François Hollande has achieved far more than his critics suggest

Piece for Shifting Grounds and New Statesman
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If you listen carefully, you can hear it coming. With next Monday marking one year since François Hollande was elected French President, a tidal wave of I told-you-so’s and smugness is about to be visited upon us by Westminster’s commentariat.

It’s fair to say that most of them have never much liked the French president. And we are sure to be gleefully informed that the first year of his Presidency has been a disaster. It will invariably be held up as a stark warning to Labour against carrying any challenge to the austerity consensus into the next election.

It won’t surprise you to learn that upon closer inspection, things turn out to be a bit more complicated than that.

Hollande has certainly had a difficult time of it, sliding recently to 25 per cent approval in the polls. Much of this can be laid at the door of his one unambiguous failure – his inability to overcome German opposition to redrawing the EU’s fiscal pact towards a greater focus on growth. As a result, unemployment is stuck at around 10%, and consumer confidence is low. The Eurozone remains largely frozen.

Some of it is also his own personal style. Hollande’s more low key, unfashioned image and patient approach – once a selling point – has bored a nation who became used to the glitz and hyperactivity of the Sarkozy years (in much the same way that ‘Not Flash, Just Gordon’ rebounded on Brown).

But if he has failed to offer much hope at a European level, the same cannot be said about his record at home. For starters, he has already made good on most of his key campaign promises, such as the hiring of 60,000 new teachers, raising the minimum wage and setting up a Public Investment Bank to lend where banks won’t (which given time could prove crucial to the country’s recovery).

But it is on budgetary matters – tax and spend – where Hollande has offered something most markedly different. Contrary to received wisdom in parts of the British press, the French President never campaigned against the principle of deficit reduction; simply against the notion that this is best achieved through deep spending cuts and huge tax hikes on ordinary people (this is after all what austerity has come to mean). And it is here that his actions in government bear far greater scrutiny than the widely held, lazy caricature that he has bowed to 'inevitable' cuts.

In 2013, only a third of Hollande’s deficit reduction measures comes from reducing spending. And all of this is coming from departmental spending freezes, not deep cuts.

The rest comes from increased taxes, largely on big businesses, banks and wealthy individuals. This includes increased wealth taxes, alongside hikes on taxes on assets and dividends. A new 45 per cent top rate has been brought in for incomes over €150,000, while companies will have to pay 75 per cent tax on any salaries over €1 million (replacing the 75 per cent income tax rate struck down by France’s constitutional court). Big banks and oil companies have also been hit with special levies. Tax exemptions have been scrapped.

While weak growth across Europe has made things harder than expected, these measures will still see France’s deficit fall to 3.7 per cent in 2013, from 4.8 per cent in 2012. Hollande has also shown admirable flexibility, resisting pressure to bring in any further deficit reduction measures to meet draconian EU targets while the economy is still weak (he has instead delayed them).

The ratio between taxes and spending reductions will level up a little in 2014, and some entitlements may be means tested. But freezes are likely to continue to take precedence to significant cuts on the spending side.

Whatever one’s view of Hollande, to equate this with the medicine meted out by other Governments in Europe is fatuous. Compare it, for instance, to George Osborne’s approach, whose ratio of cuts to taxes is 80:20, with that 20 per cent borne by people on average incomes while millionaires pay less. It’s also a world away from the broad-based slash and burn policies being implemented in Italy or Greece. Low and middle income households in France have been protected, as have public services.

Here Labour can still draw positive lessons, as beyond the need for short-term stimulus now, they face up to longer-term decisions over whether to accept the enormous cuts currently pencilled in by the Tories for 2015 and beyond. The deficit faced by any incoming Labour government is likely to be of a similar order to that faced by the French President.

Drawing inspiration from Hollande, but outside the fiscal straight jack imposed on Eurozone countries, Labour could set a longer more flexible timetable for elimination of the deficit. Assuming they inherit low growth, they could then pledge a freeze on overall departmental spending. This would be tough but would cancel planned Tory cuts and shut down accusations of profligacy or ‘turning the taps back on’ in a relatively painless way, providing them space to talk more about growth and living standards. Beyond that, levies on the well off and big businesses (e.g Financial Transactions Tax, Land Value Tax, restoring the main rate of corporation tax etc) should go towards paying for the rest of deficit reduction.

Within this overall spending envelope, further tax rises on the top (a 50p rate, mansion tax etc) could pay for tax cuts for those on low and middle incomes, aiding demand. Growth measures requiring capital spend would then be funded by taking money from budgets with the least impact on domestic demand (cuts in defence and international development to pay for a large house building programme, for instance).

There are many areas, of course, where Miliband will want and need to do the exact opposite of Hollande. He will have to be careful to not be seen to over-promise, given the public’s already brittle faith in politics. But a closer reading of François Hollande than we will be afforded in our newspapers reveals an important truth; one that can be rescued from the carnage of an otherwise difficult first year for the Socialist President. When it comes to how, when and on whose backs the national books are balanced, there are still choices.

