I am travelling for most of today and so have very little time to write. But I do comment on the latest French unemployment data released the day before Xmas which signals that things are getting worse in France as the European Commission bolts down the austerity clamps even tighter. While I thought that Italy might be the jewel in the crown and be the ones to exit the unworkable Eurozone first, I am now thinking that France might be the straw that breaks the back. Things are certainly going to get worse there and their political system is veering towards an anti Euro sentiment. Not before time, although the parties promoting the anti-euro feeling are not very nice at all. Where are the Socialists? Oh, I forgot, they are in power – spearheading the austerity. What a mess. In addition, as a sort of stocking filler, I also thought I would post the Q&A section of the presentation I made in Rome on November 24, 2014 – Framing Modern Monetary Theory.
France still melting down
The following graph shows the French unemployment rate (%) from 1975. The data is available from – INSEE – (the National Institute of Statistics and Economic Studies).
INSEE also reported that unemployment is now at a record high of 3.488 million people in November or 9.9 per cent of the workforce. Over the last 12 months French unemployment has risen by 5.8 per cent.
You can see (from the graph) that the wheels started falling off during the time of – Raymond Barre – who was the Prime Minister in the government of Valéry Giscard d’Estaing from 1976 until 1981.
He was simultaneously appointed by Giscard d’Estaing as the Minister of Economy and Finance, which prompted the President to call him the “meilleur économiste de France” (best economist in France).
He led the first Monetarist government, several years before Margaret Thatcher in the UK and started the austerity with his Barre Plans, which involved attacks on the trade unions, cuts to public spending and welfare cuts.
This was a crucial period in European history because it was the beginnning of the neo-liberal onslaught in Europe which is now entrenched in the austerity Groupthink.
Prior to Barre coming to power in France, there was no way a Eurozone could have been created. What eventually allowed the Eurozone to emerge as a reality in the late 1980s was not a diminution in Franco-German national and cultural rivalry but, rather, a growing homogenisation of the economic debate.
The surge in Monetarist thought within macroeconomics in the 1970s, first within the academy, then in policy making and central banking domains, quickly morphed into an insular Groupthink, which trapped policy makers in the thrall of the self-regulating, free market myth.
The accompanying ‘confirmation bias’ overwhelmed the debate about monetary integration.
The introduction of the Monetarist-inspired Barre Plan in 1976 by Raymond Barre showed how far the French had shifted from their Gaullist ‘Keynesian’ days.
Across Europe, unemployment became a policy tool aimed at maintaining price stability rather than a policy target, as it had been during the Keynesian era up until the mid-1970s. Unemployment rose sharply as national governments, infested with Monetarist thought, began their long-lived love affair with austerity.
You can see that in the way the unemployment rate rose sharply during this period and has never fallen back to the low levels found before the neo-liberals took over. There have been cycles since but the level has been creeping up over time – each cycle seems to create a new higher mean tendency.
The reality now is that the unemployment rate is once again on the rise in France, a legacy of the cuts that the Hollande government is undertaking to satisfy the mandarins in Brussels and Washington.
The European Commission’s response to the disaster unfolding in France is that they have to cut the fiscal deficit even harder to come within the Stability and Growth Pact fiscal rules.
The growth projections for next year are so low that unemployment will continue to rise for at least the next 12-15 months. But I consider the official projections to be overly optimistic and if the European Commission succeeds in forcing the French government to make further cuts, there is every chance France will return to recession in 2015.
The official growth projection of 1.5 per cent in 2016 is unlikely to be achieved.
The only saving grace is that the President’s popularity is now down to 12 per cent (as at November) – a record low. Remember when he came to power in 2012 his mantra was jobs, jobs, jobs.
The French Association L’UNI (Union Nationale Inter-universitaire), which was founded as a response to the May 1968 student uprising in France and seeks to – the right in education carried the following graphic to represent the disaster that is unfolding as a result of austerity:
Etudiant aujourd’hui, chômeur demain…. retraité jamais. Merci Hollande
Which means – Students today, unemployed tomorrow …. never retired. Thanks Hollande! – which sums up the rosy state that France currently finds itself in.
The problem of graduate unemployment is now becoming serious in Europe and I will be analysing that issue is more detail in the New Year as I accumulate more data.
Q&A session from my Rome presentation – Framing Modern Monetary Theory, November 24, 2014
I edited out the Italian language sections and paraphrased the questions in English. Some of the questions had long statements preceding them and I have not attempted to capture that material.
It followed the main presentation – Framing Modern Monetary Theory.
The edited Q&A runs for 41:44 minutes. Credits are included in the footage.
I will surface again tomorrow although for the rest of the week I will not be writing all that much.
That is enough for today!
(c) Copyright 2014 William Mitchell. All Rights Reserved.