France and Britain Need ‘Macronomics’

As France’s hyperactive president, Emmanuel Macron moves his agenda forward, controversy follows him.  France reeled from rioting in response to Macron’s pension reform, which incrementally raises the state retirement age from 62 to 64 by 2030, sparking such opposition that the French Republic’s eighth president controversially used the constitution’s Article 49:3 to change the law.  

This contentious provision, used 87 times since 1958, requires a parliamentary vote of confidence in the government, which entails new parliamentary elections, to stop measures passed by presidential decree.  The procedure can only be used once annually but has no limit on its use for government spending and tax legislation.

Yet the domestic outrage Macron sparked would be uncontroversial in many of France’s peer nations. 

In the UK, the state pension age is 66–four years higher than in France–rising to 67 by 2028 and 68 thereafter.  Germany’s legal retirement age also is 66, scheduled to rise to 68.  Italy already sets its pension threshold at Macron’s 2030 target, as do Spain and Portugal. Even the progressive Netherlands and Scandinavian nations set the entitlement age higher than France, while Americans born after 1960 must wait until age 67 to collect social security benefits.

President Macron argues reform is necessary to guarantee the state pension for future generations and to reflect longer lifespans. At 83 years, life expectancy in France is among the highest in Europe; higher than Germany’s and the UK’s 82; and significantly higher than America’s 76. However, polls show that young and elderly voters remain largely unconvinced by the president’s rationale for reform.

But this and other aspects of Macron’s reform prospectus are a far cry from the ‘neoliberalism’ claimed by his most vocal opponents and his commitment to changing how the French are governed is hardly unique among the French Fifth Republic’s eight presidents.  Macron’s socialist Elysée Palace predecessor also pointed to looming pension system deficits while increasing employee contributions. In fact, Macron’s modest extension to the pension age treads where presidential predecessors tried but failed.  

In this, ‘Macronomics’ has involved a weighty list of measures commonplace in many competitor countries since Macron’s arrival on the French political scene following his appointment as Minister of Economics and Industry by Francois Hollande, a position in which he served for three years before running for president himself.

As a minister, Macron moved to increase the government’s minority stake in French car company Renault alongside what became known as ‘Macron’s law’ designed to liberalise France’s 3,000-page labour code. These reforms included abolishing prison sentences for employers who failed to observe the letter of complex regulations governing employment negotiations and streamlining employment tribunals. 

Macron also acted to allow struggling industrial plants to negotiate severance packages without being forced to draw on the financial strength of parent companies and made it easier for firms in commercial difficulty to retrench employee hours and wages.

Minister Macron also championed reforms that came to the UK decades ago. Macron tried to significantly liberalise Sunday trading laws which previously largely permitted Sunday opening for tourist-related retail. Amid the now customary furor, the plans were watered down to allow local mayors to decide when shops could open for a mere dozen Sundays annually.

Rules governing where legal professionals could operate businesses were loosened, and deregulation allowed bus companies to operate routes alongside state-owned railway lines. Yet even these limited liberalisatons became law by decree. 

Pre-presidential candidate Macron planned further reforms tackling more significant French outlier regulations but what became briefly known as ‘Macron 2’ – which was to take aim at France’s legislated 35-hour work week and wealth tax – was shelved, prompting Macron to launch his presidential bid.

What followed was a detailed manifesto for his new party, La République En Marche–the republic on the move – that included five decrees which Macron characterised as “turning the page on three decades of inefficiency.”

President Macron proposed giving firms with fewer than 20 employees more flexibility to hire and fire, enabling them to negotiate directly with employees on working terms and conditions, placing a cap on industrial tribunal payments and lowering the time limit for complaints from two years to one.  Even these changes followed consultations with unions and prompted union industrial action and protest.

