Attack may fuel fires of racist populism
FRANCE is in a state of shock, its democracy defiled by barbaric, bloodthirsty terrorists. Journalists and the policemen protecting them have been murdered. A new form of terrorism has reached the West, with quasi-military operatives hunting down their targets.
The public, in France and abroad, will want to know that the authorities are in control. They will want to see the perpetrators punished and measures taken to prevent more attacks. They will want to mourn the dead and express their disgust at those who butcher the innocent and wage war on freedom.
A further question in the weeks ahead will be whether the atrocities will have affect the French economy and thus inflict a second round of damage on the country. They are certainly likely to crush consumer confidence and might affect retailing and tourism, at least until the tension begins to abate.
But even the attacks of September 11 2001, a truly enormous event that shut the US stock market and much of the country for days, reduced GDP only for about a quarter. The lost growth was quickly recovered, despite the carnage, personal suffering and destruction. Its real macroeconomic impact was indirect and longer term and was triggered by the way the US and the world reacted.
The same could end up being true in France if the attacks were to shift public opinion decisively towards extremist political forces.
Marine le Pen’s National Front and its demagogic populism are already attracting voters from the “far right” and the “far left”. Her party dislikes the rich, big business, foreigners and much else besides. She objects to all forms of globalisation, including free trade and immigration, and has toned down the fascist rhetoric, making her party more palatable to disillusioned centrists. The regional elections in March will give us an early clue to a shift in opinion.
What is certain is that, unless the mainstream political establishment finds a way of regaining the initiative on law and order, as well as on the economy, it is no longer inconceivable — although still unlikely — that she could one day win an election.
This would be catastrophic, not just for the business community and investors but for everybody else in France, in Europe and around the world.
A National Front victory would signal the final demise of the European Union and the euro: she has pledged to exit both and the unravelling can be guaranteed to happen in the worst, most irrational way. It ought, of course, to be possible for clever politicians to negotiate the dismantling of the disastrous single currency in a sensible way and to replace the increasingly centralised EU with a simple trading bloc, but Le Pen’s aggressive, protectionist, antimarket stance would precipitate a monumental and destructive crisis in international relations.
Her vision is the very opposite of the free-trading, decentralised Europe that the “Euro realists” have long advocated.
Le Pen would end free trade and economic integration; the shock would be similar to that which followed the return of trade barriers after the Great Depression, prolonging and worsening the crisis.
France’s tragedy is that it is an economic basket case, the result of decades of failed statist policies imposed by all parties.
Many of its voters are thus more likely to listen to extremists’ siren voices.
The economy probably grew by 0.4% last year; expansion this year will be anaemic at best.
A cripplingly high proportion of France’s resources are being allocated centrally, with political priorities and vote-buying rather than market-determined consumer preferences determining how money is spent.
Bad projects prosper and good ones wither, reducing productivity and growth, and destroying jobs, especially in a globalised economy.
Although supply side reforms being pushed by Emmanuel Macron, the economy minister, will help, as will the end of the 75% top rate of income tax, none of the changes goes far enough. They certainly won’t be enough to reverse the explosion in joblessness that has done so much to boost Le Pen’s popularity.
Unemployment in the French mainland jumped another 27 400 to 3.49 million in November.
Let us hope that the mainstream can regain the political initiative — before it is too late. —© The Daily Telegraph, London