Lagarde in lockdown (EN)

We are now in the seventh week of the lockdown in France, but it remains difficult to get used to.

We are among the privileged with a large house and garden in a small village in a rural area. There are hardly any corona deaths in Ariège and we are amazed at images from the big cities where people move close together and still go outside a lot. But then, they are also more locked up than we are.

We go to the supermarket every few days, instead of every day or even several times, we get greetings from a nearby farm and have them delivered by another, the butcher comes by on Friday and other things we can order and at somehow receive it.

Inside there is almost no work, so hardly any income, and yet it is difficult to turn your head and start bigger jobs. But I will have to.

Today we were in the center of Mirepoix. A dead city. The bookstore was open to pick up orders, some restaurants do takeout or delivery services behind new barriers. After May 11, things should loosen up.

With almost everyone at home, except the necessary workers in healthcare and logistics, peat is on social media and what you read is almost embarrassing. Someone said today that the solution for France after the crisis was to behead the president, his party, to burn ENA high-school officials with students still in it.

Unfortunately, that opinion is not a small exception. Most French still expect “the state” to take care of everything. And because “they” didn’t arrange for masks and fans and gloves in time, they cheated on “us”. And so they have to be paid for that.

After the government has put many billions in the economy, or is stopping, and almost everyone receives some kind of aid – Maartje and I do not, but we are not French and not (yet) ailing – many shout that it is not enough is, “” a pittance “and” why do the benefit recipients get more than honest working people “and” yes, but my overtime “from those who are unemployed in the short term with a payment by the state of 80 percent of their salary. People without a salary do not have that support.

Obviously, the French government could have better prepared and settled the crisis. In retrospect they will find it themselves, but as far as I am concerned they do their best in difficult circumstances and perhaps better than a government of other political colours could have done. It is not (yet) appreciated.

With all those injections of money and the evidence that the health care sector was not properly prepared, a number of crucial economic and political questions arise for the ‘hereafter’.

Successive French governments have cut spending and tried to cut government debt. Social security shortages and emerging problems with financing the pension system were also addressed.

The idea was that tax and tax cuts would cut wage costs, making it easier for companies to hire and retain people, which could lead to more tax revenues, less unemployment benefits, and better financing of the social system and pensions.

But the continual scraping of public spending has eroded public services and protests, such as those of the yellow vests, were “against” the loss of state supplies but also, especially at the beginning, against tax hikes – it started against an increase in fuel tax proportional to their pollution and intended to promote green energy. It resulted in weekly battles and calls for popular references to an anarchist blow-up of the system.

When you asked a “Gilet Jaune” where the money should come from to finance the public services, the answer was invariably “with the rich”. And “rich” started at twice a minimum salary to the handful of billionaires in France.

To be clear – I have always believed since my university days that the quality and efficiency of public services in itself have nothing to do with whether those services are provided by the government or the private sector. The state can do things right, and the private sector can also blunder – the extreme globalisation, the banking crises, the health insurance mess in the Netherlands, are just a few examples where the private sector has failed.

I also know that those state services and companies that were privatised were mostly the most attractive for investors and the less functioning branches remained in the state’s account. And I am not blind to see how companies that shouted “hands off” to the state and tax authorities in good times are now at the forefront of asking for state aid and would like to have an adjusted bonus structure for the top management .

Because the original profit and profitability targets, and share price levels, had become unfeasible, the old bonus rules had become useless and so they were “voluntarily” surrendered with the expectation of compensation.

So I’m not sure if the French health sector would have been better with just more money, nor if the SNCF would be better in private ownership. It concerns business operations, adapting the organisation to circumstances, technological changes and customer expectations.

However, most French people are allergic to changes and as a result there is a lot of inertia in the system which may not be the main cause of the poor state of many public services but has certainly played a major role in this.

After the war, many companies were nationalised and other companies were added up to President François Mitterrand. However, when Jacques Chirac became his prime minister – from another political camp – first came the “ni, ni” doctrine (no new nationalisations and no privatisations) but then privatised by Presidents Giscard d’Estaing, Chirac, Sarkozy, Hollande and now Macron were privatised to reduce the national debt. First out of the conviction that it was not right to have the debts paid by generations later and later more formalistically because that conviction of “good family man” also seeped from Maastricht to Lisbon in the EU with the famous three percent for budget deficit and 60 pc . national debt as a percentage of the annual Gross Domestic Product.