Undeterred and undaunted, President Macron pointed out that France’ jobless rate was almost double that of major European rivals, explaining “We are the only major economy in the European Union that has not defeated mass unemployment for more than three decades.”  The government subsequently cited the largest decrease in unemployment in 16 years as a beneficial consequence of these reforms.

The Government also reduced a voluntary redundancy scheme for the civil service to curb costs long familiar to a UK audience.  And, in a more interventionist move, Macron demanded EU action to restrict the time period during which firms could post workers in other EU countries, amid fears that firms exploited the freedom guaranteed by the Posted Workers Directive to relocate where social protections were lower.

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Taken as a whole, Macron’s measures were more an attempt to emulate the consensus-based partnership-driven and more prosperous market-based economies of Germany, the Netherlands and the Scandinavian countries rather than the ‘Anglo-Saxon’ model–a negative reference point in French politics.  This vision is firmly anchored by Macron’s strong commitment to European unity and Europe is a power in the world, equal to the United States and China.

Safe in his term-limited second term, Macron recently took to the Fifth Republic staple of the televised presidential address, pledging more policy innovations to be announced, July 14th, Bastille Day.

Meanwhile, he repeated a pledge to create: 200 new gendarme brigades for rural France where his popularity, increasingly marked by a metropolitan-provincial divide, is at its lowest. In this regard, he referenced the extreme right’s touchstone issues: crime and undocumented immigrants. 

New measures that featured in his televised speech were tax cuts, which he specified were needed because desirable social provisions were “financed collectively by work.”  A €2 billion tax cut for those earning between €1,500 and €2,500 (£1,300 to £2,200) monthly, whom he described as those “who are too rich to receive aid but not rich enough to live comfortably, hinting that the reductions wouldn’t necessarily be in income tax.

To place these in context, the French government is also an outlier in government spending, spending 58% of the nation’s GDP, eight points higher than Germany’s 50%; and double-digits ahead of Sweden’s 47%; 45% in the UK and the Netherlands; and 39% in the US.  Of course, all governments seek a balance between economic incentives and paying for social protections, and differ in the weight they give to each but whatever way it is sliced, state spending is paid for by taxes and government debt.

Critics aside, Macron continues to advance a bold, thoughtful and compelling vision. This begs a question: where is the UK’s equivalent?  

With comparable populations and per person Gross Domestic Product, albeit distributed less equally than France, and with inferior public services, the UK faces different challenges while, like France, lagging behind Germany, the Low Countries and Scandinavia economically.

Britain is beset by almost negligible economic growth; record-long health service waiting lists; productivity behind that of France; crumbling public infrastructure; and the worst housing crisis of the post-war years, with the young priced out.

Labour’s five vague pledges may not differ in style and substance from those that accompanied Tony Blair’s rise to power, and polling certainly indicates that a similar landslide general election result as 1997’s may well be on the cards.  These do not represent, however, a radical programme for government.

On the one hand, Keir Starmer and his team may well be wise to tread carefully so as not to squander their current significant poll lead with hostages to fortune.  On the other, spending some of that political capital with a view to coming clean with the electorate about the changes that are necessary may pay dividends longer-term.  Health spokesperson Wes Streeting dares to raise the subject of National Health Service reform but without details.  Treasury shadow Rachel Reeves is similarly coy about tax and spending.

Meanwhile, the Tories seem exhausted and electorally suicidal by, for example, with regard to the acute housing crisis placing themselves firmly on the side of their dwindling number of rural supporters’ not-in-my-backyard instincts.  And the Lib Dems? Their unyielding defence of the status quo implicitly rules out any Macron-style public service reforms. Indeed, on some days they seem like Britain’s most conservative party.

Whether Starmer, Britain’s likely next prime minister, is a Blair whose moderate promises foreshadow modest changes or a Thatcher, whose cautious 1979 manifesto obscured radical intent, Britain needs its Macron-moment: step-by-step radical, comprehensive reform.  The answer to Britain’s problems “cannot be rigidity or extremism,” as the French president has said of his own country.