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The Austerity Illusion

Posted By Daniel Flynn On May 10, 2012 @ 12:40 am In Daily Mailer,FrontPage | 17 Comments

France inaugurates a new president next Tuesday. A change in leaders belies a continuity in policies. Just don’t say that to incoming president Francois Hollande—or the politician he vanquished this weekend past.

Echoing a victory speech of his soon-to-be counterpart in the United States, Hollande cast his election as momentous event igniting hope around the planet. “May 6 should be a great date for our country, a new start for Europe, a new hope for the world,” the victorious French presidential candidate announced to supporters at the Bastille. “I’m sure in a lot of European countries there is relief, hope that at last austerity is no longer inevitable.”

Can something so avoided really appear so inevitable?

The word “austerity” is oft spoken in Europe but little applied. This is especially true in France. Hollande promised change from these last lean years. But without exception government spending increased annually during Nicolas Sarkozy’s five-year presidency. Real change would mean implementing austerity, not jettisoning the mere suggestion of it. Sarkozy’s tenure experienced austerity among citizens. But the government economy consistently expanded even as the private economy occasionally contracted.

Could the contrasting trajectories of the public-private fortunes be correlated?

Just 17 of the world’s 210 governments grab more in taxes from their people than Sarkozy’s government grabs in France. Reasons abound for the draconian taxation. France under Sarkozy doles out more in social spending than each of the 27 European Union member states save Denmark and Finland. Though Air France had been partially privatized by the time Sarkozy took office in 2007, state-owned ventures persist in the series of France Télévisions stations, the Paris Opera, the French Rail Network, and the utility giant Electricity of France. The state generously funds higher education and health insurance, making the price of tuition and doctor visits nominal.

Free has proved expensive. Taxation absorbs 49 percent of the French gross domestic product. France’s debt-to-GDP ratio, which approaches 90 percent, has made the cost of borrowing more costly as Fitch and Standard & Poor’s have recently downgraded the nation’s credit rating. The nation’s deficit has decreased over the last year. But this has more to do with increased receipts than with decreased disbursements. France’s economy is in worse shape than America’s. Stagnation in both instances has coincided with a spike rather than a slash in spending.

State profligacy, not state austerity, has weighed down the French economy. The unemployment rate currently stands at ten percent—a mark not eclipsed since the late 1990s. The European Commission forecasts a growth rate of a half percentage point for 2012, after the economy expanded by an anemic 1.7 percent last year.

The real lesson of Sarkozy’s loss seems lost in translation. “The defeat of French President Nicolas Sarkozy in Sunday’s French elections provides a clear lesson to America,” Jesse Jackson writes in the Chicago Sun Times. “So does the fall of the conservative Dutch government, the rebuke of the British conservative government in local elections, the defeat of the establishment parties in Greece and the turmoil in Spain. Europeans are using democratic elections and demonstrations to send a message: Austerity is spreading unacceptable human misery.” New York Times columnist Paul Krugman offered the similar interpretation that Sarkozy’s defeat means “time is clearly running out for the strategy of recovery through austerity—and that’s a good thing.”

Alas, the clock never started on austerity in France. So strong is socialism’s grip that even when it fails it convinces its adherents that its opposite has failed. So recalcitrant are socialists that the disaster of socialism in France, like the disaster of socialism in the former French colonies of Tunisia and Syria, gets blamed on something else entirely. A government that pursues socialist policies deserves a socialist president. At least then the correct ideology can be faulted for the entirely predictable results of it.

In his victory speech, Francois Hollande oxymoronically proclaimed “an end to austerity” as he announced that “change is coming.” Change would mean cuts, not stopping spending cuts that haven’t even been started. The people who preach change are the most averse to changing.

Austerity is the boogeyman of Europe. It is always terrifying and everywhere talked about. But ultimately it’s not real—at least for the French government.

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