By William Pfaff
Many in Britain and the United States are in mourning for what’s taken as the suicide of the American (or Thatcherite, or Chicago-school) model of capitalism, accompanied by the non-interventionist state that hands the national economy over to business and financial leaders to run.
Not least among the mourners ought to be The Economist magazine in London, a major part of whose charm has always been the insolent certitude with which it expresses its views. It is not a publication used to lunching on its own words. But The Economist too has become a victim of the world crisis, and its current issue’s cover story pays a handsome tribute to the success of the formerly scorned, centralized, interventionist, Colbertist French economic model, and the state practices and values that support it.
“France’s economy,” it writes, “has been less hard hit than many. Its GDP is expected to shrink by 3 percent this year ... against 4 percent in Britain, 4.4 percent in Italy, and 5.6 percent in Germany. It is less dependent on exports than Germany, and consumer spending in the first quarter of 2009 was up on the same period last year. The government ... is set to have a deficit in 2009 (6.2 percent of GDP) well below those in America (13.6 percent) and Britain (9.8 percent).”
French household debt is half that in America, no bank has failed, none has been nationalized, executive pay is reasonable, and “the income gap between the top 10 percent and the bottom 10 percent is far smaller than in Britain or America.” The country is crisscrossed by 230-mph TGV trains, 80 percent of the power is nuclear (and more is exported), its auto producers are in reasonably good shape, Air France is the most profitable airline in the world, and French-dominated Airbus sells more planes than Boeing.
The French are uncertain of what to make of this tribute, since self-denigration is (oddly enough) a national characteristic, and they have only recently elected Nicolas Sarkozy, another font of certitudes, who won the presidency while insisting to the French that the “French model” was obsolete and that France had to learn new ways to live by adopting the “Anglo-Saxon” model of laissez-faire capitalism, market freedom and financial innovation.
It is, of course, premature to say that what the French call capitalisme sauvage is dead. One doubts that it’s really dead—the cadaver twitches; the Obama administration in the U.S. has yet to drive a stake through its heart. A decade from now, Barack Obama might well be discovered on the board of Goldman Sachs, and Timothy Geithner will almost certainly be there. But the capitalism they serve may not quite be the same.
The United States is certain to learn something from the French success in long-term state planning, infrastructure development and, one would hope, will build a vastly improved health system (the World Health Organization considers France’s the best in the world) and other social protections.
The business model that has dominated the British and American economies since the 1960s, and been propagated worldwide, crashed because it is inherently unstable. It works in only one direction, to take value away from the real economy and give it to stockholders and bankers. It’s an asset-stripping system that benefits company managers and directors, bankers, stock traders and financiers. To workers and their families, who in the past believed that they had a stake in the business economy, and to the communities suffering de-industrialization, it said, “Too bad, but you’ll be better off in the long term—if you are still around.”
To be fair, this was the unintended result of an ideological position of political origin, which claimed that unregulated property ownership is the fundamental right of a free society, and which in its American version subordinated the interests of the labor force and local and national communities to the pursuit of ever-higher returns on investment.
This doctrine concerning property rights historically was a reaction against the 20th century totalitarian communism that intended to destroy private property. While the modern economic system makes a natural appeal to greed, its theoretical origins lie in the work of certain Central European intellectuals—notably Frederick Hayek, Karl Popper and, to an extent, Joseph Schumpeter—who were exiles from the political crisis in Europe and fearful of the abuse of centralized government power.
The business model that Margaret Thatcher, her advisers and conservative Americans constructed from this foundation was condemned to its eventual self-destruction by its disequilibrium.
The classic English and Scottish economists (Adam Smith, David Ricardo, etc.) believed that a business enterprise was an agent of social benefit, in that it created goods and wealth, but also had obligations to its workforce and society as a whole. The same values are responsible for the “French model,” and are now demonstrating that they can succeed in bad times as well as good.
Visit William Pfaff’s Web site at www.williampfaff.com.
© 2009 Tribune Media Services Inc.