Success for Hollande could change the terms of the debate

Piece for Shifting Grounds blog



It’s fair to say that the fallout from the 2008 financial crisis has not been kind to the left. A favourite talking point of those writing obituaries for social democracy is that right-of-centre governments have come to dominate the continent, holding power in 22 of 27 EU countries. So as the French presidential election reaches its crescendo this week, the prospect of an Hollande presidency could prove a decisive moment in recent history.

For one thing, if Hollande makes it to the Elysee he will have been propelled there by a revival of the far left. The Left Front, led by Jean-Luc Melenchon, has assumed a place and importance in this election that must seem a distant dream to their UK counterparts. Working as a coherent counter-veiling force to Sarkozy and Le Pen, they have dragged the debate leftwards and re-connected with working class voters long since thought lost to apathy or worse, the Front National. Here we should at least allow ourselves optimism at what the broad left can achieve with a few charismatic or competent leaders, and with Pythonesque splits and sectarianism left in the past. (Not losing sight of the shared enemy, Melenchon has long urged his voters to transfer to Hollande in the second round.)

But we kid ourselves if we think what we are seeing in itself represents a ‘uniform swing’ to the left acrossEurope. The French system is distinct, and the left there work on far more fertile territory than in other states: France’s political discourse (if not electoral history) traditionally leans their way. What is of more importance is if Hollande both wins and is able to implement his policy platform in the face of vested interests.

The austerity economics of the past few years has brought into focus a phenomenon that’s defined the past three decades – that is, economic policy (and debate) largely framed by the prevailing wisdom among financial elites. The most potent embodiment of this in recent times has been the almighty position assumed by the international bond markets. Although treated as neutral, these have demanded a highly prescriptive form of right-wing economics in exchange for low interest rates – with particular focus on deep spending cuts and tax rises (on all but the rich) as the best means to reduce debt, deficits and increase growth. Any alternative is deemed ‘unworkable’ or ‘unrealistic’ at best, and haunted by the threat of punishment. This trumping of sovereign governments of whatever stripe, mostly derived from unchecked de-regulation and globalisation, forms part of what Zygmunt Bauman has called a ‘disconnect between power and politics’.

Hollande at least poses a challenge to this order. His manifesto proposes deficit reduction via stimulus and growth, and represents the first coherent alternative to austerity inEuropesince the collapse of Lehmans. It promises to boost state spending by €20 billion over 5 years, create 60,000 new teaching posts, fund new jobs for the young unemployed and invest in social housing. Alongside this is a new 75% tax on incomes over €1 million, taxes on banks and financial transactions, a ban on stock options and the promise of significant banking reform. Significantly, Hollande has also pledged to re-negotiate the EU fiscal treaty to give greater emphasis to growth over cuts, and to push for a more active role for the ECB.

While this is by no means revolutionary, it is far outside what is deemed acceptable in the pages of the Wall Street Journal. Sensing the threat, Hollande’s opponents at home and abroad have begun the scaremongering that will be familiar to anyone who’s followed the economic debate in the UK. Openly inviting speculation, Sarkozy has said the Hollande’s plan will turn France into a ‘new Greece’, while transnational financial ‘leaders’ have been summoned to warn of a ‘bloodbath’ in the markets – a ‘new wave of instability’ – should voters vote the wrong way, or Hollande have the cheek to act on his mandate. Echoing this, The Economist – which has long viewed the belligerence of France’s social model as a sort of childish impudence defying ‘inevitable’ liberalisation – has spent much time fretting that candidates ‘may actually mean what they say’! Deep spending cuts are presented as unavoidable, and a country whose underlying economic position is sound has suddenly been talked up to be on the brink of collapse.

Whether Hollande, if victorious, can face down such threats and intimidation and push ahead with his programme will tell us a great deal about politics in 2012. It will give us a clear picture of where the balance of power really lies between markets and democracy, and the real scope for change. If he avoids Mitterrand’s fate, and France emerges unscathed, he may help break the hoodoo that market reprisal has thus far held over Europe’s centre-left parties and their electorate, particularly in the UK. If no ‘bloodbath’ is forthcoming, and austerity’s ‘leading lights’ are exposed to have cried wolf over the French Socialists, then centre-left parties will have the beacon of a bold, workable alternative at the heart of Europe.

Of course, there is no guarantee that Hollande will stay the course – he is, ultimately, a pragmatist – nor that he will successfully pursue his argument at an EU level. So far, though, he has shown no signs of back-tracking. No doubt the resurgence of the far left, whose presence at least partially accounts for the scale of Hollande’s manifesto, helps to explain this – and should they remain united, they may yet have a key role to play in holding his feet to the fire.

Either way, the stakes are huge. Mark Fisher has defined the ‘No Alternative’ fatalism that has underpinned the neo-liberal era as ‘capitalist realism’. In his seminal book on the subject, he writes:

"The long, dark night of the end of history has to be grasped as an enormous opportunity. The very oppressive pervasiveness of capitalist realism means that even glimmers of alternative political and economic possibilities can have a disproportionately great effect. The tiniest event can tear a hole in the grey curtain of reaction which has marked the horizons of possibility."

Francois Hollande is no messiah, and his platform is no panacea, but it may yet prove to be that tear in the curtain that social democracy has so long been waiting for.