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Gerard Dumenil: New French President Holland won’t do much to change economic policy but he might make a difference in other spheres

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PAUL JAY, SENIOR EDITOR, TRNN: Welcome to The Real News Network. I’m Paul Jay in Washington.

In France, advisers to the new president, François Hollande, are saying he should use a new audit planned for this summer that might find new debts and deficits in the shadows of the economy as a rationale for not delivering all of his campaign promises, cutting back on spending, perhaps even freezing certain amount of spending, and also revise his forecasts on growth for the economy, based on those forecasts a lot of his stimulus spending was hinged to or pegged to.

Now joining us to talk about what people of France might really expect from this new presidency is Gérard Duménil. He’s an economist and a former research director at CNR. And he’s written several books, his latest book he co-authored The Crisis of Neoliberalism. Thanks for joining us, Gérard.


JAY: So what do you make of this? I mean, Reuters, the advisers around the new president, they’re already starting out sending out signals to investors, hey, don’t worry, you don’t really have to believe what we said in the election campaign. I mean, what do you make of this?

DUMÉNIL: Well, I think the promises of Hollande were not very daring. Okay? And like any type of campaign of this type, we should not expect, you know, that they will do everything they said during the campaign. Okay? So actually, you know, these—the people around Hollande and the Socialist Party, you know, should not scare the markets, in my opinion. Okay? It’s rather people who voted for him from the left viewpoint in France should be concerned, because I’m afraid this policy will not be really true left policy.

JAY: So, I mean, I mean, I guess people on the left kind of knew that, and in the first round, many of them voted for what was considered the more genuinely left candidate—let me get his name properly—Mélenchon (I don’t know if I may be butchering his name). But given that, can one expect something more from Hollande than they got from Sarkozy? And if so, what would be a litmus test for you that Hollande’s actually at least doing something?

DUMÉNIL: But, you see, you need to distinguish between economic issue and other types of issues. Huh? Certainly from the viewpoint of social issues in France now, Hollande is very different from Sarkozy, and the policy that he will have, because, you know, Sarkozy government was trying to cut all social expenses, you know, and education, you know, schools, you know, to—. For example, this was an important aspect of Hollande’s program, which was to create new position within the French education system, because Sarkozy was cutting and cutting and cutting. And in this respect and other respect of society, issue of societies, certainly the policy of Hollande will be very different from the policy of Sarkozy.

Now, if you speak of the economy, it’s a different issue. Socialist Party has always been in favor of globalization, neoliberal globalization, and we should not expect too much in this respect. And, anyhow, what they can do is rather limited, actually.

JAY: Well, his basic—his campaign, at least, was that it’s a time for growth, it’s a time for stimulus spending, and austerity is not inevitable. And now we’re hearing that they’re sending out signals they’re already pulling back on some of the promises about spending, or they’re creating public opinion for pulling back. What do you make of—what can Hollande really do, and what—you know, within the limits of who they are?

DUMÉNIL: You see, when he was speaking, you know, of growth, okay, new program of growth in Europe, some signals came from Germany saying, very good, this is what we need, we need, actually, growth, we need program for growth. But just after, you know, this first declaration, the explanations came: what they want for more growth means deregulating the liberal market. Deregulating the liberal markets means, actually, to do what they did in Germany, which is to diminish in particular low wages, to cut on social costs. Okay? So when people speak of programs for growth, this type of program can have just any content. Okay? So—but this is certainly not the type of left program—at least what people from the left would expect in France. So program for growth would be more investment and so on. But, of course, you know, in the present situation, where there’s a big deficit of the government, it’s extremely difficult to have this type of policies. And—yes?

JAY: So what are a few things that—within the realm of what Hollande is and what kind of party that is, what are some things he actually could do that would be good for ordinary people of France?

DUMÉNIL: But, you know, I want to return to Germany, because I really believe that now the important issue in Europe is that we are entering into another new stage of the crisis, of the present crisis. In various country, like in Spain or in Greece, the recession is over, the new recession, huh, is already there. And the last figures that we have for Germany, for example, show that the German economy that everybody was considering, you know, the best economy in Europe actually is not yet in recession. But, you know, now the economy begins to stagnate. And given the figures, it’s very possible, if not likely, that they will enter into a new recession. And this will be the important factor—you know, beyond the personality of the president or the government, this will be the crucial fact for the coming months and the coming years. If Europe enter into a new recession, they will have to stop with the policy that they are now following, they will have to stop with austerity, because recession will even, you know, increase the deficit. And so, in this case, you know, they will have to try to be innovative. But innovative will be extremely difficult.

