As many in America get excited about the French sex reports that are only scandalous in America, there is actual very bad news out of France. But first up, the sex scandal.
French President Francois Hollande was caught having an affair with actor Julie Gayet. And it may indeed be the case as Joshua Keating says that, The French Merely Pretend to be Blase About Sex Scandals. But while he may be right that they are as interested in the sex lives of famous people as anyone else, they are not puritanical about it the way we are here in the United States. Here it is not news that a politician cut food stamps for millions of poor children, but it is news that he had a one-night stand during some conference. What’s more, the French media don’t treat Hollande’s sexual affairs as political matters.
Meanwhile, Hollande has moved over to the dark side politically speaking. The supposed socialist has decided that the best way to get France’s economy going is to do what the conservatives want: cut social spending and cut taxes! Sound familiar? Sound like exactly what the Republican Party in our own county always wants to do? Sound like what every person who ever passed Econ 101 would tell you is exactly the opposite thing to do?
Francesco Saraceno quotes Hollande saying Tuesday, “L’offre cree meme la demande.” This means more or less, “Supply creates its own demand.” That is, the old conservative canard that by making more stuff there will suddenly be people there to buy it. In economics, this is Say’s law. (Actually Say’s law is a bit more complex than this but it is basically the idea that all economic downturns are the result of businesses not producing the right stuff.) I call it the “Field of Dreams” fallacy: if you build it they will buy. It’s pretty simple to disprove. Assume you have an economy like ours: there are 100 people, 99 of them have no money and one has a huge amount of money. If some great low cost innovation comes along, only the one person will be able to afford it. Of course, the real economy is more complex than that but the principle is the same. Here is a great graph from Saraceno’s article:
The graph shows year by year what French businesses claim to be their biggest problems. The graph is kind of hard to read (go over to Saraceno’s article for a better copy), but the blue line is “demand” and the yellow line is “supply.” So roughly 50% of firms are suffering from lack of demand and 15% are suffering from supply problems. Roughly 10% (purple) are suffering from both. But as Saraceno points out, “Firms move from demand difficulties to no difficulties and back, but in the past six years they did not substantially change opinion on red tape, regulation, labor costs.” Do you see any evidence there for cutting the taxes of the rich?
This morning, Paul Krugman wrote a great response to Hollande’s new claim, France by the Numbers. He shows that while France is not doing great, they are actually doing fairly well. And much more important, the nonsense that Hollande is now pushing will only make things worse, not better. Currently, France’s GDP is going up. It’s budget deficit is going down. It’s debt-to-GDP ratio is on its way down. And France can borrow money at reasonable rates. So why the sudden turn to the right? Is it just another case of Lord Acton’s observation that power corrupts and that, “Great men are almost always bad men.”
I am especially upset, because I’ve been a big Hollande booster. He was the “moderate socialist” who would do the right things, but incrementally and not upset the nation. Well, I guess this is just more evidence moderates of all stripes are useless because when it comes right down to it, they all come running back to the power elite like a lonely dog desperate for a pleasant pet.
Of course, when Hollande’s new found conservative economics turns out to only make things worse, I doubt very seriously that the people of France will blame it on the fuck-the-poor and give-to-the-rich policies he now favors. They will understandably think that getting fucked for the benefit of the rich is just the socialist way. I think Hollande needs to spend more time hitting the economics books and less time hitting the lovely Ms Gayet.