Sarkozy Should Retire, Says France

The demonstrations that have rocked France this past week highlight some of its differences from the United States. The photo here, for example shows the difference between rioting in baseball-playing versus soccer-playing countries. In the US, we would pick up the tear gas canister and throw it, rather than kick it, back at the police.

More importantly, the French have decided to take to the streets in the millions - including large-scale strikes and work stoppages - to defend hard-won retirement gains. (It must be emphasised, since the media sometimes forgets to make the distinction, that only a tiny percentage of France's demonstrators have engaged in any kind of property damage and even fewer in violence, with all but these few protesting peacefully.) French populist rage is being directed in a positive direction - unlike in the United States where it is most prominently being mobilised to elect political candidates who will do their best to increase the suffering of working- and middle-class citizens.

I have to admit, though, that it was perplexing to watch the French elect Nicolas Sarkozy president in 2007, a man who campaigned on the idea that France had to make its economy more "efficient", like America's. In reality, he couldn't have picked a worse time to peddle this mumbo-jumbo. The housing bubble was already bursting in the United States and would soon cause not only our own Great Recession, but also drag most of the world economy into the swamp with it. So much for that particular model of economic dynamism.

But Sarkozy had a lot of help from the major media, which was quite enchanted with the American model at the time and helped promote a number of myths that formed part of his campaign. Among these were the idea that French social protections and employment benefits were "unaffordable in a global economy", and that employers would hire more people if it were easier to fire them, and if taxes were cut for the rich.

Sarkozy has recently abandoned one of his most politically unpopular tax cuts for the rich, but there may be others. But he had also promised not to raise the retirement age for the public pension system. This has contributed to the mass outrage at his current proposal to raise it from 60 to 62, for those taking the reduced benefits, and from 65 to 67, for full benefits. (Under the US social security system, most people opt for the reduced benefit that is available beginning at age 62; full benefits are available, for those born after 1959, at 67.)

Once again, most of the media thinks the French are being unrealistic, and should just get with the programme like everyone else. The argument is that life expectancy is increasing, so we all have to work longer. But this is a bit like reporting half of a baseball score (or soccer, if you prefer). On the other side is the fact that productivity and GDP also increase over time, and so it is indeed possible for the French to choose to spend more years in retirement and pay for it.

France's retirement age was last set in 1983. Since then, GDP per person has increased by 45%. The increase in life expectancy is very small by comparison. The number of workers per retiree declined from 4.4 in 1983 to 3.5 in 2010, but the growth of national income was vastly more than enough to compensate for the demographic changes, including the change in life expectancy.

The situation is similar going forward: the growth in national income over the next 30 or 40 years will be much more than sufficient to pay for the increases in pension costs due to demographic changes, while still allowing future generations to enjoy considerably higher living standards than people today. It is simply a social choice as to how many years people want to live in retirement and how they want to pay for it.

If the French want to keep the retirement age as is, there are plenty of ways to finance future pension costs without necessarily raising the retirement age. One of them, which has support among the French left (and which Sarkozy claims to support at the international level), would be a tax on financial transactions. Such a "speculation tax" could raise billions of dollars of revenue - as it currently does in the UK - while simultaneously discouraging speculative trading in financial assets and derivatives. The French unions and protesters are demanding that the government considers some of these more progressive alternatives.

It is, therefore, perfectly reasonable to expect that as life expectancy increases, workers should be able to spend more of the lives in retirement. And that is what most French citizens expect. They may not have seen all the arithmetic, but they grasp intuitively that as a country grows richer year after year, they should not have to spend more of their lives working.

An increase in the retirement age is a highly regressive cut that will hit working people hardest. Poorer workers have shorter life expectancies and would lose a higher proportion of their retirement years. Workers who have to retire early because of unemployment or other hardships will take a benefit cut as a result of this change. And, of course, this cut would not matter to the richest people in society, who do not rely on the public pension system for most of their retirement income.

France has a lower level of inequality than most OECD countries and is one of only five - out of 30 OECD countries - that saw inequality decrease (pdf) from the mid 1980s to the mid 2000s. It also had the largest decrease in inequality in the group, although all of it was from the mid 80s to the mid 90s.

France has, until now, resisted at least some of the changes that have rolled the clock back for working people and, especially, low-income citizens in the high-income countries. The European authorities (including the European Commission, European Central Bank and International Monetary Fund) are currently accelerating these regressive changes in the weaker Eurozone economies (such as Greece, Spain and Ireland). All of these institutions and many politicians are trying to use the current economic problems of Europe as a pretext to enact rightwing reforms.

Polls show more than 70% support for France's strikers, despite the inconvenience of fuel shortages and other disruptions. The French are already sick of their rightist government, and that is also part of what is generating the protests. Despite the recent electoral weakness of the Socialist party, France has a stronger left than many other countries do, and one that has the ability and willingness to organise mass protest, work stoppages and educational campaigns.

The French are, in effect, fighting for the future of Europe - and it is a good example for others. We can only hope that, here in the United States, we will be able to beat back any proposed cuts to our much less generous social security system, with attacks on benefits looming on the horizon.