French Students vs. Capitalism/Globalism

A nationwide strike in France has disrupted train service and closed schools, as unions joined French students in protesting a law that would allow employers to fire young workers within two years without reason. More than two thirds of French citizens oppose the law, and the protests are forcing the government to confront its own two-tier system, one that creates an elaborate system of benefits for society’s haves -- and one that imposes more restrictions and unemployment for a growing group of have-nots. Like many developed nations, including the US and the UK, France has achieved economic success with foreign investment and policies that promote open trade. Yet, the gains seem concentrated in a few pockets. For increasing numbers of middle-class workers, let alone low-income, immigrant or uneducated sectors, globalization has come to represent insecurity and declining social justice. Many fear that the phenomenon has not so much eliminated poverty in developing countries as much as eroded standards in developed nations. Patrick Sabatier, an editor based in Paris, suggests that politicians worldwide will have trouble simultaneously pursuing policies of globalization for some and posturing with protectionist talk for others. (Yale Global Online)

1. No Globalization, Please – We Are French!
Populist posturing comes head to head with Chirac's stealth globalization
By Patrick Sabatier

PARIS: Students occupying the Sorbonne, riot police battling demonstrators, cars burning on the chic tree-lined boulevard near the Eiffel Tower. Are these the images of an anti-globalization riot? Is this hide-bound France resisting the onset of global norms of a flexible labor market and free trade, as many foreign commentators insist? A look behind the headlines shows that the discontent goes much deeper than mere revolt against a law that allows for easy firing of young employees. The French government, which has engaged in stealth globalization while espousing populist anti-globalization rhetoric, has been caught in its own trap. By creating two Frances – one of insiders who enjoy the fruits of globalization and state protection and another of have-nots – the government of President Jacques Chirac has set the stage for the explosive protests.

Sure, the demonstrations began against the proposed law allowing easy hiring and firing for workers under the age of 26, during their first two years of employment, without reason. Foreign analysts quickly concluded that the roots of this resistance rest in a French refusal to adapt to the iron rules of globalization by abandoning an overgenerous social safety net and adopting labor rules similar to those prevalent in the US, the UK and other liberal countries.

This analysis overlooks the fact that the failures of the French political system drive these demonstrations as much as this particular legislation. The labor law has been a mere spark setting fire to a combustible political landscape. The present explosion resulted from the collision between a weak economy with endemically high unemployment and the terminal illness of a paternalist Gaullist regime built in the nationalist 1960s, whose standard-bearers are President Chirac and Prime Minister Dominique de Villepin.

In recent years, France increasingly acts as a citadel besieged by the evil forces of globalization. The word itself has become a synonym for loss of jobs, lower wages, and harsher working conditions, all attributed to unfair competition from countries in the developing world, where unionization, social laws, and even basic democratic rights are unknown or systematically ignored, and where wages are abysmally low. These fears fueled French voters' resounding rejection of the EU Constitution. The EU has become, for many of the French, a Trojan horse for increased and unfair job competition from the new Eastern European members of the union, epitomized by the specter of the “Polish plumber,” supposedly allowed to steal work from French craftsmen because of the lower wages and minimal social rules in his native country, added to a loss of social protections because of Brussels-mandated deregulations and privatizations.

Those fears of globalization have paradoxically been fueled not only by the Left, whose ideology traditionally emphasizes social rights, public services and the regulating role of the national state, but also by the supposedly pro-business Right. Chirac has opposed WTO and European reforms in the defense of endangered French farmers; de Villepin has positioned himself as the main exponent of “economic patriotism.” But exaggerated fears of globalization, the playing up to protectionist reflexes for domestic political gains, are not just a French story, as shown by recent uproars in the US over the proposed Chinese buyout of an oil company or Dubai control of operations at six ports. In France, anti-globalization tendencies have been fueled by a social crisis grown out of the very success of the French economy's opening to the world. Besides the UK, France has attracted the most foreign investment in Europe. One out of four private-sector employees works for exporting firms, and one out of seven works for a foreign company. Over a third of the valuation at the Paris Bourse is made up of foreign capital. And globalization has been good to big French companies, which announced record profits this month, a 28% increase over the previous year, thanks to strong world demand, with shareholder dividends increasing by 30 percent.

All this fuels suspicions among the French that not everyone has a piece of the globalization pie. It also supports the criticism, even voiced by some business leaders, that companies have been guilty of neglecting medium- and long-term investments, in R&D and job creation, to satisfy the gluttony of financial markets and shareholders. At the same time the gap has increased between two tiers of the population: The “haves” are made up of the moneyed classes, shareholders, property owners but also workers holding permanent jobs with big companies or the public sector, who enjoy all the benefits of the safety net and the liberalizing policies of the present government. The “have nots” are the growing mass of the unemployed (over 10 percent of the workforce), those who can't find anything other than precarious, short-term, low-skilled and low-paid jobs, termed MacJobs, even when they belong to the middle class.

The ranks of the have-nots are growing. More are college-educated degree-holders. The student demonstrators of spring 2006 fear being condemned to the have-not category, alongside those suburban unschooled who rioted last November, 40 percent of whom are unemployed, a protest that was as much a social explosion as a problem of integrating immigrants or ethnic or religious tensions. The protesters direct outrage not against globalization as such, but at perceived injustices in the redistribution of its benefits, at the targeting of young people for special labor legislation. A deep distrust of the political system has emerged from the incoherent policies of the successive conservative governments of Chirac, following the failures of the socialist Left to enact reforms. More often than not, the students say, politicians ignore their campaign promises.

