Don’t worry, I am alive and well. Judging from the concerned emails I am getting from friends across the Atlantic since the start of the protests by the French movement known as the Yellow Vests, I felt that I should get this out of the way first. Paris is not burning. As even the most casual observer of France knows, protests are part of our way of life, and few of our protests go without at least some violence, since sundry anarchists (and run-of-the-mill thugs) always show up, whatever the issue. Yet, does this mean the Yellow Vests are nothing more than another example of France’s protest culture, perhaps slightly more tremulous but otherwise unremarkable?
No—but not because of numbers of people burning things, or of vests on the ground, the Yellow Vests are important because of who and what they represent.
These are, as a chastened Emmanuel Macron admitted in an apologetic December 11 address to the nation, protests by the people who don’t protest. The Yellow Vests are drawn from France’s lower middle class, people who don’t protest because they have unglamorous jobs they must go to, unlike the welfare recipients, students, civil servants, and unionized workers who typically take to the streets.
In part, they fit the stereotype of the recently much-scrutinized Trump and Brexit voters—the losers of globalization and technological change, whose wages have stagnated for decades, who live on the cliff-edge of economic insecurity, who fear that their children will have it worse than they do. But in part, they are a product of the French system: people who make just enough money to fail to qualify for most social programs, but not enough to live comfortably, even as the country’s elite keeps doing better. They are people who are also reluctant to protest because they object to interest-group handouts on principle, but they’ve become so fed up that they’ve taken to the streets anyway. They represent the specifically French failure of the country’s elite over the past 30 years to heal what Jacques Chirac, in 1995, called France’s “social rift.”
The French demographer Hervé Le Bras noted that the map of Yellow Vests protests overlaps nearly perfectly with the map of French districts that are experiencing population decline. The Yellow Vests live in the unglamorous French exurbs that foreigners never see. Tourists see our urban landmarks and our picturesque countryside. News consumers sometimes get a glance at our fearful immigrant-majority public-housing ghettos, the notorious banlieues. But those bleak exurbs are invisible, outside and inside the country. As the French economist Eric Maurin has shown, middle-class French people are increasingly defined geographically, stuck in semirural areas whose economic life is slowly drained, priced out of the glamorous city centers by NIMBYism, and driven even farther out to avoid the banlieues.
Little surprise, then, that gasoline taxes should have been the spark that set off the powder keg. In the city centers and banlieues, public transport is cheap, available, and high-quality. In the French exurbs, as in America, driving is simply a necessary part of life and work. But there is another layer to this: What set off the Yellow Vests protests specifically was taxes on diesel. For as long as I can remember, the French government has had a deliberate policy of encouraging the purchase of more-expensive, more-efficient diesel cars by keeping taxes on diesel fuel comparatively low. Far more than dissatisfaction with green-friendly policies, this dual aspect of the tax increase—raiding the pocketbooks of people who can scarcely afford it while betraying public trust—is what accounts for why dissatisfaction turned to rage.
The very fact of using yellow safety jackets as a rallying sign is a rebuke to France’s elites. All drivers must have them in their car because of a much-disliked government mandate; by contrast, Paris is proverbially a city where it makes no sense to own a car. Everyone who might be a protester already owns a yellow vest; as a member of the unrepentant Parisian elite, I wouldn’t even know where to get one if I wanted to.
What do the Yellow Vests want? There is no black-and-white answer for a movement that is entirely organic and leaderless, born out of hundreds of Facebook groups. Still, the widely shared list of demands that seems to serve as an unofficial manifesto is a mix of:
- the left-wing—higher minimum wage, lower retirement age, a laundry list of public spending items;
- the right-wing—small-business tax cuts, a crackdown on illegal immigration, tougher policing;
- the crazy—paying for the above by defaulting on the national debt;
- and the interesting—investing in hydrogen fuel cells as an alternative to gas and batteries for cars, direct democracy via popular initiatives, a return to seven-year presidential terms.
The government’s early response was to sneer that it is impossible to have lower taxes and more public services at the same time. Cue policy wonks and serious people everywhere sagely nodding, perhaps smirking as they do so. Except that this is, strictly speaking, false. In a country that experiences real, long-run economic and productivity growth, lower taxes and increased spending are perfectly sustainable. In this sense, the Yellow Vests are a symptom of what the economist Tyler Cowen has called the Great Stagnation—the slowdown in real productivity growth and technological progress that has occurred since the 1970s. In a slow-growth environment, wealth tends to trickle up, as Thomas Piketty pointed out.
The lesson of the slowly worsening social and political situation of Western countries is that modern, social and liberal democracies work only where there is real long-run economic growth; under these conditions, wealth does actually trickle down, and an expanding pie enables positive-sum bargaining among various interest groups via peaceful democratic processes. In this sense, the Yellow Vests are much more “rational” than their sneering betters: What they expect is not Santa, but what our political economy, built on a bedrock assumption of long-run growth, says they should expect.
