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France partly abolishes private ownership

I know that many conservative French women like their socialist leader Hollande – among other things, he is an active warrior. However, what he's doing internally would look rather terrifying to me. It's not just about huge tax rates for the rich anymore.

A story hasn't made it to the world media. The French National Assembly has already approved some Hollande's bills sending France two more steps closer to communism.

According to the new bill, takeovers have to be consulted with the employees (!) as if they were kolkhozes in the Soviet Union. The second major point of the bill is that

[t]he owner of a company with more than 1,000 employees who is trying to close a unit with at least 50 employees has to do everything she can to avoid the closure and get a stamp from a special collective of parasitic, pushy, obnoxious apparatchiks that will officially confirm that everything has been done to preserve the jobs.
In other words, you can't even decide whether or not you should close a door in your "privately" held company. This regulation is apparently meant to reduce the unemployment rate. Holy cow.




It's not hard to see what is probably happening inside Hollande's skull. He has distributed tons of nonsensical promises about a lower unemployment rate and these promises don't seem to materialize. So he's ready to do anything to achieve these goals. His mindset is a mindset of a Marxist who apparently believes that a zero unemployment rate is a good thing.




Let me tell you a secret. In the communist bloc, the unemployment rate was zero. The communist leaders were expected to be proud about this arrangement and the citizens were obliged to be proud, too. But the forced employment and the elimination of the basic right of a company to fire an employee were among the key detailed features of communism that reduced the GDP approximately by one order of magnitude (over the 40 years of Czechoslovak communism, to pick an example I know very well) relatively to where the GDP would stand without communism.

A nonzero unemployment is an essential component of a working economy. Companies need a pool of potential employees from which they may choose new workers that are required due to the growth of the company, its gradual or sudden restructuralization, or to replace workers who left (or retired or died). This replacement should occur sufficiently quickly because many other people in the company depend on the good and continuous work of many essential workers. Also, the nonzero unemployment encourages people to work because they're afraid of becoming unemployed themselves.

Concerning these particular policies, takeovers and closures are essential processes in the everyday business life in an efficient economy, too. Companies sometimes merge which allows them to do certain operation just once although these operations would have been done at two places before the merger. This allows them to close some sites. Such a closure may be bad news for those who are just losing their jobs but it's good news for the whole company and the whole society because such things improve the efficiency of the company's work and the efficiency of the whole economy.

Much of the increases in productivity have been due to similar reorganizations. Even if you take the perspective that the economic growth has been mostly due to the technological progress, and I am inclined to agree, this technological progress only brings the positive economic consequences if it is allowed to reorganize how the people work and the closure of some units that have become redundant is an essential part of it.

The new bill, if it comes into force, may also be interpreted as a partial nationalization of the French economy because of its retroactive character. The bill cripples not only the rights of the companies that will be newly founded but also the rights of the companies that already exist. So you may have bought a company – or stocks in a company – and you may have thought that it has belonged to you and you may generate decisions about it. However, you are suddenly told that the decisions about the company aren't made just by you. Instead, they are done by you and a special collective of parasitic, pushy, obnoxious apparatchiks anointed by the government.

So if you decide that there's a good way to make your company more effective or more profitable, a way that would lead to the reduction of the number of employees, but this improvement isn't done in any "crisis" – you just want to improve a company that is already doing sort of fine – you have two possibilities. The first possibility is that you just give up. You realize that you now live in a partial communism where such things are politically incorrect – illegal, in fact. The society no longer respects your rights as a private owner and it doesn't value efficiency, excellence, and continuing progress. It values mediocrity, stagnation, and full employment, even for employees who are redundant. So you just let your company stagnate – and perhaps wait for the moment when things go wrong and the company goes bust. That's much more likely if your company is "just above the red line".

The second possibility is that you artificially engineer the economic results of the unit you want to close so that the apparatchiks have to agree that the unit isn't economically sustainable. You pay salaries to the employees in this unit and tell them not to work much, for example. It's easy and there's no possible way to prove that this is what you are doing – the state institutions are acting in this way all the time, after all. So the economic results of the unit will be bad and the apparatchiks will agree that it may be closed. Or the bill allows you to close the company if you pay a huge fine, like 2 years of income for each lost employee.

In both scenarios, the owner will have to pay some extra expenses. He either sacrifices the extra profit that could have been achieved by the reorganization, or he has to pay the extra money needed to defend the closure. These extra expenses that owners are forced to pay reduce the value of the companies, including the existing companies. The companies are being partly nationalized; some events in their life (and they're not hypothetical events, they're events that are normally affecting a significant fraction of the companies each year) aren't decided by the owner but by government-affiliated apparatchiks who have a completely different agenda, like their sick communist dreams about a full employment.

