No one should be surprised by the protests in France. The antipathy towards the government has been bubbling like some sort of concoction in a mad scientist’s laboratory. The gas tax appears to be the one final volatile element needed to cause an explosion.
What an explosion it was! Protests. Riots. Tear gas. Emergency meetings of government officials and, finally, concessions. France won’t do any tax or utility increases this winter – although it’s still up to the French Legislature to get the bills to President Emmanuel Macron’s desk for his signature.
Macron noted the onslaught of anger directed towards his government, writing on Change.org he was trying to reduce the gap between the people and government but, “I have not yet succeeded. And after 18 months of action, the changes we are making are far from being sufficiently perceptible.”
The frustration is still palpable, and no one knows exactly who will end up benefiting from the protests.
American conservative commentators are trying to frame the issue as a rejection of globalism (whatever the blue cow it means this week). The reality is the anger in France started – much like the 2011 Arab Spring – as a rejection of government overreach into the economy.
The clash has been a long time coming and dates back to earlier this decade when the French government was controlled by Nicolas Sarkozy.
Sarkozy’s government attempted major spending cuts and tax increases in 2011 – before he was replaced by the socialist Francois Hollande in 2012. Yet, Hollande discovered the harsh reality you can’t tax and spend your way to prosperity and France’s budget crisis refused to abate – while debt exploded.
“Everything is taxed,” Charline Petit told The Telegraph in 2014 as she explained why her bagel shop was shutting down. “You can’t move without being taxed. Even when you are not making any money, you are taxed. I had to lie about my income to rent an apartment. So then the tax authorities said I had not been declaring enough. I was taxed again. If I stopped working, I would get all kinds of benefits, but as a business person, I get nothing. You are better off unemployed.”
This was the situation Macron was coming into last year when he won the presidency. He attempted some tax reform, but The Economist noted his budget was rather light on actual spending cuts. His gas tax proposal ended up being the spark which set off the protests and riots of the past several weeks.
His reaction to said protests proves the tenet that politicians are fickle in their promises to the electorate they claim to serve because of the desire for power. Macron is trying to appease everyone by enacting multiple increases in government spending – whether it be giving police a raise for battling protesters or a minimum wage hike “without it costing your employer one more euro.” The government’s hope is this will increase participation in the workforce, and their budget for next year – which was proposed months before the “Yellow Vest” protests – already included a minimum wage hike, “to reach a total of almost €80 per month at minimum wage level by 2022.”
Of course, the question is who will pay for these changes?
“The people,” Mercatus Center Senior Research Fellow Veronique de Rugy declared to me over the phone. “This is what basically taxes, right, because the government won’t pay for it and that’s the problem with subsidies; gotta be paid by someone. And the problem with the French government is it’s too big and needs to be shrunk and not grown.”
This is why de Rugy is disturbed by France’s insistence on giving out more subsidies instead of trying to actually get their financial house in order – even with the repeal of the gas tax.
“These are just band-aid (solutions) because the problem is going to continue over and over and over again until they address fundamental problems with the spending structure,” de Rugy, who is originally from France, noted. “Retirements are very generous to the public sector. Macron knows he needs to change those. But each time there are big, big, big strikes about this…This is not going to address anything. I don’t even know if it’s going to help calming things down now.”
Hence why Macron’s appeasement may not solve anything and, in fact, may exacerbate France’s budgetary problems.
“I think Macron needs to buckle up,” de Rugy declared. “Realize that there’s no way he can placate them in ways that is good for France, so he needs to go on with reforms and accept he won’t be re-elected in five years.”
See previous statement regarding the fickleness of politicians.
The solution – which Macron and the French government seem averse to try – is to heed the words of eminent French economist and philosopher, Frederic Bastiat.
“Reduce taxes. Reduce expenditure in an even greater proportion,” Bastiat wrote in Peace and Freedom or the Republican Budget in February 1849. “And, to clad this financial thought in its political formula, I add: Liberty within. Peace without. This is the entire plan…I grant you only that the attempt is bold. But first, if the gravity of the situation has been clearly established and second, if it has been proved that the tradition means will not extricate us, it seems to me that my thought has at least some right to be considered by my colleagues.”
Bastiat’s theory is obviously daring – but also completely correct. France and Macron would be wise to heed his words (and de Rugy’s “buckle up” declaration) and enact more spending cuts – instead of trying to make everyone happy. He’d risk not being re-elected, but the alternative is more businesses leaving the country and France spiraling into even more chaos.