Meanwhile the elite expectation that the system can endure without these necessary preconditions and that the majority should simply settle for less seems supremely irrational. Elite dismay that everyday people would actually try to cash the check of future growth that the elites collectively wrote out is downright Marie Antoinette-ish—as the 17th-century cleric Bossuet wrote, “God laughs at those who deplore effects whose causes they cherish.”
This global phenomenon has been made worse by the specifically French failure of the country’s elites to build an inclusive political and social system. That failure transcends party. What foreigners need to understand about Macron’s presidency is that it is less about a person or an agenda than it is about the caste he represents—France’s technocratic and pseudo-meritocratic elites. Through him this caste has taken over the levers of the country, beginning with his election in 2017.
All of Macron’s actions can be explained by this caste’s unspoken belief that these democratic checks and balances must be overrun, and a technocratic agenda implemented full-bore, to restore French prosperity. Macron has duly concentrated more power in the president’s office than any other leader before him. And that is saying something given France’s already monarchical constitution. He turned Parliament into a rubber stamp, plucked cabinet ministers from the ranks of the technocracy, empowered senior bureaucrats over political appointees, sidelined unions and other groups traditionally included in the legislative process, and made Trumpish comments about the press (this is why it’s strange to see him hailed in the international press as a champion of small-l liberalism). Macron’s agenda represents a doubling down on the smartest-guys-in-the-room agenda that French elites have been promoting over the past three decades. Given that agenda’s stubborn lack of results, it feels like the proverbial Marxist’s assertion that the Soviet Union failed because it wasn’t Communist enough.
Now, you might say, Americans certainly know something about out-of-touch elites. Not really. For all its faults, the American elite is still far more diverse and inclusive in every way than the French elite, which comes from an even narrower selection of even smaller schools and works even harder to protect its privilege and status. Just ask Macron, the neurosurgeon’s son and Jesuit-school pupil who actually describes himself as an up-by-his-bootstraps outsider because he was born in a wealthy provincial town and not Paris. French-style crony capitalism means that business and bureaucratic elites are one and the same, with media elites pretty much integrated within as well—since virtually all mainstream media are owned by conglomerates that either rely on public contracts or operate in highly regulated industries.
But wait, you might say, doesn’t Macron stand for a liberalizing agenda? Wouldn’t that shrink government and take power away from the mandarins? Isn’t that what France needs to get over its economic stagnation? Alas, this is the wrong way to look at things, partly because of macroeconomic reasons that apply the world over, and partly for reasons that have to do with French culture and history.
I believe in free markets as a positive good and an engine of prosperity in general, and I think France does need a lot of regulatory and spending reform. But “reform” can mean a lot of things, and there is a long way from the what to the how, a way full of details and devils.
Several things can be reliably said about technocracy everywhere. It is never as competent as it thinks it is; its claims to nonideological competence mask an underlying commitment to deeply held ideological beliefs; and its supposedly neutral policies somehow always intersect with the technocrats’ class interests more than they do the general interest.
First, macroeconomics. One of the lessons of the aftermath of the global meltdown in 2008 has been that supply-side economic reform fails when it is not paired with demand-side stimulus. Freeing up innovators to create new goods and services is wonderful, but it won’t get you anywhere if people don’t have any money to buy those new things. Nor will investors back those new ventures if they know there’s no demand for them. If you don’t believe me, ask the notorious socialist Milton Friedman, who as far back as the 1970s warned against steep government spending cuts as economically destructive. Or look back to 1980s America. Most of Reagan’s tax cuts were, in macroeconomic terms, demand-side stimulus. They put money in ordinary consumers’ pockets, and the famed Reagan boom showed the power of supply-side reform when married to demand-side stimulus. Or look at today’s Japan, written off by serious centrist economists as a lost cause for 20 years; Abe-nomics, which joins supply-side reform and demand-side stimulus at the same time, has caused Japan to roar back. By contrast, look at the European Union since 2011, where German-imposed fiscal and monetary austerity and “tough love” reforms have empirically damaged the continent’s economy and set off a plague of political radicalism.
The signature economic policy of Macron’s predecessor, François Hollande—cuts to employer-side payroll taxes, engineered by Macron as his key economic adviser and later finance minister—was doomed to fail. France’s onerous payroll taxes are certainly a terrible drag on the economy and employment, as even the leftist Piketty admits. In a world where France had thrown off EU budget shackles and paired payroll tax cuts with Reagan-style middle-class tax cuts, businesses would certainly have been driven by the increased demand to hire and invest. In this world, however, with the macroeconomic hand brake on, French bosses rationally pocketed the extra money instead of investing it, tragically proving left-wing politicians and pundits right.
