Whether the French vote ‘oui’ or ‘non,’ the underlying economic troubles remain
Wolfgang Munchau in the FT puts the problem well:
In France, the constitutional referendum got mixed up with a debate about “neo-liberalism”. Opponents of the constitution fear that France will not be able to defend its social and economic model in the age of globalisation. They argue that the enlargement of the EU has shifted its ideological balance towards Anglo-Saxon-style capitalism, and that this is bound to lead to greater income inequality and lower social protection.
In Germany, a more sinister debate is raging. By describing foreign financial investors as “locusts”, Franz Müntefering, chairman of the ruling SPD party, unleashed an anti-capitalism campaign, the like of which has not been seen since the early 1930s. A series of tasteless drawings in the latest in-house journal of IG Metall, the steel and metalworkers union, depicts Jewish-American investors as insects with long noses, sucking the honey from the German economy. Despite the many taboos that persist in German public discourse, it seems as if it is no longer frowned upon to express anti-Semitic sentiments.
The reason why this debate is so intense, and why it is happening now, is that economic decline is finally being felt by the middle classes in both countries. Germany is undergoing its fifth consecutive year of quasi-stagnation. The French economy has performed a little better than Germany’s in recent years but is also now heading for a sharp fall in growth.
If the Americans or the British were in a similar economic pickle they would blame their governments and central banks. The French and the Germans, by contrast, blame economic liberalism. In the past, support for the free market has been stronger in Germany than in France, but only for as long as the economy performed well. Germany’s “Social Market Economy” was designed as a system with significant institutional interference in free market decision-making. The French balanced the free market more directly through the national ownership of industries.
In both countries, the elites neither respect - nor comprehend - the inner workings of a market economy. Nor do they understand the economic significance of the financial sector. They believe it consists of speculators who enrich themselves and who endanger democracy. In an article in the German weekly Die Zeit last week, Günter Grass, the Nobel-Prize winning author, went so far as to call the Bundestag, Germany’s parliament, a subsidiary of the stock exchange.
Furthermore, the Franco-German establishment has drawn different conclusions from the demise of communism. They still regard their system as a third way between capitalism and communism. Most other EU countries, by contrast, have adopted a free market economy or moved towards one, albeit with different degrees of social protection.
We have discussed the dreadful performance of the French and German economies in this space a dozen times in the last month, making one version or another of the same point: the 10-12% unemployment in these countries is a direct result of their foolish policies of massive government spending (45-55% of GDP) and placing great obstacles to the market’s necessary creation and destruction of jobs — all while the more nimble new EU entrants and go-getters like the Chinese are eating their lunch. Munchau makes the scariest point of all: that the elites haven’t a clue why they are in this mess.
Of course it is not just the French and German elites who think, like Günter Grass, that markets are a rigged game for greedy speculators. We note that his hippy-dippy piece, which read in parts like The Greening of America, was reprinted — you guessed it — in the New York Times. For further reading, we’d suggest an earlier piece we did on the decline of the NYT, which showcases Howell Raines’ rather similar understanding of how market economies work.
UPDATE
Here are pictures and some of the text from the IG Metall magazine discussed above:
Die Plünderer sind da
Blackstone, KKR, Investcorp - Finanzinvestoren aus Amerika schlachten deutsche Unternehmen aus. Sie kaufen die Firmen, um sie kurz darauf mit Gewinn weiter zu veräußern. Rücksicht auf Menschen, Regionen oder Traditionen nehmen die amerikanischen Finanziers nicht. Wie Mücken saugen sie aus den Betrieben das Geld, um dann nach dem gleichen Muster weiter zu schwärmen. Leidtragende sind die Menschen.
Sie haben unscheinbare Namen: Blackstone, KKR, Carlyle, Lone Star, Terra Firma, Apax, Cinven, Investcorp, Permira. So nennen sich “Finanzinvestoren” in New York, Houston und London. Man kennt sie kaum, aber sie haben eines gemeinsam: viel, viel Geld. Und mit diesem Geld krempeln sie die deutsche Wirtschaft um. Sie kaufen Unternehmen auf, “verschlanken” sie und verkaufen sie nach kurzer Zeit wieder oder verwandeln sie in Aktiengesellschaften - mit hohem Gewinn…..
Mit Tricks das Kapital herausziehen
Dazu kommen weitere Tricks, um das aufgekaufte Unternehmen finanziell auszusaugen. Nachdem KKR Bosch Telecom/Telenorma gekauft und in Tenovis umbenannt hatte, gründete der Investor auf der Kanalinsel Jersey die Tenovis Finance Limited. Bei dieser nahm die Tenovis GmbH & Co KG, Frankfurt, einen Kredit über 300 Millionen Euro auf. Das Geld stammte aus der Platzierung einer Anleihe der Tenovis Finance….
Here’s the link to the pdf of the story about the plunderers with their “Tricks” in search of “viel, viel Geld.”