France's Failure: Part 2,048

It is no secret that I am not the biggest fan of the French polity (individual French people - I've been a fan of most that I've met), but my personal prejudices aside, I think President Chirac's withdrawal (log/pass=optimate/optimate) of the proposed CPE law (the youth labor contract that has had students and unions striking in France the last two weeks) illustrates the ongoing failure of the French government to govern and lead its own people.

The CPE was not perfect. Far from it, in fact. The law was a loosening of the firing restrictions imposed on companies with regards to people 26 and under. The (correct) aim of the legislation was to put a dent in France's egregiously embarrassing 12% unemployment (23% among 16-26 yr olds) by removing some of the disincentives to hiring that many French companies feel from France's highly restrictive labor laws. The move was meant to be a first step towards a much needed liberalization of France's labor laws, but was seen by students and unionists (most of whom were either not effected, or would be older than 26 by the time they graduated) as an attack on already feeble job security for youths.

The problem with the law was not that it weakened restrictions on firing too much, but rather that it did so too little, and took aim at too narrow a section of the labor market. The current laws create a rigid two tier system, with lifelong, heavily protected jobs for older professionals and an endless string of temporary jobs for those youth that can get them. The entire system needs to go, which means loosening not just the restrictions on the temporary positions held by young French, but on all jobs.

A shakeup of this sort would no doubt lessen the artificial job security enjoyed by those fortunate enough to have protected full time employment (a full third of whom work for the state), but the benefits will be twofold. First, French companies, freed from enormous costs associated with letting workers go under the current system, would be able to adjust their workforce according to their business needs, making them much more competitive globally. Second, as a result of this, companies would also be far more willing to hire new full time employees (because doing so would not commit them to paying a painful future cost should the need to downsize arise).

The benefits of a liberalize labor market are obvious, especially in a country with such high chronic unemployment as France has. Why then does the French government continue to fail in its duty to explain and sell these benefits to the French public? Perhaps the one silver lining here is that the failure of the law (as opposed to a watered down and irrelevant "success") leaves the issue unresolved, allowing the possibility of more comprehensive (and more effective) reform at a later date. If the law had stood, it might have relieved France's feeling of urgency, without doing much to solve the underlying problems. This issue is one of that common sort in governance, where a partial, or incomplete solution can be worse than no solution at all. The nature of representative government is such that you sometimes need to get all of your structural reform done in one feel swoop, before public attention and patience dissapates. Of course, that is often difficult because you have to build consensus to prosecute major change. Furthermore, the public will often be resistant to change, even when it is in their long term best interest because such change requires a short term pain. The job of leaders is to take the long view and to help explain to the people why they are necessary. The French government has failed to do this and is now facing the double price of an unreformed labor law and a loss of public confidence.

Chirac has been forced into dealing a blow to Prime Minister Dominique De Villepin's hopes of succeeding Chirac as president and strengthening his main opponent Nicholas Sarkozy (who has been distancing himself from the whole thing, even though he most likely supports some sort of liberalization as well). I'm not sure that I'm the biggest fan of either hopeful, but one thing is for certain; whoever wins will need to make a serious effort to bring France out of its self imposed delusions of isolation and into the real, global world.