This double-talk has been particularly obvious on the question of globalization. Government leaders promised to uphold the “French social model” against the pressures of globalization, while at the same time implementing actual policies that introduced liberal reforms by stealth. For example, the government has opened energy and transportation sectors to competition, allowing foreign groups to operate within France, while employees – truck drivers for instance – work under different labor laws. The government attracts foreign investments by granting special tax status to expatriates and multinationals.

Opposition to the latest French proposal about youth employment has less to do with a French hostility to globalization than with an acute domestic political crisis – made more virulent by the refusal of the government to engage, prior to the crisis, in any social dialogue on the reforms proposed in the labor market and educational system. The only similarities between the near-mythical student uprising of May 1968 and the present movement are that both mark the coming-of-age of an entire generation, through street confrontation with a conservative government. But in 1968, France was confident of its economic standing and post-war social model. Its youth fought the weight of a parochial society and traditional culture in order to modernize and globalize it. Today, French culture is thoroughly modern and globalized. Its youth, beyond reacting to the anxiety born of an economic slump, essentially protest failed policies.

Most understand that the French social model must be reformed in the age of globalization, but they want it accomplished without forfeiting the legacy of democratic ideals of equity and social justice. That may be as idealistic as their parents' cause, but could be just as useful in the long run in a country that – as argued by Jacques Marseille, a history professor at the Sorbonne – seems to know no other way to modernize than street confrontations.

(Patrick Sabatier is deputy editor of the Paris daily, “Liberation.”)


2. France's Politicized Students
Capitalism Under Fire
by William Pfaff

The protests' ostensible purpose is to force withdrawal of a minor change in this French government's employment policy, but they have taken on a radically different significance.

The crowds in the street contest a certain form of capitalist economy that a large part, if not the majority, of French society regards as a danger to national standards of justice and, above all, to "equality" - that radical notion of which France is nearly alone in proclaiming as a national cause, the central value in its republican motto of "liberty, equality, fraternity."

Prime Minister Dominique de Villepin undoubtedly had little notion of the consequences when he launched what seemed to him a small but constructive employment initiative, intended to loosen current structural inhibitions to job-creation.

He inadvertently opened what many of the French see as a central question to their national future, just as two years ago they saw in the European constitutional referendum disturbing questions about the future nature of the European Union and about the model of capitalism that would prevail in Europe's future.

They are not alone in this concern. A kindred debate about "models" of capitalism has been a persistent factor in Germany, now suffering labor unrest, and in the European Commission itself, which since EU expansion to 25 members, has tipped away from the traditional European "social" model. Even in Britain last Tuesday there was the biggest strike since the 1920s, on the question of pensions.

The French, of course, have been against "capitalisme sauvage" ever since that rough beast loomed amid the satanic mills of Britain in the 19th century, subsequently making its trans-Atlantic journey to establish another lair.

A recent international opinion poll on the free-enterprise and free-market system, found that 74 percent of the Chinese say they think it the best system of all, compared to only 36 percent of the French. (The Germans were not far off the French.)

The essential question is, what capitalism are we talking about? Since the 1970s, two fundamental changes have been made in the leading (American) model of capitalism.

The first is that the "stakeholder," post-New Deal reformed version of capitalism (in America) that prevailed in the West after World War II was replaced by a new model of corporate purpose and responsibility.

The earlier model said that corporations had a duty to ensure the well- being of employees, and an obligation to the community (chiefly but not exclusively fulfilled through corporate tax payments).

That model has been replaced by one in which corporation managers are responsible for creating short-term "value" for owners, as measured by stock valuation and quarterly dividends.

The practical result has been constant pressure to reduce wages and worker benefits (leading in some cases to theft of pensions and other crimes), and political lobbying and public persuasion to lower the corporate tax contribution to government finance and the public interest.

In short, the system in the advanced countries has been rejigged since the 1960s to take wealth from workers, and from the funding of government, and transfer it to stockholders and corporate executives.

While that may seem an incendiary comment, it seems to me a simple factual observation. The criticism currently made of Europeans who resist "reform" is that their policies block managers from downsizing and outsourcing jobs, in order to add "value" to the corporation. (A recent headline in the International Herald Tribune read: "AT&T- BellSouth deal gets Wall St. applause. Merger would lead to 10,000 job cuts.")

I once called this "CEO capitalism," since corporate chiefs today effectively control their boards of directors and are also the biggest benefactors of the system, subject only to critical attention from investment-fund managers, themselves interested in maximizing dividends, not in defending workers or the public interest. (The well-known American fund manager, John Bogle, now retired, has taken up my argument and advances it in his recent book, "The Battle for the Soul of Capitalism.")

The second change that has taken place is globalization. The crucial effect of this for society in the advanced countries is that it puts labor into competition with the poorest countries on earth.

We need go no further with what I realize is a very complex matter, other than to note the classical economist David Ricardo's "iron law of wages," which says that in conditions of wage competition and unlimited labor supply, wages will fall to just above subsistence.

There never before has been unlimited labor. There is now, thanks to globalization - and the process has only begun.

It seems to me that this European unrest signals a serious gap in political and corporate understanding of the human consequences of a capitalist model that considers labor a commodity and extends price competition for that commodity to the entire world.

In the longer term, there may be more serious political implications in this than even France's politicized students suspect. What seems the reactionary or even Luddite position might prove prophetic.