatively safe prediction is that the government will somehow eventually accede to union demands that wages be raised artificially, blithely setting the nation on the primrose path to higher prices as producers pass higher payroll costs on to consumers. The country would then be back to square one.

What then should the government do instead?

Free-market economics suggests that Mr. Sarkozy should try sharper competition among retailers as a way to bring consumer prices down. After all Draconian zoning laws effectively prevent big chains from setting up new stores anywhere. Something along the lines of less regulation is under consideration but anything meaningful in this area will clash with the government’s pledge to protect small city-center retailers who might be driven out of business by larger stores. Indeed French policy has traditionally been to redistribute income from consumers to small storekeepers in order to "preserve the character" of French villages, towns, and cities.

The government might also try building up momentum for greater liberalization in world trade talks to expand consumer choice and cut prices, but again protectionist sentiments among French officials coupled with Mr. Sarkozy’s own dirigiste instincts, as exemplified by his opposition to foreign takeovers of French companies, preclude any realistic chance that free-trade correctives might work.

The lesson to be drawn from these schizophrenic impulses is that empirically-proven, commonsensical prescriptions like higher productivity, less regulation, more competition, more supply-side tax cuts and freer trade are too obvious or too messy or too Anglo-Saxon for French Cartesian minds. The country may have been through many more revolutions than any other in the Western world but, as Alphonse Karr, former editor of Le Figaro once pointed out in a famous epigram, in France plus ca change…