JAY: But the austerity policies in what they’re calling the periphery countries of Europe, and even the bigger countries, Spain and Italy, I mean, those policies undermined German exports, didn’t they? That was their big export market was the rest of Europe. So, I mean, you would think these austerity policies Germany’s pushing have to lead to some kind of slowdown in Germany.

DUMÉNIL: Well, you see, all the countries in Europe are interdependent [incompr.] But I think that if you take the present government, you know, Angela Merkel’s, in Germany, their view is actually to use the conditions created by the present crisis to try to obtain more. Okay? And maybe, you know, this will diminish a bit the export of Germany in the rest of Europe, but you have also the rest of the world. And, of course, Germany’s also exporting a lot, you know, in country like China and many, many other countries.

So the problem is that maybe—I was speaking of recession in Europe, but maybe the recession which is beginning now will be a global recession. I don’t know when it might reach Asia or Latin America. So, you see, the situation in the United States may be a little different, you know, because while we just had the election in France, and in the U.S. you will have the election in the future, the European Central Bank is certainly less committed, you know, to the financing of the government than in the United States. So in this respect the situation is different.

But the main—you know, the crucial point is what will happen with the global crisis, or at least the crisis of United States and Europe that we are having now. Okay? This is [incompr.] the crucial issue. If we enter in this new phase—which seems in Europe to be more and more likely, and in my opinion will come also in the United States about six months later—then [incompr.] they will have to change, because what’s happening now is that actually in Europe, as in the United States, they are not changing the rules. They are changing the rules of nothing. You know, the only thing that they did was to—they have deficit, okay, and the deficit support to a certain extent the microeconomy. But, you know, if we enter in a new recession, then they will have really to worry about actual solutions. An actual solution means regulating financial mechanism, means maybe a certain degree of protectionism, although it will be extremely difficult, even the present situation, while it’s hard to imagine what they could do, because, you see, this new phase of the crisis would be really something—it’s even difficult to imagine what they could do. But they will be forced to do something.

JAY: So what you’re saying is Germany’s okay with deep recession in Greece and Spain and such, but if it hits Germany, then they got to switch their austerity course.

DUMÉNIL: And also, you know, there is a very strong ideological, I would say, or political aspect to the issue, because if you read French newspaper, for example, you will read every day, you know, that Germany is the example we should follow. Okay? If we could do like Germany did, you know, we would be okay. Okay? And it’s true that Germany has an important surplus of its foreign trade, and this is one advantage. You know. But the German economy is not growing faster than the French economy, and the recession in Germany was much deeper than in France, for example. And just compare the two countries. So, you see, there is an important ideological [incompr.] aspect, you know, because now they keep telling us we should imitate Germany. This means cutting low wages, diminishing social protection, and what they call the flexibility of the labor market. So if now Germany, the German model, you know, enters into difficulties, well, they will have to change a little bit the discourse, and it will be politically extremely important.

JAY: Now, Hollande, partly because of his speech that he’s against austerity, and he even in his speeches, you know, called on Europe to change course, and his new presidency is sort of a sign of a new stage against austerity measures, to what extent is this, you know, just campaign rhetoric? I mean, some people are suggesting he’s kind of an Obama—change you can believe in until you get elected, and then in fact what he’s going to do is manage the crisis, and maybe even diffuse some of the mass opposition to these policies.

DUMÉNIL: During the campaign, you know, both candidates, Hollande and Sarkozy, had to, in a certain sense, follow the discourse of the recommendation of, on the one hand, you know, the extreme—more extreme—more radical, let’s say, left or the more radical right. And so Sarkozy was imitating completely, following all the arguments, you know, of Marine Le Pen to be elected, and Hollande had to follow to a certain extent the recommendations of Mélenchon. Okay?

JAY: On the left.

DUMÉNIL: Yeah, on the left. You see? But when Hollande say, okay, we have to finish with austerity, certainly, I mean, certainly we have to stop austerity. If you read your economists—I’m speaking of the Nobel Prize—the Canadian Nobel Prize that you have. They say, you know, that the austerity policy of Europe is suicidal. Okay? And it’s certainly true. And it will be exactly the same thing, I believe, in the United States very soon. Okay?

