Mises Daily Articles

Home | Mises Library | Ooh Là Là!

Ooh Là Là!

09/23/2004Sean Corrigan

Currently, the French établissement is enjoying the spectacle of a power struggle between President Jacques Chirac and his hyperactive former protégé, Finance Minister Nicolas Sarkozy as a spat has broken out over the latter’s ill-concealed desire to secure his place in the Palais d’Él ysées, once M. Chirac’s incumbency ends.

For his part, M. Chirac, like all Grandes Vieilles, would like to feel he can lay down the sceptre of office, secure in the knowledge that an anointed successor will carry on his legacy and thus underline his place in history. Sarkozy, though, is refusing to play the role Chirac would like to assign him.

Thus, like the head of a family épicerie who is being treated with disrespect by the pushy new son-in-law, Chirac has taken an understandable umbrage at the younger man’s display of naked and intemperate ambition.

But Sarkozy himself is worthy of more than a moment’s consideration, for here we have, not just a typical French dirigiste, but a veritable economic Napoleon—a man of whom it could be said, as did the Corsican ogre of himself, that while he may lose many battles, he will surely never lose a minute.

Indeed, such is the scale of his activism that a scan of the European business press hardly fails to throw up some new initiative, or some new pronouncement emanating from the imposing arches of his headquarters on the Rue de Bercy.

"Sarkozy has fixed himself a rule," commented the left-wing daily Libération sarcastically of his earlier and rather Draconian period as Minister for the Interior: "go somewhere or say something at least once a day so that no 24-hour period goes past without him getting talked about."

For example, earlier this year, he proposed extra "help" be provided for French exporters, one form of which was a scheme to cancel Algerian sovereign debts in exchange for the awarding of new contracts to suitable French firms—when what he should have been doing, of course, was to lower barriers to Algerian imports with whose proceeds the debt could be paid down. 

At this very same moment, however, M. Sarkozy was offering tax breaks on consumer credit (Non! C’est vrai!) in order to stimulate domestic consumption—something which, at least as a first-round effect, surely could be foreseen as being antagonistic to a drive for increased exports?

Next, he called in the powerful life insurance industry and browbeat its members into making extra investments in small to medium size firms (though the 0.6% asset allocation increase and the EUR6 billion projected rise over three years hardly amounted to a revolution, French or otherwise).

Furthermore, he proposed—laudably enough, in this instance—to cut taxes on dividends, hoping to discourage the archetypally mistrusting Gaul from putting all his savings in the bas de laine—the woollen sock, stuffed with cash and kept hidden under the bed—or into today’s less certain equivalent, in bonds or bank deposits.

At the same time, however, he acceded to a rise in minimum wages (only partly to be offset by a cut in payroll taxes), while he also increased corporate turnover taxes (admittedly by a fraction of a percent) in order to help fund the enormous deficit racked up by France’s similarly legendary populace of hypochondriacs as they overuse—in economically predictable terms—what the individual mistakes for the free good of his vaunted public health service!

The upshot of this, of, course, is that what he gave with la main à droite he took away again with l’une à gauche. But if this gavotte has left you confused so far, brace yourself, for we have hardly begun the dance!

For example, our Empereur économique recently cheered foreign observers when he threw his powerful advocacy behind moves to change the ludicrously-backward 35-hour maximum working week schedule imposed by the previous Socialist administration as a "job-sharing" measure (in truth, an un-, or at least under-, employment sharing one).

But what must have disconcerted them equally was that he next lambasted the German Bosch corporation for its act of "blackmail" when it threatened to move a Rhineland auto component factory to the Czech republic if the workforce did not agree to work longer hours for the same wages, in order to reduce its costs of production to levels commensurate with those attainable in Eastern Europe.

Still interfering, Sarkozy then modified his initial position somewhat by declaring that the 35-hour ceiling should, indeed, be lifted, but that overtime payments in such cases must be mandatory—for, naturellement, such matters clearly should not be left to the private economic agents involved to negotiate among themselves!

Yet, alongside this, our hero argued in favor of offering tax incentives to those French firms who were to repatriate any previously outsourced work and jobs—presumably unaware that this would then disadvantage those firms too patriotic (or too inflexible) to have maximized their own return on capital both by fleeing his pettifogging jurisdiction and through a recourse to the benefits of the international division of labor!

Moreover, this subsidy—which, bluntly, is what it is—is being promoted at the same time as Sarkozy fumes at the "fiscal dumping" practised by those Eastern European nations which have not yet fully strangled their capital-poor countries by raising low, or even nonexistent, post-Soviet corporation taxes up to stultifying EU welfare state levels!

As you will have realized by now, consistency is clearly not one of our man’s cardinal virtues, but for a truly tangled tale of false economic logic compounded by overt political opportunism, consider the vexed matter of his policy on prices.

Earlier this year, Sarkozy—having tried to get the Banque de France to sell its gold hoard to finance his tinkering—made a great deal of noise in berating the European Central Bank for its "fixation" with its mandate to keep the rise in the continent-wide index of consumer prices to under 2% per annum, saying the target should be made "more flexible"—political cant for "more purposefully inflationary."

However, having campaigned unavailingly for higher prices in the spring, Sarkozy was then seized by the brainwave that what was needed to stimulate consumer spending was, in fact, lower prices and so his next coup de theâtre was to summon another conseil de guerre in which he thrashed out an agreement between French retailers, such as the giant Carrefour supermarket concern, and their suppliers to share the burden of a 2% price reduction across a broad range of their goods.