Or take “labor-market reform.” France has onerous labor rules that hold back employment, right? Despite trying, I have yet to find a single French legal expert who believes it is hard to fire people under current law, and I did not interview the Socialists. Since 2002, French governments left and right have done many rounds of small-bore reforms to France’s labor code, whose cumulative effect is that 15 years later it is now easy to hire and fire in France. So why doesn’t France have full employment? In the abstract, a lightly regulated labor market should encourage employment. But in a depressed economy, it creates an incentive to fire but does little to promote hiring. The story of the lightly-regulated U.S. labor market over the last decade shows us how it works. When macroeconomic conditions collapsed, mass unemployment appeared; when macroeconomic conditions improved (in large part through fiscal and monetary stimulus), full employment returned.
In France, “reform” is most often mere crony capitalism. Historically, from Colbert’s investment in manufacturing in the 17th century to de Gaulle’s investments in nuclear and aerospace technology, economic progress in France has come from government’s running roughshod over private business, which is generally more interested in rent-seeking than actual liberalization. This history means that simply handing things over to the private sector might not always be growth-friendly. Since the 1980s, French governments left and right have privatized countless state-owned businesses and public services. Now, certainly some privatization was desirable. But whatever else it did, it created an extremely lucrative revolving door, with senior government offices moving pieces on the economic chessboard, investment banks advising on those same moves and on the senior management of government-linked companies. This created a unified French managerial class of people who went to the same schools and now rotate between the senior jobs in government and the private sector. French senior civil service was always a path to power and prestige, but in the 1980s it also became a path to making vast sums of money quickly. The cohort of senior civil servants who came of age in the 1980s is collectively known as “the cash-grab generation (la génération fric).”
Furthermore, whatever the abstract benefits of privatization, France has a unique, two-century tradition of government engineering schools and highly successful government-driven civil engineering, which has given it some of the best infrastructure in the world, and world-beating innovations in fields such as aerospace and nuclear technology. Meanwhile, the academic case for privatizing natural monopoly infrastructure is, on a most generous reading, mixed. Some privatizations were successful, but others were atrocious failures. Perhaps the most egregious example is the 2000s-era privatization of highways by French governments left and right. Given the excellent state of French highways—I still have fond memories of a friend, a student at an elite school for government engineers, waxing lyrical about how French highways have a unique high-tech, rain-absorbing, and therefore life-saving coating—a conservative should be forgiven for wondering what was broken that needed fixing. I have an idea what: The government’s independent auditor later found that the government-linked companies that bought the highways underpaid by 40 percent, and tolls later increased by 20 percent with no corresponding increase in quality. Had this happened in Venezuela or Russia, everyone would know what to call it, but here in France it is “reform.”
Today, Macron intends to implement an EU mandate to liberalize France’s railways, generally regarded as among the best in the world. Why? Just because, the answer seems to be. He also means to privatize France’s national lottery and the Paris airports—in other words, two businesses that are essentially licenses to print money—ostensibly to pay down the debt. Apparently Macron, the former Rothschild managing director, is unaware that an investment banker who advised a CEO that he should sell assets returning 10 percent a year to pay for debt that costs him 2 percent a year would be summarily fired for gross incompetence. Does the vaunted expertise of French technocrats not extend to arithmetic?
Where is my yellow vest?
That France’s senior executives tend to be either inheritors or bureaucrats probably explains why large French corporations routinely plumb the depths of rankings of companies that people want to work for. A landmark book called The Logic of Honor, by the French sociologist Philippe d’Iribarne, perfectly described how French business-management practices are obsessed with status-seeking and measuring rather than results. In The Society of Defiance, economists Pierre Cahan and Yann Algan show how this mentality creates a self-perpetuating cycle of distrust and hostility between employees and management. I have lost count of friends who will say things like, “Never again in my life will I work for a French company,” which they can say because they went to an elite school and can pick and choose among employers, unlike the Yellow Vest protestors.
This cultural history also explains a lot of the hostility to “labor-market reform.” In France, if you think your boss will use any legal loophole to screw you over, well, you’re probably right. A tight labor market punishes bad bosses as a class, as employees simply vote with their feet. France rewards exploitive bosses. With mass unemployment, employees will tolerate a lot more abuse for fear of walking, and with no growth, squeezing employees is a much more rational path to profit than investment or innovation. Is it any wonder that most French people will hold on to their labor protections for dear life? That they have such a negative view of private business and anything labeled “market reform”?
By tweaking things at the margin, just enough to make his friends richer but not enough for any benefits to trickle down to the average voter, Macron is predictably exacerbating French people’s anger and their alienation from institutions. The senior ranks of the Chinese Communist Party have certainly been exemplars for feeding at the trough and robbing the public trust blind, but they also consciously spend time improving their average subject’s lot.
