Jobs? Jobs. Jobs. And more Jobs. Where are the jobs? Always the wrong answer to the wrong question. Do we have to wait upon big employers or the government for deliverance? Why not foster entrepreneurship and broaden capital accumulation to promote wealth creation? Instead we try to make the planet turn in the opposite direction. Maybe the French are finally starting to get it (if they listen to this banker). No such luck on this side of the pond.
From the WSJ:
The Emperor Creates No Jobs
France’s top central banker speaks some blunt economic truths.
French and German ministers met Tuesday in Paris to discuss the euro zone’s stagnant economy and rising unemployment. We hope they took with them the recent annual reportfrom French central bank chief Christian Noyer, who offers as clear an assessment as you’re likely to find in Europe of what ails the euro zone.
“The underlying objective,” Mr. Noyer writes, “is growth. Not just a temporary spurt, sustained artificially by public spending, but strong and lasting growth that creates jobs and is based on the development of modern and competitive production capacity. This kind of growth cannot just be summoned up. It requires a profound change in public policy.”
Consider France’s inflexible labor market. Mr. Noyer says France “is one of the biggest spenders on employment policies in the developed world, but it still has one of the highest levels of unemployment.” The central banker argues that France’s various programs and incentives to boost employment are undermined by their sheer complexity.
He also asks a fundamental question: “Do these subsidies not serve to offset market rigidities that could in fact be addressed directly at a lower cost and with more effective results?” In almost any other country, the question would answer itself. But to argue for “flexibility” in France is to risk the barricades. Maybe it takes a central banker to say that the emperor creates no jobs.
German GDP, Mr. Noyer notes, “contracted almost twice as much as in France in 2009.” But Germany’s greater labor-market flexibility allowed for a much faster rebound. France lost 500,000 jobs in that period, while German unemployment “remained stable,” in part because businesses could cut working hours when growth slowed. [Note: this is called market flexibility in the face of inevitable change.]
With French President François Hollande pushing older workers into retirement to “make room” for the jobless young, we hope he pays attention to Mr. Noyer’s words on jobs: “Public policies are often overly concerned with preserving the jobs of the past, at times to the detriment of future job creation.” He adds: “Today’s jobs are not the same as those of yesterday and, likewise, those of tomorrow will be different from the jobs that exist today.” [And nobody in government or the private sector really knows what tomorrow will bring. I doubt it will be a Tesla in every garage.]
Mr. Noyer’s third truth concerns government spending, which is 55% of GDP. “For the past ten years,” he writes, “France has had one of the highest levels of public spending in the world. Over a certain threshold, which our country has probably crossed, any increase in public spending and debt has extremely negative effects on confidence” (our emphasis). For this reason, trying to stimulate growth through a spending binge is bound to be counterproductive. Businesses and households, anticipating higher future taxes to pay for the binge, will cut back, offsetting any boost from deficit spending.
Mr. Hollande has in recent months led the charge for new German-financed spending to bring Europe out of recession. Mr. Noyer has hit on a better cure: less government spending, more flexible labor markets, and more competitive private firms able to create the jobs of the future. If only the President would listen.