Rioters Burn French Social Model

No problem? Evreux is 25 miles from Giverny, the home of Monet’s garden and its famous Japanese bridge. The garden was restored in the 1970s by American publishing heiresses.

After the Los Angeles riots in 1992 the French were supercilious. It couldn’t happen here, they sniffed. The French social model made such a thing impossible. But on Sunday after ten nights of riots, French President Jacques Chirac convened an “emergency security meeting” to address the crisis.

He could start by ordering the French pompiers to put out the blaze in the social model, a system designed to frustrate opportunity and job growth for the poor and the marginalized.

Inspired by the social model, the French have a very high minimum wage, about twice the level in the United States. Ten years ago, the Joint Economic Committee of the U.S. Congress issued a bibliography on how the minimum wage “reduced employment,” “reduces employment among teenagers more than adults,” “hurts the unskilled,” “hurts low wage earners,” “increases the number of people on welfare,” and “hurts the poor generally.” The minimum wage is so high in France that supermarkets don’t hire people to bag groceries.

Encouraged by the social model, the French have extremely rigid employment laws that make it difficult to fire employees. As the consulting firm Triplet & Associés puts it, “employment in France is not ‘at will’… [and] dismissals are subject to stringent, and often bureaucratic, procedural statutory constraints.” This makes employers in France hesitant to hire permanent employees. They do hire interns, of course. And now the interns are starting to protest. They are getting fed up with serial internships but no jobs.

The French also have generous unemployment benefits. They have recently “slashed” them, according to Deutsche-Welle, from 30 months to 22 (compared to US state unemployment benefits that mostly last for 6 months.) Research on long-term unemployment indicates that the unemployed are hurt by overgenerous benefits. They lose skills while they are unemployed, and after a year, the skills erosion gets serious. So it is not surprising that Evelyne Zylbermann, 22 months after she last had a job, doesn’t know what she should do now that her benefit has been cut from $1,780 to $500 per month.

The French have always strongly believed in protecting French companies from global competition and administer a complex system of subsidies and preferences that privilege French enterprises over non-French, and producers over consumers. But researchers such as William W. Lewis in The Power of Productivity assert that the way to grow a healthy economy is by removing all privileges and subsidies for producers and entrenched interests: “Undistorted competition in product markets is essential.”

What about discrimination and racism? Surely nothing will change while the children of Muslim immigrants in the Paris suburbs remain underprivileged and oppressed? Actually, light to moderate discrimination is not much of a barrier to advancement. In New York City the Irish went from “No Irish Need Apply” and 50,000 streetwalking “nymphs of the pave” to respectability in fifty years and the Jews went from the Pale of Settlement in Eastern Europe to Harvard in a single generation. Blacks in the United States made more rapid economic progress in the years before the Civil Rights Acts of the 1960s than afterwards, according to Thomas Sowell.

The French are lucky. While they have been pompously digging themselves in deeper with their brilliant social model, we Anglo-Saxon cowboys have figured out how to dig out of the social model hole. For macroeconomic policy, set tax rates low and uniform. For the labor market, lower the minimum wage, unemployment benefits, and dodgy disability benefits. For the business arena, wipe out subsidies, rigidities, and privileges that distort the markets for products and services. But it is unlikely that the French are ready to bite the bullet. Not yet.

In the wake of the US riots in the 1960s the Kerner Commission called for “the addition of 1 million government-created jobs, the institution of a higher minimum wage, significantly increasing welfare benefits, spending more money on education and housing.” That was how the political elite in the US proposed to deal with urban riots.

After the “long hot summers” of the 1960s it took 15 years in the US to cut tax rates—in the teeth of opposition from the US political elite. It took a mere ten years before the US started deregulating transportation and telecommunications monopolies. But it took 30 years to reform the welfare system to put a time limit on benefits—in the teeth of opposition from the Democratic Party.

Why should we assume that the French are any smarter than we are?

Christopher Chantrill blogs at www.roadtothemiddleclass.com. His Road to the Middle Class is forthcoming.

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