It was also privatised because the EU commission was against “unfair competition” from state-owned versus private companies in the European market.

Those objectives in themselves were designed to harmonise the public finances and households of the euro area and wider EU Member States. But why sixty-three?

Due to corona and the enormous injections of money, these goals will no longer be attainable for many years and the question must be asked to what extent they are and / or were realistic.

Without harmonisation, no euro, without the euro no internal market and no geopolitical power bloc. But where should the yardstick lie?

What has also become clearer is that the close view of the EU commission on competition has weakened the position of European companies on the world market. The motive of several Commissioners has been to protect consumers and to lift some cartels, for example in telecommunications has resulted in much lower prices for telephone calls and so on.

But was rejecting the merger on trains between Alstom and Siemens a good decision? Was Mittal’s offer of Arcelor best for the longer term? Maybe not.

Even with more flexible rules for budget deficits and sovereign debt – or perhaps some more sophisticated rules for types of budget deficits and debts – no state can fulfill all the public’s wishes regarding public services without a tax bill in return. And that will also be about income. But that can be progressive and no flat tax that better yields more money than less wealthy. This can also be about the added value in a company and not only about wages and calculation profit.

Then those billionaires and other “capitalists” that many French people are spitting on social media and, when possible, on the street. Now they believe that companies should declare all dividends, and small businesses should be able to stop paying rents and other fixed costs.

In my view, a “dividend” is not a dirty thing in itself. It is a compensation for the share capital contributed. Just as a rent is a compensation for an investment in real estate. And interest on a loan and salary for labor.

The real discussion is about the correct amount of that compensation. And in the situation of zero to negative interest rates for short-term cash deposits and low loan interest rates until recently, some dividends and rents were perhaps too “rich” as anyone could and can say that a nurse was rewarded for labor.

Billionaires are most likely too rich. After the recent sharp declines in the stock markets, that is somewhat adjusted, but a “wealth” of several billion – such as the Arnault family of luxury company LVMH – does not consist of a pool for money that they can dive into every morning like a Scrooge McDuck. It is often the value of the companies and if that would be taken from them – as is suggested – then that value will drop enormously and the question is whether and how LVMH would function without them. You can tax more heavily, tax avoidance must be tackled much harder.

However, luxury goods are a totem in our capitalist consumer society because they are seen as a sign of success and there are millions of people who like to carry such a totem and have a lot of money for it, or less for a copy.

And that brings us to the question of what kind of society we want to see after the coronavirus crisis. Some people want to see an end to importing (unnecessary and / or unsustainable) goods from distant countries such as China and want to bring back more strategic companies to France and Europe. Also buy more locally in terms of food.

Very commendable. But listen to the votes on Facebook and Twitter – food prices have become more expensive! No, they are not. At least, the prices consumers – like us – paid for local vegetables, cheese and meat before the crisis have not changed. But for those who bought bulk vegetables from the Netherlands, Spain, Morocco or Peru / Argentina, or big bangs from industrial meat factories, it is more expensive because the cheaper alternative is not available at the moment.

I fear that as soon as the borders reopen, most (French) consumers will drop their own local producers again because of those prices. With a weaker euro, those imports would become cheaper, but then European exports would become more expensive and European companies cheaper to buy.

Closing borders is also not “neat and can provoke counter-moves, so something more intelligent is needed. Such as a levy for the distance, an “internalisation of external costs” or the charging of the costs of environmental pollution that are currently not included in the cost calculation for the localisation of the purchases.

But then a group of French people will say on social media that “they” make it “us” difficult to get import items and that “they” artificially keep up the prices that “we” cannot afford with “our” low income and the “Heavy” loads. But that money for higher income must come from somewhere – taxes or debts or the proceeds from selling public property.

But, say the supporters of the left-wing LFI as well as the right-wing RN, you can still do that with state debt. Those are just a calculation illusion – tell the banks and pension funds and life insurance companies that have those debts as investments on their balance sheets for their customers …

But those customers are “rich”, those “sheep” who accept and even support the current government and who are actually against “us” and therefore “enemies of the people”. Plus ça change, plus ça reste la même chose