The Economist this week has two very good articles (here and here) on the riots in France. As I emphasized myself earlier this month (here), The Economist sees the source of the rioting in (a) “mass unemployment that persists in a welfare system supposedly glued together by ‘social solidarity’” and (b) “ethnic ghettos that have formed in a country that prides itself on colour-blind equality.”
Some French commentators explain that discrimination and the failure of social integration are the sources of the problems. The policies of the last 30 years have not gone far enough. More is needed to achieve the dream of a perfectly integrated society. Others have been quick to draw a line between radical Islam and the French riots (see for instance Mark Steyn’s article in the Chicago Sun-Times). The Economist also believes radical Islam is an issue in France, which boasts Europe’s biggest Muslim population. However, The Economist doesn’t see Islam as the source of the riots. Instead, it offers unemployment, the failed welfare system, and the ghettoization of some suburbs as the main culprits. They are right.
The riots find their deep roots in the fact that France is one of the last experiments of Western dirigisme (code word for ‘socialism’). The French must stop deluding themselves with the idea that they are different from the rest of the world. They need to understand that the problems on their hands are the result of decades of deeply misguided social policies. The best illustration of this state of affairs is the level of youth unemployment. As much as 23% of the young below 25 years of age are unemployed. Many of them are poor and belong to ethnic minorities. For these young people, the hope of finding a stable job is almost non-existent. And this is in spite of (I should say because of) an armada of social policies: the 35-hour week, high minimum wage, restrictive firing rules, RMI (minimum income for the unemployed), high unemployment benefits, etc.
Reforming the labor market is most urgent. In fact, it is a sine qua non of social change. As always, the example of New Zealand comes to mind. Kiwis deregulated their labor market relatively late in the reform process (they should have started as early as 1985). The Employment Contract Act (ECA) of 1991 was an attempt to restore freedom of contract – and it was very successful. Labor relations until then were based on centralized bargaining with an important role given to unions and the government. The impact of the ECA (in conjunction with other important reforms) has been huge. Unemployment fell from 11 % in the early ‘90s to less than 4 % today. Strikes (which are a daily event in France) almost disappeared from the social scene.
The French Government’s policy responses in the next few months are going to be crucial to the way France deals with her policy failures. As of now, the responses are inadequate. For instance, it is about establishing a “civil service”, giving more money to local associations, or legislating against discrimination (see here). Moreover, the influence of the populist right might increase (see CSM article here), which may entice the government to implement tougher immigration laws and order more expulsions of non-citizen rioters.
In spite of the riots, the necessary reforms still seem to be politically impossible. The Economist is right in saying that the “biggest lesson of the French riots is that more jobs are needed,” but this is to mean only one thing: less socialism, bad policies and French dirigisme; freer markets and a freer society.
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