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Globalism’s Great French Hope

Posted by hkarner - 22. Juni 2017

Date: 21-06-2017
Source: The Wall Street Journal by Greg Ip

French president Emmanuel Macron has exposed a hole in the nationalist agenda,

For global elites left dispirited by Britain’s vote to leave the European Union and Donald Trump’s presidency?, France has provided a shot of adrenaline. Emmanuel Macron won the presidency last month on a proudly pro-European platform, and Sunday, French voters gave him a solid legislative majority.

It is premature to say the nationalist wave has crested. But after establishment victories in the Netherlands and Austria and a setback to Brexit champion Theresa May, it appears globalism—whether the European Union specifically or open borders more generally—is not as politically poisonous as feared.

Still, the message of the last few months is not that voters are in love with globalism again: Turnout in the French elections was historically low. Rather, it’s that nationalists have been far better at spurring anger at the status quo than offering a coherent replacement, as Britain’s Brexit confusion and Mr. Trump’s stalled agenda demonstrate. The public unhappiness that fueled their rise remains, although it increasingly is being felt on the left, not just the right.

If any scene captured the essential globalist case against nationalism, it came in the closing days of the French presidential campaign when Mr. Macron paid a visit to his hometown, Amiens. His opponent, Marine Le Pen of the National Front, sought to upstage him by arriving the same day at a local Whirlpool factory slated for closure and promising to keep it open.

Rather than ape Ms. Le Pen’s populism, Mr. Macron attacked its foundations: “When she tells you the solution is to turn back globalization, to close borders, she is lying,” Mr. Macron told the workers. “Madame Le Pen does not understand how this country works…If we shut down borders, thousands and thousands of jobs will be lost.” He cited a Procter & Gamble factory nearby that exported 90% of its output. “If you close borders, it’s finished.”

The encounter ended as a draw. Mr. Macron defused the workers’ fury with his willingness to meet and listen, without winning their votes. Yet in that refusal to pander, he exposed the hole in the nationalist agenda. The institutions of free trade and, in Europe, the free movement of services and labor, have developed over decades. Tearing them out is guaranteed to disrupt.

Nationalists have generally waved away these costs, invoking superior bargaining skills or eagerness by other countries to minimize their own costs. In practical terms, though, those claims have proved empty. More than a year after Britons voted for Brexit, most to limit immigration and EU rules, they still don’t know what they’ve given up in return.

Conservative Prime Minister May struck a hard-nosed posture with Europe, expressing readiness to accept “hard” Brexit, i.e. no preferential trading arrangements at all, then called an election to bolster her majority and her negotiating position.

The gambit backfired and Ms. May lost her majority. This isn’t a clear rejection of Brexit, which Labor leader Jeremy Corbyn supports. But, as The Economist notes, it appears many voters who switched from Conservative to Labor were signaling unhappiness with Ms. May’s determination rush to leave the EU no matter what.

Moreover, the costs of Brexit are becoming more apparent. Predictions that Brexit would bring on recession always looked overwrought. But it did bring down the pound. That corrects for the loss of competitiveness caused by higher trade barriers but has also pushed inflation to a four-year high of 2.9%, well ahead of wages.

In the U.S., Mr. Trump’s promises to cut down on immigration, outsourcing and imports have repeatedly collided with the reality that such moves would be hugely disruptive to countless companies and workers accustomed to current arrangements.

A theatrical withdrawal from the North American Free Trade Agreement was shelved when Mexican and Canadian leaders, businesses and some members of his own cabinet warned of the repercussions. His plans to limit imports of steel on national security grounds could trigger a similar backlash.

Mr. Trump long assumed the U.S. market is so important that other countries could not afford to retaliate even if the U.S. took unilateral action to protect its market. Yet his bellicosity makes it politically difficult for other countries not to retaliate.

Mr. Macron may have benefited politically from standing up to Mr. Trump in his first weeks in office, for example criticizing his withdrawal from the Paris climate accord.

Yet while this may play well to French pride, Mr. Macron’s main order of business is firmly domestic: reviving French economic growth and in particular the job market. Mr. Macron aims to make hiring more flexible and firing less onerous. This is always easier when companies are in a mood to hire, not fire. The good news is that they seem to be: France is enjoying a solid cyclical upswing, with business sentiment at a six-year high and the unemployment rate down half a percentage point since December.

More important, Mr. Macron was clear with voters, including those workers in Amiens, about his plans. He thus has a clear mandate to undertake reforms, which his predecessor, Francois Hollande, never did.

The combination of political capital and opportunity could produce truly consequential economic reforms. There’s a lot riding on his success: not just the future of the eurozone and the European Union, but the liberal, pro-market prescription for economic growth.

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