The Pandemic Depression
The Global Economy Will Never Be the Same
A long time coming: France's president, right, and his finance minister. (Regis Duvignau / Courtesy Reuters)
About 20 years ago, François Hollande and Pierre Moscovici co-taught an advanced economics course at Sciences Po, France's elite college for government study. Their stint in education was brief, but their association has endured: Hardly a week after being elected the new president of France, Hollande named Moscovici as his finance minister.
I sat among the dozens of undergraduates in Hollande and Moscovici's class, held in a nineteenth-century auditorium overlooking a Renaissance garden in the heart of Paris. It was a unique, unguarded environment to discover two men who would later rule France. Moscovici was the sunny one: Charming, charismatic, and enthusiastic, he came to class well prepared, just as his mentor, Dominique Strauss-Kahn, a bona fide economics professor, was known to do.
Hollande was the dark one: unprepared and unorganized yet certain of his ability, even to the point of condescension. He occupied his time on the podium walking the class through hard economic data that did not always seem to have a point -- until, that is, he would suddenly light up, once he arrived at numbers showing how affluent classes had actually benefited economically during the 1980s, under the administration of France's first Socialist president, François Mitterrand. Inequality was already Hollande's cause: He never showed as much pugnacity as when he denounced the hypocrisy of a bourgeoisie always whining about the state's redistributive policies and scheming to retain its privileges.
Hollande knows his subject matter. He comes from a provincial, bourgeois Catholic family. His father was a well-off physician who unsuccessfully ran as a far-right candidate in municipal elections. Hollande would have none of the paternal politics and was inspired instead by his mother's leftist Catholicism. Moscovici's upbringing was equally bourgeois but more flamboyant. His father was a Jewish Romanian immigrant and renowned psychologist, active in the early environmental movement of the 1960s; his mother was a psychoanalyst close to the Communist Party.
Hollande and Moscovici received a first-tier education, and political activism brought them together. They were cherry-picked early in their careers by the Socialist intelligentsia, an inner circle around Mitterrand that included Jacques Attali, one of France's most brilliant minds; Jacques Delors, the architect of the European Union; and Strauss-Kahn, a future finance minister and International Monetary Fund director who was a near shoe-in for the 2012 French presidential seat until his career imploded in a New York hotel room last summer.
Hollande's career was marked by neither irresistible ambition nor meteoric success. Moscovici had a five-year stint in government, as minister of European affairs, a junior position. But prior to becoming president, Hollande had never held significant public office. Both did successfully run for elections for unremarkable positions in relatively remote regions, but neither had ever been a national public figure. For decades, Hollande was eclipsed by his partner and mother of his children, Ségolène Royal, who held various ministerial posts until unsuccessfully running for president in 2007. But unlike Moscovici, who settled into the secondary role of number cruncher, Hollande nourished vast personal ambitions. He bided his time, raising his profile in the thankless job of leading the factious Socialist Party.
Moscovici managed Hollande's campaign, which promised to bring normalcy back to the presidency and to France. But in the same breath, the duo tapped into the country's old revolutionary ethos, threatening the rich with a 75 percent income tax bracket and promising to increase wealth and estate taxes, which will affect most of the upper middle class. Their extraordinary education in business, economics, philosophy, and, of course, government gives the two men the confidence that they can turn things around for France by boldly reconfiguring the social classes. In a way, Hollande and Moscovici are the Occupy movement in suits.
One could have feared the new president would shower jobs and perks on mediocre ideologues who command regional votes, men and women for whom socialism and the growth of the public sector is a way to get money to spend on pet projects. Only a few months ago, Hollande was seen as a usurper trying to steal the presidency from more eminent Socialists, and he had few friends in his camp. Yet, as he formed his government, Hollande doubled down on his ideological principles. He selected his team on merit, giving the most important ministry -- finance -- to Moscovici and the office of prime minister to a colorless but loyal and competent alter ego, Jean-Marc Ayrault, a veteran leader of the Socialist Party.
