Economics and politics - comment and analysis
22. January 2016 I Heiner Flassbeck I Countries and Regions, Economic Policy

Hollande’s twilight zone – hot air is not enough to fight unemployment

 The French president is getting serious: the media report that Hollande will make 2 billion euro available in order to fight unemployment (see here for the report in the Financial Times and here for the one in the Süddeutsche Zeitung). Bravo, Monsieur le Président, such an effort has the potential to lead France towards full or near-full employment, which is precisely what you promised the nation during your campaign four years ago.

The cost of the program that the president announces is truly “enormous”. French GDP is circa 2 trillion euro (this is 2,000 billion). Hollande proposes to take one thousand part of it to create much needed new employment that will hopefully sweep young people off the streets and give them something worthwhile to do.

Or this is what you would think. The ‘huge sum’ (dixit Hollande) for the new employment program does not come from additional government spending but the program has to be financed by spending cuts in other departments. This means that, due to the absurd rules of the European Stability Pact, even the potential minimal effects of the plan will have negative impacts elsewhere. It turns Hollande’s whole plan into nothing but a breeze of hot air. There is no content to be found here, least of all an aggressive plan to cut unemployment. A Plan like this spells the definitive end of social democratic ruling in France.

This confirms, once again, what I unfortunately had to say so many times already: social democracy fails because its staggering lack of economic competence. The French social democrats are not failing in the way that their Germans friends and colleagues diagnose it, namely because of their lack of proximity to big business. French social democracy, much as anywhere else, fails because of a proper lack of distance to big business. Social democracy is not working because social democrats are incapable (or unwilling) to recognise the proper role that states and governments have to play in any realistic model of a well functioning market economy. Such an economy is very different from the ridiculous neoliberal models that the conservatives all over Europe advocate – the Christian Democrats and the conservative FDP in Germany, the conservatives in the UK etc.

The simple reason is that the neoliberal models are static while reality is dynamic. For modern economies to work, governments are needed to closely monitor economic development and to intervene more or less on a daily basis to make the system adjust smoothly to new events and quickly changing circumstances. It is high time that European social democracy comes to terms with this. If they continue to blindly follow the neoliberal ideology, they will become politically useless and superfluous. Hollande is well on his way to achieve this.