The French Presidential Elections May 2012

OK then, I don’t normally comment on current events. I tend to find them a bit uninteresting, and besides that, they’re really messy and open to a lot of interpretation. That being said, I feel that I must now give the whole of Europe the following warning: You are completely screwed. For anyone who isn’t following European politics, France is going to have an election on Sunday. Y’know, one of those things I hate so much. Now, as of today, when the far right decided that none of the candidates were quite xenophobic enough, Sarkozy is expected to lose the election, and the head of state in France will be the left wing Hollande.

Now let’s be clear here. I don’t like Sarkozy. I, honestly don’t follow French politics that closely, but what I’ve seen of him hasn’t been great. But I’m not going into that any further. Because this isn’t about politics, or about my personal opinion*, and it’s not about France. It’s about Europe.

OK then, economics time!** Whilst Sarkozy wants to cut spending, and make all the French people poor as dirt, on the basis that people are much more likely to spend money and get the economy moving again if they don’t have any money. Hollande, meanwhile, wants to deal with the problems of ordinary people, spending the state’s money in order to allow people to get out of poverty, and to gain confidence that they won’t suddenly be starving tomorrow, and so start spending again, since it’s probably lack of confidence that’s the main problem***.

As you can probably guess, I think I have to agree with Sarkozy here. Let’s be clear, there’s a lot to be said for the ‘spend’ policy. I normally don’t really like Keynsian economics or deficit funding, or anything in that vein. I won’t really go into why, except that habitually spending more than you earn is really only a good idea if you can reasonably expect to die before it catches up with you****. But during a recession it can be a good idea to, just temporarily, allow oneself to go a bit over budget, in order to get stuff done. You can pay it back once you have money again, and you can get the economy moving again a lot faster, with a lot less pain. There are even examples of it seeming to work – Roosevelt’s New Deal is one you’ve probably heard of, and if I remember rightly (my internet is rather spotty at the moment – it took me about as long to post this as it did to write five hundred words – so I can’t look it up), the Japanese spent their way out of the Great Depression too*****.  But I’m not aware of a single case where the zero welfare free market approach has really worked. I’d rather like to believe that it does, and, it’s true, the free market does tend to stop sulking eventually, and to go back into boom mode, but it’s a rather painful process, which gets a lot worse if the government’s been trying to hold back the recession for some time. I mean, let’s look at some examples. There’s Ireland recently. Or Hoover†. Yeah. There are problems with spending one’s way out too, but it’s a decent option.

Unfortunately, it’s a decent option when you aren’t in debt already.  When FDR started the New Deal, a national debt in the billions††† would probably have led to a lot more than just getting thrown out of office. Things get a whole lot harder to work when you’re already heavily borrowing, and you start wanting to borrow more.

But that’s overshadowed by a bigger problem, which I think France is about to run into††††. The market doesn’t just lend you money. The market is a group of investors who’re mainly looking out for themselves. If they don’t like what you’re doing, and they don’t think it’s going to work, they’re not going to want to lend you anything. Which is fair enough – if I was going to lend large amounts of money to someone, I’d want to think I was going to actually get it back†††††. And the market is currently holding firm to the belief that the best way to do things is via austerity, rather than growth. Which makes it a self-fulfilling prophecy, especially since growing one’s way out of recession requires rather a lot of money, which you have to get from the market. If France tries to grow its way out of recession, no matter how good a strategy that should be, I’m pretty sure they’re going to run into problems (I actually felt the need to specify that they were the French presidential elections of May 2012). And France is a rather big part of the Eurozone. France goes down, the results for the rest of Europe would not be entirely positive ones.

Oh, and I changed the layout of the site, if you didn’t notice. Not really intending to stick with this layout at the moment , but we’ll see.

*At least as far as possible.

**Amazing. It really is true that nothing can make economics sound exciting.

***Recessions are just about the only things in existence where ‘just ignore it and hope it goes away’ would actually be a valid strategy.

****For the interested, a basic description of why I don’t like the country being in debt: Firstly, interest. Do you have any idea how much interest countries have to pay on their debt? It’s really not very nice to think about. We don’t have enough money anyway (clearly – we’re deficit spending), and all the money you have to pay in interest has to be taken out of something that’s actually useful. Secondly, if you’re in debt, you’re going to basically be at the mercy of the markets, which, as I’m going to show, is going to be a rather bad thing once you are in recession. Which will, sooner or later, happen, at least if you’re capitalist. And thirdly, it shows rather a lack of foresight. Once you’re in recession, you’re going to want to spend more money, and you’re going to have less to draw on from the normal, non-lendy sources. The more you’ve borrowed, the harder borrowing tends to get, so deficit spending makes it a lot harder to cope once you actually are in recession, especially if you add in the last two.

*****OK, more technical stuff. The New Deal helped, but it’s debatable how much it did to actually end the depression, given that as soon as spending was reduced, the American economy went right down again. The only thing that really got the American economy truly started again was a good war, so they had a nice market to sit back and produce stuff for, whilst their competition was rather effectively removed. The Japanese, meanwhile, didn’t have quite as successful a recovery as America, possibly due to the fact that, when the war started, instead of getting themselves a new market, they got repeatedly bombed. So you can do rather a lot of debating as to whether spending one’s way out actually works.

†FDR’s predecessor, not the secret service psychopath††

††Alliteration always amuses Acanthus’ author.

†††Still using British billions. I’m bloody minded like that. And to be clear, this still holds even if you’re working with the actual value of the debt, so in FDR’s time, because of inflation, the actual debt number I’m talking about would have looked a lot lower.

††††Yes, more than a thousand words later, I reach my actual point.

†††††If we simplify massively, it’s not doing that that got us into this mess to start with. And that’s as far as I’m going to get into that particular debate.