Hollande immediately stepped onto the world stage. Only a few days after being inaugurated, he found himself at a G-8 summit in Washington, where he made clear in his first meeting with U.S. President Barack Obama that Paris wants out of Afghanistan. Going forward, Hollande is unlikely to stand in the way of U.S. global leadership as long as the demands on France remain minimal. France's love-hate relationship with the United States is particularly acute among the French left, which spews venom on U.S. religiosity and the inequality that its capitalism fosters and yet is awed by the United States' power and the liberal, irreverent, innovative popular culture of the big cities on its coasts. Plus, Obama, a man of the left, is the leader of a powerful nation. Hollande respects that.
In reality, French foreign policy is on autopilot, with talk about human rights, democracy, and aid to poor and indebted nations on the one hand, and arms deals and cozying up to dictators on the other. Hollande will try to emphasize the moral approach to foreign policy, but the man who promised to save French industry will have to protect the jobs that make France the world's fourth-largest arms exporter. His first real test will be the challenge of finalizing a sale of high-tech Rafale jet fighters to India.
Hollande sees that the most inviting development for Paris in global politics is actually the Arab Spring -- if only because almost ten percent of the French people are Muslim, of mostly Arab origins. But he lacks the means to have an impact. France is in a tight fiscal position, and Europe is absorbed by its financial crisis. Hollande can be more welcoming to Arab emigrants in France without antagonizing his constituents (which in itself would be a departure from the approach of former President Nicolas Sarkozy), but he will have to navigate the deep mistrust between his own camp and the Islamists who rose to power in the Arab world. The values of the Muslim Brotherhood do not speak to France's separation of church and state, or laïcité, a principle dear to the left.
And of course, there is Germany and its chancellor, Angela Merkel. Hollande's commitment to the European Union is unquestionable, and in the past he has opposed the majority of his own party on that point. But Hollande wants to reform the union into less of a free market and more of a collective safety net. Against Merkel, Hollande and Moscovici rightly point out that a recession is not the time for austerity. But state profligacy goes back decades, including periods of prosperity when governments should have saved for rainy days. Without a surplus to tap into, with few markets to borrow from, and with monetary policy in the hands of the European Central Bank, that leaves only the rich to tax. Germany, with a structural surplus and excellent credit, is Europe's rich.
The European campaign employs the same populism that Hollande and Moscovici relied on during the French campaign: anti-banker rhetoric, rage against the wealthy, and rejection of pro-market fiscal policies, which, the two argue, depress standards of living across the European Union. Here, the ideological rejoins the practical: In the short-term, salvation from the terrible economic and financial crisis visiting Europe can come only from transfers from the affluent to the have-nots.
Hollande's mandate for wealth redistribution will be strengthened if the left wins the French parliamentary elections in June and if Merkel's center-right party, recently defeated by the Greens in a Baden-Württemberg regional election, does poorly in the general German election slated for 2013. Either way, Merkel backed herself into a corner months ago by agreeing to bail out Greece. She has since expended so much financial and political capital that she is now forced to double down or concede that she was wrong. That gives the Greeks and the French considerable leverage over the embattled chancellor.
It would be easy to underestimate Hollande, an improbable, uncharismatic president who owes his ascension to a sex scandal. Unless one was in love with his politics, it was difficult to leave that auditorium at Sciences Po with the impression of having been touched by brilliance. But he knows to play to his strengths and never tries to be everything to everyone. Hollande is cunning, and what he lacks in seduction he makes up for in determination and endurance. The man has not changed: He has waited for his time to come.
Today, Hollande is the bearer of a clear -- if utopian -- vision shared by many Europeans. It is the vision of a society racially and religiously diverse but socially integrated, where income inequality is minimal, sustainable public transportation replaces automobiles, energy is renewable and consumed in moderation, and all are employed and no one is abandoned by the generous hand of state welfare. Previous socialist governments faltered due to their inability to create growth as opposed to simply redistributing it. Hollande and Moscovici are versed in those histories, and in retrospect, this is probably what they were trying to argue in the classroom: That equal distribution of income -- socialism -- is actually compatible with the kind of economic success promised in the recent campaign. Failure to put that into practice may well be Hollande's fate, but for now he embodies the mood of times that do not look kindly on the ups and downs of free markets.