Macron’s Great Gamble

January 21, 2019 Political economics

In reaction to the ongoing “Yellow Vest” revolt in France, President Emmanuel Macron has decided to hold a “grand” nationwide debate. Over the coming months, locally organized workshops, Internet-based consultations, and regional citizen conferences will assess the French public’s views on four issues: environmental policy, democracy and identity, taxes, and the organization of the state.
But Macron’s plan faces three obstacles. For starters, French public opinion is rife with contradictions. The yellow vests, for example, want both lower taxes and more public services. Neither demand is unreasonable. But nor is such a fiscal approach sustainable in a country where public expenditure amounts to 57% of GDP and the debt ratio, already officially estimated at close to 100%, does not include large off-balance-sheet public liabilities like unfunded pensions.
Complicating matters further, there is broad support in France both for the yellow vests, whose rebellion started with a demand to repeal the carbon tax levied on fuel consumption, and for an initiative to sue the French government for failing to
address climate change.
Moreover, when the yellow vests complain about inequality, they tend to focus on Macron’s elimination of the wealth tax, which previously brought in €5 billion ($5.7 billion) per year – a pittance compared to the €188 billion ($214 billion) generated annually by the value-added tax (VAT). Or they complain about the salaries of top government officials. But they offer no concrete proposals that address two key factors driving inequality in France: education and labor-market access.
According to the Programme for International Student Assessment, the educational-performance gap between students from disadvantaged backgrounds and the rest of the population is higher in France than in any other OECD country. And not only does France’s unemployment rate rest at around 10%; its two-tier labor market funnels over 90% of new hires – particularly younger, low-skill workers – into short fixed-term contracts.
In addition to contradictory demands, Macron will also have to confront obstacles rooted in public perception. The way French citizens view economic conditions rarely accords with reality. One often hears that France is a particularly inegalitarian country, where the rich don’t pay taxes, where retirees are always gouged, or where tax evasion and politicians’ salaries consume vast resources. None of these claims stand up to scrutiny.
To be sure, Macron’s government was too slow in designing compensatory measures to offset the combined impact of increased oil prices, the programmed increase in the carbon tax, and the repeal of subsidies for diesel vehicles. But the French are also blaming him for the effects of unreasonable policies going back decades, including the diesel subsidies (maintained for 20-plus years to support the French car industry) and measures promoting high inner-city land rents.
The third obstacle to progress is violence. In recent weeks, there has been a striking increase in threats from yellow vests against legislators, journalists, and even fellow protestors who have expressed a willingness to negotiate with the
Macron’s government thus finds itself between a rock and a hard place. And yet, a public consultation could well create even more havoc. Centuries of political history stand as a warning against the current enthusiasm for instituting a “referendum d’initiative citoyenne.”
After all, most democracies have opted for representative government, rather than rule by referendum, for good reason. In theory, at least, the people’s representatives can devote more time to thinking about the tradeoffs of different policy choices, and have more access than average citizens to expertise. And, unlike citizens debating in cafés or on Facebook and Twitter, elected representatives’ arguments are publicly scrutinized and fact-checked.

Moreover, there is good reason to delegate certain forms of public decisionmaking to independent judges, central banks, and regulatory authorities. Insofar as they are insulated from political lobbying and elections, these actors can take a longer-term view and protect the rights of minorities.
By circumventing these checks, referenda in France could open the door to the revocation of laws permitting abortion, banning capital punishment, and recognizing gay marriage. It also could lead to all manner of demagogic economic policies – from a lower retirement age to anti-immigrant measures or even a “Frexit” from the eurozone or the European Union.
On the other hand, if Macron’s government merely pays lip service to civic consultation, the malaise will deepen; the yellow vests will have received “confirmation” that elites do not listen when citizens express what they need.
So, what good could come of the consultation? A successful debate would reengage the French in their country’s political life. In France, decision-making is highly centralized, policies are uniform (despite some timid attempts by Macron’s government to promote flexibility), and civic participation is weak. The elite’s reluctance to trust citizens, combined with citizens’ own lack of engagement and occasional puerility, creates a self-fulfilling prophecy.
Against this backdrop, it is little wonder that the feeling of “existing” – of participating in an adventure and having one’s voice heard in the media – has become a palpable feature of the yellow-vest experience. The problem is that French citizens’ previous disengagement and poor understanding of economic realities predisposes them to make categorical demands, rather than pushing for realistic reforms.
A properly structured consultation in which French citizens ponder tradeoffs, acknowledge objective facts, and rediscover a sense of community could be a tremendous success. For example, once everyone accepts that there is a tension between reducing taxes and improving public services, a debate can be held on how best to achieve an optimal policy mix.
Everything should be on the table. The French must consider the purpose of each and every public service; whether those services are fulfilling their objectives, and at a reasonable cost; and whether there are better alternatives on offer. This is what the Canadians and the Scandinavians did in the 1990s, when they, too, were facing dysfunctional public sectors, rising public debts, and high unemployment.
France is finally engaging in a process to modernize the economy while still protecting its citizens. But the country is at a crossroads, and its citizens could still drag their country down the path of illiberalism and demagogy.

Published in Project Syndicate, Copyright ©