France's Oft-Derided Largess Insulates Many From Slump
For Beaufranqui and millions of other French people dependent on tax-financed largess, this country's cozy social protections, vast numbers of bureaucrats and unhesitating government intervention have proved to be a shelter from want in these hard economic times.
Denounced for decades as a millstone preventing growth and competitiveness, particularly by free-market advocates in the United States, the French government's dominant role in economic activity has suddenly found new favor at home and grudging respect abroad.
The crisis has landed hard in France, just as it has elsewhere. European Union specialists estimated last week that the number of unemployed is likely to rise to more than 3 million by next year as factories close. But the French economy is expected to shrink by just 3 percent, markedly less than in Britain or Italy, largely because of the country's traditionally high level of government spending, they added.
More significant in human terms, broad sectors of the population -- bureaucrats, retirees, teachers and the millions of others whose livelihood depends directly or indirectly on public outlays -- find themselves surrounded by a government cushion. The effects are easy to see: As the crisis grew and began to obsess French officialdom in Paris, for instance, Alpine ski resorts reported full bookings for the winter and spring seasons.
Unfortunately in this country we have a lot of talking heads on TV and Ivory Tower intellectuals perpetuating to people the myth that socialism is on its way. As CATO points out, Socialism doesn't exist--"Socialism is dead even in Moscow and Beijing." All industrialised nations use some form of the market economy. They just make different political choices as to what they prioritize.
In France they prioritize the quality of life for its citizens. In the United State's we've prioritized lower taxes on those who benefit the most from the Government. These are political rather than economic decisions. A lot of people I talk to on the ground here in Henry prefer the European model of capitalism and want a healthy debate on this question. This is hard to do with so much propaganda flying around on Fox news et. al.
A lot of people say that Obama is doing something drastic and unheard of and they long for the past before he brought socialism to this country. But they cite examples in their lives from the past--back when there were higher taxes, more protectionism, and more unions. These contradict each other and show that the debate in this country is based around a poor understanding of the facts and history.
Longing for the days of freewheeling entrepreneurship that never existed is not an argument that has validity.
The terms we must maneuver within are those of industrial capitalism. We must accept the facts about what capitalism is and what it isn't. Capitalism has and always will be intertwined in government intervention in the economy. As Edmund Phelps recently noted in the Financial Times:
In countries operating a largely capitalist system, there does not appear to be a wide understanding among its actors and overseers of either its advantages or its hazards. Ignorance of what it can contribute has in the past led some countries to throw out the system or clip its wings. Ignorance of the hazards has made imprudence in markets and policy neglect all the more likely. Regaining a well-functioning capitalism will require re-education and deep reform.
Capitalism is not the “free market” or laisser faire – a system of zero government “plus the constable”. Capitalist systems function less well without state protection of investors, lenders and companies against monopoly, deception and fraud. These systems may lack the requisite political support and cause social stresses without subsidies to stimulate inclusion of the less advantaged in society’s formal business economy. Last, a huge social insurance system, with resulting high taxes, low take-home pay and low wealth, may not hurt capitalism.
In essence, capitalist systems are a mechanism by which economies may generate growth in knowledge – with much uncertainty in the process, owing to the incompleteness of knowledge. Growth in knowledge leads to income growth and job satisfaction; uncertainty makes the economy prone to sudden swings
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