EMU and Social Models

[tmurphy@xxxxxxxxxxxxxx]

Bernard Girard affirms that the European Commission, the Maastricht and Amsterdam Treaties are transforming Europe's social model and imposing neo-liberalism. The Treaty of Rome destroyed protectionism; Maastricht threatens to destroy the social security system.

He goes on to identity the source of Jospin's victory : it was "the people of the left" defending the sans papier, the immigrants who had entered France illegally. He rightly identifies my thinking with the political left exercising power in contemporary France : Jospin, DSK, J-P Chevenement, L Fabius.

Bernard illustrates Bruxelles's assult on the social model by referring to

1) a "revenu social minimum", a kind of salary that everyone above 18 would receive. The idea, not far [from] some of Friedman's,  would pave the way to the privatization of most of what we call social security (health, rents for old persons...) and the introduction of pension funds ;

2) every one in Bruxelles uses the word "employabilité" and wants the
unemployement  insurance to be linked with this "employabilité" which would mean that
those who are not "employables" would not get any insurance when unemployed.

My response: Eurostat estimates that there are 57 million Europeans living in poverty. 8 million live in France. Poverty is defined as persons with revenue less that half of the average in their country. With the average net in France at 7.800 FF/mo the poverty threshold is 3 900 FF. Half of these people are within the ages of 17-64. Most are unemployed. Of the 18 million unemployed in Europe 3 million live in France. Offering the poor a revenu social minimum somehow is wrong. Somehow this is a step to destroy the European social model. How we move from the fact of poverty, to a revenu social minimum and then conclude that this significes the destruction of the welfare state requires a leap of the imagination that I find hard to make.

An even greater leap of faith or disbelief is required to get to the second part of the sentence : that this would pave the way to the privatization of the social security system.

These are scare tactics, introduced to conjure up fears at every mention of revision or reform. The left, as the right, has been confronted significant deficits in the social security system. Separately and together they have decided on reforms. These are precise measures. Their ulitimate objective is the preservation of the social model, not it's destruction.

A means to an end, they aim at reducing the burden of taxation on labor. Social security taxes in France take 24% of a worker's brute. They take another 56% from the employer. If you add in a 20% sales tax, you conclude that taxes add nearly 100% to the cost of building a house. That burden destroys employment opportunities. Seeking to reduce the taxation on labor and consumption increases the opportunities for investment, private and public, which generate higher employment and higher wages.

Further, private pension funds will not be a Bruxelles's invention,nor an invention of the right. Private saving is the result of fear and anxiety; it is the consequence of 1) demographics 2) a pay as you go system that is not capable of sustaining present levels of pay outs. People have been putting money into insurance policies as a way of saving for their old age.

I ask that Bernard produce the evidence for the second affirmation, that Bruxelles is preparing a scheme that would deprive the unemployed of social security insurance. I suggest that Europe's social democrats would ridicule and dimiss such a proposal. These are scare tactics that serve no useful purpose.

Explaining the victory of the left: To suggest that the street demonstrations in defense of illegal immigrants explains the Jospin victory requires a special understanding of contemporary French politics.

 The arrogance and ineptitude of Chirac and Juppe better explains Jospin's victory. The Right's  inability to put together a response to perceived public needs, their failure to deal with the problems of income levels and unemployment.  The French public were fed up with Jacobian statism.

Jospin's action embodied truly Keynesian economics regarding government spending:  the refusal to cut the deficits, the creation of 150,000 jobs for the young in the public sector, the eventual introduction of a 35 hour week --all these have won the support of the French public. Confidence returns, spending and investment increases, the French economy benefits. Growth rates are at the highest levels in nearly 10 years.

Bernard rightly points out the divisions on the left. Bourdieu has created a counter movement to what his group refers to as "the intellectuals of December," those union leaders (Notat, CFDT) and intellectuals at L'Esprit and the Fondation Saint-Simon who defended the need for reform. Bourdieu's success among the university students has encouraged him to think about preparing a separate electoral list for the European elections. That would effectively divide the youth in France into several antagonistic camps. It would reenforce the fragmentation on the left.

In sum, what's happening on the right in an extreme form is also happening on the left, political fragmentation, a mixture of political discourses. The upcoming debate in the Fall on the Treaty of Amsterdam will be an occasion to manifest those divisions.  That could translate into an erosion of the credibility of the social democrates. Taking advantage of the discord Chirac would dissolve the National Assembly. The election campaign would focus on France's place in Europe on the eve of EMU. This is not the kind of excitment I enjoy.

Terence Murphy