Perhaps it is because they have some idea what they’re doing. The same cannot necessarily be said for France’s incompetent mandarins. In another example of hollow “reform,” while the worst of the bureaucratic mindset has infested private business, the worst of business-school pablum has infested government. French mandarins earnestly believe that government should “learn from the private sector” to be “more efficient.” Sounds wonderful, right? In practice, this has turned into a drive to merge government agencies in order to “generate economies of scale” and “synergies”—word salads closer to something generated by an algorithm out of Harvard Business Review back issues from the 1980s than anything anybody with real private business experience would contemplate.
The overwhelming consensus in the academic literature is that most private-sector mergers destroy value and that the vaunted synergies most often fail to materialize. In any case, the concept of “economies of scale” applies only to specific types of private businesses that have commodity inputs or depend on supplier relationships, which is not at all comparable to most of the things government does. Those tend to be more analoguous to labor-intensive service providers, a type of business notorious for its lack of economies of scale.
Nevertheless, the hot thing in French government from the late 1990s onward has been merging various government services together, with the typical result being many years of dysfunction and, at the tail end, an elephantine bureau that, in the best case, doesn’t do its work any better than its combined predecessors but certainly costs more money.
This has incinerated countless amounts of taxpayer money and deteriorated the quality of public services. And sometimes lethally—parliamentary as well as independent investigations have found that the intelligence failures that enabled the 2015 terrorist attacks can be attributed to the botched merger of France’s two domestic intelligence services during the 2007–12 presidency of Nicolas Sarkozy. That might be bad for most French people, but it is very good for France’s managerial elites, since it creates endless opportunities for high-priced bureaucrats-turned-consultants and public-service contractors to “advise” these Alice in Wonderland projects and, perhaps even more important, enables them to play office Napoleon (which studies say is the real goal of most mergers, public or private).
Another example of failed French “reform” has been the multi-decade drive toward decentralizing government power. Now, doesn’t that sound like an anti-mandarin move, and a generally praiseworthy direction for public policy? Again, in theory, yes, but in practice, not so much.
As social historian Jacques Julliard put it, historically France was “a dual electoral monarchy of president and mayor.” French people typically hold their officials in contempt, but mayors are the standout exception. Mayors tend to be highly popular. The typical French town is small—France has 36,000 townships, more than the rest of Europe put together—which means mayors are inevitably close to their constituents. The average French person probably can’t name his member of Parliament or half the cabinet, but he has probably had the mayor round the house for a beer at least once.
Municipal government is one of the quiet wonders of French life, both in terms of policy delivery and, what’s important in an age of rock-bottom trust in public institutions, democratic engagement. Naturally, this offends French policy wonks, who want to merge townships together to, you guessed it, generate synergies and economies of scale.
Paris is too large for anyone to know the mayor, so it makes sense that Parisian mandarins don’t understand what mayors mean to French small-town life. And so instead of improving on a good thing, giving municipalities more power, decentralization laws have invested more prerogatives in intermediate levels, départements, and, especially, the highest level, regions. The idea is to imitate France’s neighbors, which have a federal system of government; a typical reflex of French mandarins is to hold in contempt whatever is uniquely French and want to replace it with something foreign. Now, Germany, Italy, Spain, and the UK have a federal or quasi-federal system of government for reasons having to do with their own history and culture, while France has a very different history and culture. But the idea that imitating their system might not work for France for cultural and historical reasons simply does not compute for a technocrat.
Thus, François Hollande decided to merge regions together to “generate economies of scale”—and later audits found, surprise, that this disrupted the delivery of public services and failed to deliver expected savings. A popular idea among wonks is to finish the work by putting all power in the hands of regional governments and merged mega-townships—that’s right, they can’t help it, even when they want to decentralize, French technocrats centralize. That this approach has been a dismal failure over the past 30 years does not enter the equation, even with government spending ballooning while the quality of public services and public trust in local government have deteriorated.
It is telling that Macron has been the first sitting president in living memory to decline to address the annual convention of the French mayors’ association—and that one of his moves to try to appease the Yellow Vests was to promise to consult with mayors on future policy.
So what about the Yellow Vests? French history has always been a sort of dialectic between elites and the masses, and yes, this dialectic sometimes turns violent. The French people revere good leaders; they are angry first of all because they despise mediocrity. Over my lifetime, France’s elites, the product of the best of one of the most advanced cultures on the planet, have grown cowardly, insular, increasingly arrogant as they have become less competent, increasingly entitled as they have become less public-spirited, and greedier as the country has grown poorer. The country I love has become weaker, smaller, and more fragile.