France in the Populist Wave: The Economic Danger of Denial

The increase in most European interest rates has sparked numerous comments about the underlying electoral risk. France’s forthcoming presidential elections (in addition to the European Central Bank’s anticipated shift to “tapering”) are on many observers’ mind, as the spread between France’s and Germany’s 10-year yields reached a four-year high. A rebound in interest rates from 0.1 to about 1 percent is certainly impressive from a market perspective. This trend falls short, however, of translating the magnitude of the seismic threat facing not only France but the European Union (EU) as a whole, as the populist backlash is only just beginning to upend European politics.

Over the past six months, the prospect of Marine Le Pen winning the French presidential election has been upgraded by most observers from “impossible” to “remote” and, more recently still, to “tangible.” Although her election remains unlikely at this stage, she is undoubtedly enjoying a strong momentum and, if one thing is certain, the runoff on May 7 will in no way resemble her father’s defeat in 2002 to Jacques Chirac (who garnered 82 percent of the votes).

There is no indication however that political leaders, on either side of the spectrum, strive to adapt their political strategy to a threat that, for the very least, is here to stay. Unlike far-right movements in most other western countries, the National Front is in first place among young voters[1] – a fact which speaks volumes about the party’s long-term dynamic, should mainstream movements fail to develop a new approach.

Right-wing populism, although on the rise for more than three decades, was contained electorally speaking by the buffer of the two-round voting system, despite the trend of decomposition affecting French politics. In a context of ingrained complacency, political reasoning still fails to adapt to a threat that remained unthinkable until recently.

The Brexit vote and Donald Trump’s election have, quite surprisingly, resulted in little impact on mainstream politics in France and continental Europe at large, apart from rhetoric. The general shift toward anti-system speech only adds to the confusion, on the part of career politicians or even unelected public-sector officials, oddly branded as “mavericks.”

The National Front’s victory, whether in May or in five years’ time, would mean an almost certain end to the European Union. Even in the absence of a full-blown “Frexit,” the already damaged European construct would be at risk of unravelling at an accelerated pace. It could have been expected that politicians attached to the EU or to European cooperation would seek to develop an innovative and reasonable platform in order to lure back voters into mainstream politics. Yet, most expect the prospect of institutional paralysis to act as a sufficient deterrent in the eyes of angry voters, this time and the next one.

Compared to Trump’s election and Brexit, Le Pen’s election would result at the national and European level in an institutional upheaval of a greater magnitude, as she would have to form a cabinet almost entirely cut-off from the French political elite, and would probably fail to secure a parliamentary majority. Although the Brexit vote and Donald Trump’s election have induced significant political turmoil, neither led to a state crisis.

Despite the divisiveness of the referendum campaign in Britain, the result led to Theresa May, a pragmatist and moderate figure of the Conservative Party, becoming Prime Minister. Fears of an economic collapse do not seem to be substantiated either, despite an obvious challenge to the growth model if the country loses access to European markets in practice. In the United States, despite his shocking xenophobic rhetoric Donald Trump won as the GOP’s candidate and as a member of the business elite, yet on a protectionist platform. He was therefore able after the election, despite the lasting discord, to reach over to more mainstream factions within the party.

Meanwhile, France’s mainstream candidates fail to respond to the populist challenge at all, even if it means having to face a chaotic political and economic situation in the coming years. Emmanuel Macron, despite becoming the frontrunner and gaining the support of centrist figures, still suffers from a rather volatile electoral base as he tends to be seen not so much as an independent contender, but as the candidate of the socialist establishment; the latter was no longer able to secure the grassroots’ support. Because of that risk, Macron remains reluctant to clarify his economic platform beyond his traditional focus on fiscal “fine-tuning” and unemployment regulation, and he even oddly speaks at times of his “Christlike” attitude.[2]

François Fillon, who used to be described more or less ironically as the “French Margaret Thatcher,” can no longer afford to advocate a shock therapy and slashing 500,000 public sector jobs, as he faces a fake job scandal. In order to remobilize the party amid a wave of defections, he seeks to shift his focus toward security issues, away from economic ones.

Benoît Hamon, the Socialist Party’s official candidate, did not receive the support of Hollande or any prominent cabinet member, even after winning the primary. He is leading a left-wing campaign which bears some ideological similarities with that of Jean-Luc Mélenchon, the popular far-left candidate who has been bound by an unclear and shaky alliance with the evanescing Communist Party.

All in all, no one seems to be in a position to offer a platform that would overcome the populist threat and take account of the sweeping economic changes of the past couple of decades. The slogans repeated ad nauseam about the need to embrace the European project without any reorientation, a bureaucratic French-style vision of globalization, and monetary convergence toward Germany, have not evolved in substance since the 1980s.

On European issues, the main candidates advocate a more or less radical economic adaptation to the euro zone. But they do not even question the severe flaws of the currency union and the absence of any macro-economic coordination, of which Germany’s breath-taking trade surplus is a blatant symptom. The odd view, shared by many in Paris and elsewhere, that Berlin has taken over the role of “leader of the free world” after Donald Trump was elected illustrates the hurdles that stand in the way of Europe’s stabilization.

On globalization, most lack a fundamental understanding of the fourth industrial revolution and the way robotics, artificial intelligence and 3D printing will undoubtedly reshape the world economy. As the costs of these disruptive technologies decrease fast, and the detrimental effect of unlimited off-shoring on productivity grows clearer in the eyes of many business leaders, green shoots of a re-shoring trend begin to appear in industrialized countries that are able to embrace technological change and to offer a healthy business environment.

Although populism has long been synonymous with xenophobia, there is no reason why countering populism, especially on the economic front, should entail succumbing to any kind of xenophobia. As the unintended consequences of globalization fuel the populist backlash, a realistic economic platform that would address the cracks in the global and European industrial order, without undermining productivity and entrepreneurial initiatives, would both work as an antidote to social divisiveness and prove economically effective.

France lags behind most other developed economies on the robotic front, notably behind Germany. This is certainly a pernicious effect, in terms of investment decisions, of the fall in the country’s competitiveness, the relegation of science, and the bureaucratic circles’ omnipresence. The candidates’ recent fiscal proposals in support of manufacturing, even if they were implemented, would fail to offset that fundamental trend. In addition, taxing robots at this stage to purportedly defend workers’ interests (as recently debated at the European parliament and advocated by France’s socialist candidate) bears the risks of preventing major productivity gains and harming competitiveness even further, in the absence of any international coordination on that issue.

While automation destroys a segment of low-skilled jobs, it also carries the promise of restoring the competitiveness of developed countries, of redefining high value-added production entirely and, in turn, allowing democracies to decide how to rebuild an inclusive, greener and vibrant economy through reindustrialization. Reflecting on globalization should not be considered a populist prerogative. The global economy is on the cusp of being upended not so much by political demiurges as by a new wave of technological breakthroughs.

[1] In the first round of the 2015 regional polls, the FN secured 35% of the 18-24 year-olds’ votes while 65% abstained.

[2] See: “Pour Macron le Programme n’est pas le Coeur de la Campagne” [For Macron, the Programme is not the Core of the Campaign], Le Figaro, 12 February 2017, http://www.lefigaro.fr/flash-actu/2017/02/12/97001-20170212FILWWW00081-pour-macron-le-programme-n-est-pas-le-coeur-de-la-campagne.php