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OPINION - THATCHERISM

ECONOMY

‘France is in need of a dose of Thatcherism’

After the death of Margaret Thatcher, there has been much talk in France about the impact of her economic policies on the UK. Paris based Professor of Economics, Tomasz Michalski tells The Local why France could do with its own dose of Thatcherism.

Published: 9 April 2013 16:24 CEST
'France is in need of a dose of Thatcherism'
The two Iron Ladies. Could France do with some of Maggie's secret economic remedy?

With France suffering from an ailing economy, rising unemployment and weekly strikes by trade unions protesting job cuts and austerity measures, parallels have been drawn with Thatcher’s Britain of the early 80s.

France may not quite be the “sick man of Europe” as Britain was labelled back then, but its worrying economic situation and outlook did earn it the title last year of “the ticking time bomb at the heart of Europe” from the Economist magazine.

Thatcher’s death has added fuel to a debate in France over whether the country needs the same liberal economic remedies that Thatcher prescribed for Britain, to help reboot the ailing economy.

Many political and economic commentators are quick to highlight what they say were the destructive effects her liberal market policies on working class Britain, but others stress that France could do with something similar to haul it out of the mire.

Tomasz Michalski, Professor of Economics at Paris’s prestigious HEC business school is one of those who believes France needs to take heed of the Dame de Fer.

“France could definitely do with a dose of Thatcherism. The country has maxed out on state spending and has maxed out on debt. It needs a change of thinking to get back to reality and realize that there are market-based economies that are generating wealth. Many people forget that.

“You just have to look at a recent report by the London School of Economics which showed that up until 1980 the UK was growing at a much slower rate than both Germany and France, but after Thatcher came to power that all switched around, with France having the slowest growth rate of the three, and Britain the fastest.

“Whereas Britain was encouraging privatization and making labour laws more flexible, the exact opposite was happening in France, where Mitterrand was re-nationalizing big companies, which then had to be re-privatized later, because it didn’t work. They stiffened the labour market laws until we ended up with a 35 hour week.

“The private sector is currently being crowded out in France because around 58 percent of France’s GDP is swallowed up by state spending in national and regional governments. The public sector is taking up too much responsibility.

“France is in need of the product market competition that Thatcher introduced in the UK. You need to have competitive markets because if you don’t you will have high prices, high costs, less profitability and therefore you will be less competitive. Here you have monopolization all across the board, whether its hotels, banks, supermarkets – you name it.

“There was recently a tender put out for delivering trucks to the French army but because it was not won by a state firm, the tender was scrapped.

“In terms of reducing the power of the unions – yes, France could do with doing this too. Although membership is not actually that high here, they do carry a lot of clout. The problem with the labour unions in France is that they protect those in jobs, but there are lots of young people out there who cannot get jobs.

“France has ended up with a two-tier labour system, those with a CDI (permanent contract) and those without one. Those who have one, sit on them and benefit from the protections and those on the outside are stuck there.

“In France all sides need to give something up so these reforms can be implemented without the violence that was seen in Britain under Thatcher.

“Recently in France, you have seen ministers threaten investors with nationalization because they said they intended to close down a factory. It’s not even like the situation with the miners in Britain, which was a case of the state versus the workers.

“These are private matters for the private sector and the French government is trying to prevent them from making HR decisions. It's not even a need to break the unions, it’s just a need to let the private sector be.

“The difference between the UK then and France now is that the economic situation in Britain made it ripe for a change and perfect for Thatcherism and it allowed her to do what she did. It was really the sick man of Europe.

“France is lagging behind and is ready for a major overhaul.  There will be a time maybe in two to three years and it may not come under this government, but I think it is needed.

“There is a Chinese saying that if you can’t avoid it, just accept it.”

READ ALSO: France needs solidarity not Thatcherism

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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