But now let’s stop with austerity. What does it mean? Shall we increase deficits? Okay. So in this case the debt will rise, and this is exactly what is happening. This is a problem. You treat structural crisis with deficit. But the problem of the structural crisis is that it last one year, three year, now four years. Okay? So the debt of the government is increasing. We’re going to pay for the debt, China probably no longer. Okay? So now you move to the United States, which has a central bank which is paying. Okay? In Europe, the central bank has been paying, but actually very slowly, very slowly.

So what will happen probably, you know, is then to say, if we enter into a new recession, the central bank, European Central Bank, will have to step in, you know, and pay more and more of this deficit. If not, I don’t see any other type of solution. But right now, you know, in country with 5 or 10 percent of deficit of the government, the idea of really, you know, spending more, it’s obviously a problem, you know, it’s obviously a problem, because it will not solve the present crisis. Solving the present crisis is much more structural problem.

You see, for example, in a country like France, since 2004 about, French transnational corporation now are exactly following the type of course that you have in the United States, which is that they are more and more investing in direct investment outside of the country. Okay? And this is the difference between France and Germany. But France is exactly following the U.S. example. How can you restore the activity in a country which is in a big crisis, when transnational or French multinational corporation or U.S. multinational corporation are every year and every year increasing more and more their investment in the rest of the world? Okay, this is obviously impossible. But how can you stop transnational corporation doing that? By some kind of fiscal policy giving advantages in term of taxes and so on. But taxes are absolutely necessary now because we are having very big deficit.

You see, the problem is really that, as in the title of our book, this crisis is the crisis of neoliberalism. Neoliberalism is a monstrosity. It is completely unsustainable social order. So what we need is a very deep political transformation. But you know neoliberalism is here in the world. It has been here during the last 30 years. All the economy of the world organize themselves gradually, you know, according to the rules of neoliberalism, in the periphery, in the center. Corporation are now managed according to rules of neoliberalism. And I have explained, you know, they go and they export their capital where they believe it’s better, it’s cheaper to produce. Okay? So, you see, it’s people in newspaper, they speak of deficit, they speak of austerity. But the fundamental problems, you know, is that we are in what we call a social order which is unsustainable. But to change that, you need a very deep transformation.

JAY: Which means a big mass movement.

DUMÉNIL: Well, I mean, a big mass movement would be, maybe, the political force which could lead to such a transformation. But you know what happened during the Great Depression in the United States. Okay? And so at some point, you know, we will need some type of New Deal, you know, in a sense. But if you’re reading the French Le Monde, the French newspaper yesterday named their front page of the world, you know, New Deal. Okay? But it’s just a joke now. It’s just completely a joke. Okay?

And so, you see, this type of situation already has occurred in history, and what we need is actually a very deep change. But for—the crisis was already a shock. Of course, you know, more social struggle would be extremely important. But look at the result of the elections in France. Okay? Fifty-two percent, 52 percent. In a situation like the present situation, this is just ridiculous, you know, 52 percent. Forty-eight percent of French people voted for Sarkozy. How can you do that?

JAY: Well, it’s a similar situation in the United States is, you know, as critical as one can be of Obama, it boggles the mind that he’s running neck-and-neck with Romney.

DUMÉNIL: Yeah, that’s exactly the situation everywhere. You know. So people like it. But, you see, of course, you know, the propaganda is extremely important.

And here we move to the discourse of the extreme right. You know? The extreme right see all these immigrants. They come here, you know, they take your jobs, you know, and they spend the money of our social system, which is health insurance and everything. Okay? And they have their kids in school, and the schoolkids are bad, so they don’t even study. You see? And so this discourse, this propaganda of the right, that Sarkozy took actually as his discourse, and repeated this discourse everywhere, okay, with extreme degree of Xenophobia. You know? So of course, you know, the link between this type of—the social aspect of the campaign and the economic aspect of the campaign is very strong.

So we need more. You know, the crisis was not enough. We need more of a crisis to maybe have some change. But we know also from history—and I was referring to the Great Depression, but you know what happened in Europe. Okay? We had the Nazi and everything. So it’s not because you have a crisis, because people are suffering, that you necessarily have a left alternative. You can have also an alternative to the right. And this is what happened in France, because, actually, Marine Le Pen was doing much better than Mélenchon.

JAY: Yeah. Thanks for joining us, Gérard.

DUMÉNIL: Okay. Thank you very much.

JAY: And thank you for joining us on The Real News Network.


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Gerard Dumenil

Gerard Dumenil is an economist and Former Research Director in the French National Center for Scientific Research. He is the co-author of The Crisis of Neoliberalism and presently working on a new book, entitled The Stability Frontier.

Thank you for joining us.