"This is an agreement which should give confidence to consumers and this is an agreement that should support the return of growth in our country," the Finance Minister grandly told the press at the time.

Toutefois, il ne pleut jamais, sauf à torrents, comme on dit en français.

Alas! This little scheme, it transpired, was all too successful, for the big concerns have long chafed under the market-impeding lois Galland et Raffarin, the first of which—in an implicit piece of Marxism—bans retailers from selling "below cost" and the second of which places limits on the expansion plans of the big boys, in order to protect the smaller, less efficient shopkeeper at the expense of the public at large.

So, what happened was that Carrefour and peers promptly attempted to widen the gap in the legal fence which Sarkozy had thus opened up, with one of them—Leclerc—having had the temerity to announce across the board reductions of 2% (we’re not exactly talking slash and burn here, as you can see!)—to be applicable even in cases where the suppliers had not themselves first reduced the prices of those goods to the retailer.

Quelle horreur! 

This shocking departure from Sarkozy’s little scheme then prompted Benoît Mangenot, managing director of France's Association of Food Producers, to rage that: "What was agreed was an average reduction in prices of 2% percent"—i.e., the deal gave the retailer no authority to cut prices on certain premium value brands which the makers were trying to exclude from the pact—"and Leclerc has now promised to stick to that."

"It's not up to the retailers to set our prices," fumed Mangenot used, but "Consumer sovereignty, be hanged!" was clearly the message intended to be sent by this mouthpiece for a dismal, state-supported, producers’ cartel. If you listened closely, you could just hear the despairing wailing of the restless shade of that great French libertarian, Frédéric Bastiat.

But, more delightfully, this outbreak of dissent among the various Guild Socialists has left Sarkozy in something of a muddle, to the point that he has since been moaning to reporters that barely half of his precious agreed cuts have been enacted—that the path was "only half travelled," as an official put it—while he has simultaneously issued a ministerial edict to the effect that "no reduction in price can be carried out if suppliers don't change the price at which they sell to retailers."

This ukase further warned that ". . . the competition, consumer and anti-fraud officials have been mandated by the minister to ensure the law against selling at a loss is applied.''

One might be forgiven for thinking this was all something from the pen of Georges Feydeau himself, but there was yet one more element, perhaps more Theatre of the Absurd than bedroom farce, to consider.

Namely, this was that, even before this latest brouhaha blew up, Sarkozy had further muddied the waters by telling the very same supermarkets he had inveigled to charge their customers less for certain items now to pay more to the hard put-upon suppliers of tomatoes, peaches, and nectarines! [The press made no mention of the fate of the patient cultivators of grapefruits and courgettes, etc., but there was loudly-expressed ire from the excluded producers of—what else?—garlic!]

Ironically, the dirigiste finance minister was constrained in this action by means of his own instruments of control: the retailers politely demurred by telling him that though they would "take particular note of the request. . . It isn't possible for competitors to sign agreements for minimum price, whether it be on a regional or a national basis . . ."—and their grounds for this refusal? Their fear of breaking one of Sarkozy’s department’s own laws!

To this point, we have been having a little innocent fun at the expense of any Anglophone’s favourite bêtes noires, the French.

But, more fundamentally, what we have been seeking to highlight is that once a government minister of any stripe—and we should all be painfully aware that our own nations harbor all too many Sarkozy’s for complacency—imagines that he can employ state power to redesign the economic structure of society, the free market inevitably suffers, along with a host of other liberties.

For what Sarkozy and his confrères habitually arrogate to themselves is the right to impose their goals and their wisdom in place of those of all the individuals cursed to be under their sway in some way.

It is the Sarkozys of this world whose conceit is that they should order what can and can’t be sold and at what price; that they alone should decide under what terms employers may offer and employees may accept work; that they are justified in weighting the split of the proceeds of that generalized legal theft known as "taxation" among this month’s or the other’s favored special interest groups; that it is given to them to use coercive means to disrupt the free expression of the preferences of individual savers, workers, consumers, and entrepreneurs, everywhere at large in the polity.

In doing this, be assured that none of these men will ever achieve one iota of good, nor will they advance—rather than retard—the course of human material progress even one miserable centimeter; though they can reckon, no doubt, on advancing their own careers and status, as they strut about the international stage, bragging of the laws they have enacted, of the edicts they have issued, and of the "difference" they have therefore made.

But, if a Sun King, or a Robespierre could bring about no identifiable or lasting increase in the commonwealth of the proud people under their rule, what do we really think can be done by such a pale shadow of absolutism, by such a petty, latter-day tyrant, as a Sarkozy, or a Blair, or a Bush-Kerry—or by any of a thousand other vainglorious elective monarchs who fill the council chambers of the world with their empty babble?

Little enough, indeed and, so, to reflect this insight, let us conclude by rehearsing the true French motto of freedom.

Not the pernicious "Liberté, Égalité et Fraternité," but the more profound and wholly benign "Laissez-faire, laissez-passer."


Sean Corrigan is the Investment Strategist at Sage Capital Zuerich AG (www.sagecapital.com), a Swiss-based organization dedicated to the cause of capital preservation and is co-adviser to the Bermuda-based Edelweiss Fund. See his Mises.org Articles Archive, or send him mail (corrigan@sagecapital.com). This article is written for the exclusive use by Mises.org; the usual liberal reprinted policy does not apply. Comment on this article on the blog.


Contact Sean Corrigan

Sean Corrigan is the author of 'Money, Macro & Markets' newsletter & Consultant to Hinde Capital.

Shield icon library