France’s
would-be Thatcher is short on reform
François
Fillon’s economic platform is lacking in growth boosters.
By PIERRE
BRIANÇON 11/23/16, 3:17 PM CET Updated 11/24/16, 5:54 AM CET
PARIS — François
Fillon is the rare politician who doesn’t mind being called a name
that has long been an insult in French politics: “Thatcherite.”
The conservative
presidential candidate was this week shown a front-page montage of
him wearing a wig that made him look like former U.K. leader Margaret
Thatcher. “Always glad to be compared to someone who saved her
country,” Fillon shot back.
Yet a close look at
his economic platform reveals that apart from catchy headline numbers
on spending and tax cuts, Fillon’s plan fails to address the French
economy’s fundamental flaws or put forward the type of structural
reforms economists have long said were needed for growth to pick up.
His platform has
been subjected to increased scrutiny in the last few days after he
emerged as the surprise winner of the first round of the conservative
presidential primary on November 20. Fillon beat Alain Juppé, who
will challenge him for the conservatives’ nomination in the second
round on Sunday.
Critics tend to use
one word to describe the program of the new favorite to win next
year’s presidential election: “archaic.”
Fillon’s program
seems “devoid of any sense of economic strategy,” said Alexandre
Delaigue, a professor of economics at Lille University. “Its
underlying narrative is the old moralistic tale: We have sinned, with
the deficits, public debt, the 35-hour week; we must expiate; and the
only way to redemption is suffering — in this case, massive cuts in
the public service ranks.”
“The only
Thatcherite thing about his platform is that it looks 30 years old,”
quipped another detractor, an adviser to Juppé who asked not to be
named because the former frontrunner has chosen to campaign on the
supposed “brutality” of his rival’s proposals.
“Fillon’s
is not a market-friendly liberal program. It’s just a platform to
please the French business lobbies” — Economics
professor Marc Ferracci
The critics have
focused on Fillon’s plan to cut 500,000 public sector jobs —
which Juppé, who advocates half as much, says would be “impossible.”
But Fillon’s stated readiness to take on France’s public sector
unions seems to please his supporters.
While the public
sector job cuts make for good soundbites, critics also point out that
Fillon has been mum on one of the most crucial problems plaguing the
French economy: its ingrained lack of competition.
“Instead of
obsessing about public debt, where are the proposals to create jobs
for the youth, to break monopolies in protected professions? He
doesn’t even mention the digital economy, and seems to have no idea
about how to foster a better business environment for startups,”
said the Juppé adviser.
“Fillon’s is not
a market-friendly liberal program. It’s just a platform to please
the French business lobbies,” agreed Marc Ferracci, an economics
professor and an adviser to independent presidential candidate
Emmanuel Macron, the former economy minister under President François
Hollande. “There’s nothing on globalization and its challenges,
on how best to improve labor relations in France, or on public
investment.”
Fillon has suggested
some €100 billion in spending cuts over the five years of the next
presidential term, and has pledged to reduce taxes over the same
period by some €50 billion.
But “if you want
to have a strong right-wing, growth-friendly program, you should look
to Ronald Reagan instead,” Delaigue said, adding Fillon should aim
for massive tax cuts, and minor spending cuts.
“He could also
eliminate all the tax deductions that professional lobbies have
accumulated over the years, then use it to, say, lower the corporate
income tax to 10 percent — even lower than the Irish — and play
tax competition. You could argue for or against from a political
viewpoint. But at least that would be a true right-wing,
growth-friendly policy.”
Critics argue that
Fillon avoids the tough choices that his supply-side policy would
entail by sticking to generalities and headline numbers, such as the
500,000 public sector job cuts.
He has not said
where the cuts would happen, simply announcing they would be spread
among the central government, local authorities and the large public
health care system.
In France, education
accounts for almost 60 percent of the central government’s
payrolls, while armed forces and security services make up the bulk
of the rest. But Fillon has refrained from saying whether he would
consider cutting the number of teachers or policemen.
Doing away with the
wealth tax won’t stimulate the economy, Delaigue noted, because
it’s paid by people who will save and not spend the proceeds.
The conservative
frontrunner is also advocating cuts to payroll taxes — which help
finance welfare spending such as family and health care benefits. To
make up for the cuts, he would raise the VAT by some 2 percentage
points.
“Raising taxes
while there’s no inflation is a brain-dead measure,” the Juppé
adviser said. “That means you cut real wages and you’ll have a
recessionary effect in the next two years.”
Meanwhile, Fillon
wants to repeal the controversial “wealth tax” that has been a
topic of fierce debates between the Left and the Right ever since it
was created by François Mitterrand’s Socialist government back in
1982.
Subsequent
conservative governments have refrained from abolishing the tax for
fear of being accused of favoring the rich; even Nicolas Sarkozy, who
repeatedly labeled it “stupid,” only reformed it slightly during
his presidency.
Doing away with the
wealth tax won’t stimulate the economy, Delaigue noted, because
it’s paid by people who will save and not spend the proceeds.
Fillon doesn’t suggest any cuts in income tax rates, which would
help boost growth faster.
The major risk in
Fillon’s plan is that its recessionary impact would alert financial
markets that France’s debt situation could deteriorate fast —
which would only work against his stated aim to shrink it.
For now, however, it
seems Fillon is telling his right-wing supporters just what they want
to hear.
Authors:
Pierre Briançon
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