Viewpoint article published in the french magazine Marianne on the 25/10/2008
How have we got to where we are today ?
Analyzing US Federal Reserve statistics over the last 50 years one can understand the deep roots of the present crisis. Until Ronald Reagan was elected US president, the ratio of debt to GDP was perfectly stable in time. Until then collective rules had ensured a regular improvement of wages and a fair division of productivity between working people and shareholders.
But then, in 1981, Ronald Reagan arrived in the White House. Republicans decreased taxes on the richest, leading to the increase of public debt. This debt increase was the result essentially of deregulation, which led to a huge increase in part-time low-paid employment and to a decrease of the relative part of wages in the GDP.
Nicolas Sarkozy often speaks of “America’s full employment” but the US is in fact very far from full employment: in 2005, even before the subprimes crisis, the real average weekly working time (without taking into account unemployed people) had fallen to 33.7 hours because millions of workers are employed only between 10 and 15 hours a week.
An average of 33.7 hours a week !
This sharing of work leads to a more and more unequal division of income: a study by the French bank BNP Paribas shows that over the last 8 years, “only 5% of Americans, the richest, have seen their real income grow” while 30% of them have seen it decrease. This latter 30% should have reduced their consumption. If this consumption has in fact continued to grow, it is only because the middle classes and the poor have been pushed to contract a little debt every year. In fact they have been pushed to indebt themselves beyond any reasonable limit.
In all western countries, fear of unemployment unbalances wage negotiations: “If you are not happy with what we’re offering, go take a look elsewhere”. In just 25 years, in France, in Germany and also in Japan, the fraction of GDP redistributed to wages has decreased by 11 percent.
This year, in France, almost 200 billion Euros went to profits which would have gone to working people if the balance between profits and salaries of the early eighties was still in place. 200 billions Euros in a single year. It’s a lot and it’s also the same number of billions less for consumption. Without the increase of debt, this decrease of wages relative to GDP would have slowed down consumption enormously.
“Without the increased debt of European families, growth in Euroland would have been zero since 2002″ explains Patrick Artus, a French economist. In the UK, average family debt is over 160% of available income. A recent study shows that, without an increase of such debt, the UK economy would be in recession since 2002!
According to Sarkozy in a recent speech in Toulon “the French people are ready to hear the truth”. Let’s go for it! Here is the truth: the debt crisis is not a routine accident caused by just a few inconsiderate traders. To guarantee colossal benefits to holders of capital while still ensuring a high level of consumption, neo-liberalism has a structural need for an increase in private debt every year! For 25 years, this crazy system has been very profitable for share holders and bankers but, today, it is leading us straight into the wall!
There have always been overly greedy shareholders expecting an annual profitability of 10 to 15%. What’s new in the last few years is that they have been able to get what they wanted because huge gains in productivity led to mass unemployment which has totally unbalanced discussion on wages.
The roots of the present financial crisis: 30 years of social crisis, 30 years of badly managed productivity!
It is because of unemployment that wage negotiations have been so unbalanced that the relative share of salaries in GDP has decreased so much. It is because of unemployment that our economies need so much debt. And it is only by giving to as many people as possible a real job and a real ability to negotiate improvements of their wages that we can escape from crisis.
Unfortunately, 18 months after his election, everybody has understood that Nicolas Sarkozy will not take a single useful decision in that domain. There isn’t a week that passes without an announcement by him of a major state project, a big plan or a great mobilization… but against unemployment, he has announced nothing! Absolutely nothing.
An historical initiative
Given the gravity of the present situation, it is very urgent to push the Left back to work. But, taking into account the accumulated unbalances, a national answer cannot be enough. The whole of the European Left has to gather and start working together to define, in a very pragmatic way, new tools of regulation.
This is why, with my friends of Nouvelle Gauche, with a large number of militants who signed a text entitled “Un monde d’avance” presented by Benoît Hamon during the last French Socialist Party congress, we ask the French socialist party to take an historic initiative and to invite socialists from the 27 countries of EU (both those in government and those that are not) to meet for 3 weeks this coming December and January to work together with some Nobel prize winners in Economics on the definition of the necessary new regulation rules needed in our present situation : what financial and monetary regulations are needed financial ? What regulation of our exchanges with China (ecological and social compensatory amounts)? What intra-European regulations (social treaty and European tax on the benefits)? How can we fight radically against unemployment and precariousness? How can we recover a stable balance between wages and benefits? What regulation of productivity increase and of working time do we need?
“The World shall not be destroyed by those who commit evil, but by those who look on without acting ” said Einstein. Sarkozy talks but does nothing. He lies and his policies can only worsen our country’s problems. We, Socialists, cannot only criticize Nicolas Sarkozy. We have to make realistic proposals and we have to act! After 25 years of no reaction in the face of neo-liberalism, after 25 years of lukewarm socialism, it is time for us to react.
Pierre LARROUTUROU is National Delegate for European affairs for the French Socialist Party. He has published Le Livre noir du libéralisme (Editions du Rocher), prefaced by Michel ROCARD.