If you live in France (or in Brussels) you have certainly heard a French politician stressing the necessity to protect “la spécificité française”. A closer look reveals, however, that this “French way” is nothing else than the « third way » approach to economic and social policies; a way similar, indeed in many aspects identical, to the socialist way. A way to a dead end.
Indeed, that the French economy is doing poorly is obvious. Unemployment is still fairly high (7.8% end of 2007); so that nearly 3 millions individuals would like to work but don’t find a job. GDP growth is sluggish (1.7% in 2005, 2.2. in 2006 and below 2% in 2007) so that, in a once wealthy country, GDP per capita is now close to the average for OECD countries.
Prospects for the future are not good either. France has one of the fastest growing national public debts (14% of State revenues serves the interest of the debt) and the money borrowed has not been used for investment1. Worse: France has left almost untouched its pay-as-you-go system so that taxpayers will have to make a tremendous effort in the coming decades.
To identify the cause of such a doldrums has never been an easy task. But it can surely not be imputed to France endorsing free market policies! As a matter of fact, regardless of their political circle, French politicians (and citizens) despise the market system and, if they have to put with it, they attempt to regulate it by every possible mean. And there is an abundance of examples to illustrate this. I have already mentioned that France has a fully State-run retirement pension system, hence avoiding the capital market. The education system, with 1.2 millions civil servants, is another illustration of “the French way”. This system is indeed close to breaking a world record in terms of centralization. Hence, if greater autonomy was recently given to universities, this does not include the possibility to select students or ask for tuition. Besides retirement scheme and education, the State interferes in many fields and the consequences are invariably the same. Hence, even though we are able to walk on the Moon, in France there is a shortage of housing. This housing crisis is due to a long-standing desire to regulate urban development and control rents. Another issue that concerns the present government is the high price of basic products (such as food and cleaner). From both the politicians’ and the consumers’ perspective, retailers are to be blamed; they raise prices to increase their profits at the expense of consumers. The truth, however, is that this is due to a regulation limiting the creation of new malls and of hard discounters and therefore limiting competition. Finally, to give the right dimension of the involvement of the State in economic and social life, let us recall that France is today second among OECD countries in terms of public spending (54% of GDP), just after Sweden (at 56% but down from 67.5% in 1993).
For many years French citizens thought that the market – that is, freedom – is just another option, and that government can choose to limit that freedom via regulation as it finds suitable. Today the same citizens find themselves trapped. They are used to rely on the government and each of its new failure leads to new demonstrations calling for more government intervention and more failures. At the root of this vicious dynamics (so well depicted by Ludwig von Mises) lies what Hayek, the great economist and political philosopher, branded “the pretence of knowledge”, that is, the desire to control the outcome of interactions coupled with the belief that we have the capacity to do so. Such inclination towards organization is no surprise in a country like France that has always been highly centralized and has developed a profound veneration for engineers. Social engineering is indeed another description for the “third way”.
Interestingly, the youth in France seems to be aware of the fact that their country is engaged on a slippery slope that brings more collectivization and lower growth. In a recent poll (L’Express 2948, January 3rd, 2008) some questions were put to individuals between 16 and 29 years of age from various countries. As it turns out, in France only 27% of them believe they have a bright future ahead of them (compare to 60% in Denmark), only 26% believe they will get a good job (compare to 60% in the US). Also, a record low 20% of the youth thinks that globalization brings new opportunity and a record low 11% say they are ready to pay taxes for the older generations. The third way does not bring social peace: it carries with it social disintegration!
How can we put a society in such a bad position on the right track? Surely, some better understanding of economic phenomena would help. Paradoxically enough France is the country of many great teachers who can open the eyes of our contemporaries, if only they wish to. Let us just listen to one of them, Frédéric Bastiat. « Ignorance, says Bastiat, surrounds [man] at his cradle; therefore, he regulates his acts according to their first consequences, the only ones that, in his infancy, he can see. It is only after a long time that he learns to take account of the others. Two very different masters teach him this lesson: experience and foresight. Experience teaches efficaciously but brutally. It instructs us in all the effects of an act by making us feel them, and we cannot fail to learn eventually, from having been burned ourselves, that fire burns. I should prefer, in so far as possible, to replace this rude teacher with one more gentle: foresight. »
As did Bastiat, we would like French citizens to open their eyes on the drawbacks of regulation instead of walking the fatal path of the “third way”. But if they remain deaf to Bastiat’s teaching, let’s hope, at least, that the French experience will lead other countries to opt for wiser policies. That is, to stick to the principles of free market and individual responsibility and to refuse to entrust to the State everything. Including their soul.
 See Pierre Garello and Vesselina Spassova in The Journal for the New Europe, vol. 3, n°1 here.
Pierre Garello is currently Professor of Economics at the Univeristy Paul Cézanne Aix-Marseille.
He received his Bachelor education from that same university and received his PhD from New York University. He taught at the Universities of Montepellier and Saint Etienne, France and was invited to lecture in various places in Warsaw, Sofia, Bucharest, Vilnius, Jena, Guatemala City, Washington, Roma and Vienna.
He is Director of Academic Affairs for the Institute for Economic Studies - Europe and Director of Research for IREF - Institut de Recherches Economiques et Fiscales.
Besides Taxation, his field of specialization includes Decision theory and Law and Economics. He is director of the Law and Economics Erasmus Mundus Master Program at The University Paul-Cézanne.
The lecture was presented at the Conservative Economic Quarterly Lecture Series (CEQLS) held by the Conservative Institute of M. R. ©tefánik in Bratislava on March 17, 2008. More information is available here.
Pierre Garello: Third Way as a Dead End: French Experience (prezentacie/Garello_CEQLS_2008.ppthere for download as .PPT
1. The economic and social situation in France is deteriorating
• The second highest level of public spending in Europe
• The fastest growing public debt
• Ramping unemployment
• Failure of education system
• Failure to address the pension problem
• Slow growth (absolute and per capita)
• Lack of enthousiasm among the youth
2. French economic and social policies: a sample of “French ways”
• Fighting high prices: the war against retailers
• Reforming the university system: a fake autonomy
• Tax policies: creating new taxes
• Housing crisis: due to overregulation
• Pension reform: no reform
• Decentralisation: just more spending and less accountability
• Regulatory inflation
• Attali’s report: pointing out to rent seeking behaviour
3. The nature of the third way
• Definitions of the third way
• The dogma of pragmatism
• The State as a responsible entity
• The pretence of knowledge
4. Why third-way policies don’t work
• The complexity of Human interactions (Polytechnic) unintended consequences…
• The neglect of incentives (Geant Casino)
• Regulation failure calling for… more regulation
• The time horizon of politicians and their motivation
5. But there is another “French way”. This one should be followed
• French have a long experience of centralization, but also a long experience of liberal economists (Fenelon, De Gournay, Turgot, Say, Bastiat, Rueff)
• Bastiat was especially good at formulating clearly the shortcomings of State intervention
• Say was a Master
• For them pragmatism was no replacement for a true political philosophy
• What is at stake here is our approach of justice.