As kids, we would sometimes be told that France and Italy were closer to the ideals of communism. The pro-communist teachers wouldn't really explain that they still had democracy, unlike Czechoslovakia, but the essence of the claim was more or less right. The policies that are ultimately possible in France aren't that different from what we knew before the year 1989.

Bloomberg and others mentioned that the French companies already belong among the least targeted in the EU, a "virtue" that is likely to become even worse. This Fortress-France status of a country isn't healthy for an economy by itself because it prevents the country from focusing on activities it's really good at and it diminishes the flow of know-how across the borders.

Incidentally, I don't even expect the unemployment rate to be significantly decreased. While the firing of the currently employed people will be discouraged, the creation of new jobs will also be disfavored – owners will often prefer to avoid new risks and costs associated with the difficult firing process in the future.

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reader petrossa said...

France lives in a time bubble. They just ignore everything and live in their fortress. The French are best captured with the joke: If the world comes to an end move to France, eevrything there happens 15 years later.
But anyway, the next government will undo those laws just as this one undid laws the previous government made.
It was funny. Hollande has such a minority complex and hatred of sarkozy he just had to win from Sarkozy and destroy his legacy. Strauss-Kahn was the first victim on his path . Hollande is a real nasty piece of work.


reader Seth said...

This new policy ultimately will lead to greater unemployment as sick companies who are attempting to reorganize to become profitable wait on government functionaries to bless the wanted reorganization. The red tape will become nightmarish over time. Eventually, all companies in France will be sick and dying as they will be unable to operate in an environment where creative destruction makes for strong and healthy companies and a vibrant economy with nonzero unemployment. The policy invites calamity long term.


reader Xemist said...

Capitalism: Elitism insists the better is preferable to the worse. The Seven Dreadful Sins: stupidity, insanity, fetish, religiosity,malice, irresponsibility, and mandated charity . God save us from the congenitally inconsequential.

Socialism: Worship the lame, halt, dim-witted, and proven unable. Management murders the future, for the only trusted employee is one whose sole marketable asset is loyalty. Management is rewarded for enforcing process not creating product.

Government solves the paradox of want amidst plenty by destroying the plenty - for all but its few managers, hence "fewdalism." Honest citizens do not have a license to kill, but they are granted learner's permits by feckless crapweasels' compulsory degradative egalitarianism.


reader Shannon said...

Exactly. Hollande didn't get elected, he broke into power with lies. As a French, I've given up any hope for my country. There isn't one day I'd like to see our President and his concubine executed just like the Ceaucescu (only with rusted bullets, and save the brand new ones for the next one)....


reader Shannon said...

Hollande promised earlier this year he will invert the unemployment curve. He will do whatever it takes to a socialist to meet this deadline: this new law plus half a million State-aided work contracts will help for a while and keep his popularity rating non zero.


reader petrossa said...

patience, in a few years he's out. No way he gets reelected.


reader Guest said...

I live in France. Already we have one employable but lazy young person (in their 20s) who has been given a job to sit in the tennis club and watch porn/play video games. This is supposed to be a job of the future. It is a waste of money.


reader Peter F. said...

Hi Shannon - please allow me to detach the letter-string "non" from your name and attach it to the front of "executed"! ;-)


reader Remarkable Kanoodle said...

We seem to be in another "progressive era". The last one ended with WW2. Let's hope this one doesn't.


reader TomVonk said...


But the forced employment and the elimination of the basic right of a company to fire an employee were among the key detailed features of communism ...
.
Dear Lubos this is not an accurate statement.
Actually the company, ANY company and even more so the local secretary of the communist party had an unchallenged right to fire immediately anybody without any kind of justification.
And they actually used this right often and intensively.
.
What was the key feature was that the reasons (that always remained unstated)were in that order :
- the job was needed for a relative of the company boss or a relative of any random communist party aparatchik.
- the person in job did not show proper communist consciousness. F.ex she made jokes about comrade Novotny.
- the person in job refused to do a service for the director when he asked for it
- the person had an unreliable and actually anti socialist background. F.ex my cousin teaching english was fired from the Prague university because her mother fleed to Germany.
However you are fully right in one point - as unemployement didn't exist, she got a job as a cleaning woman. Ah and yes, even if one wanted, one couldn't refuse a job once one was imposed anyway.
The alternative was Pankrac :)


reader TomVonk said...

But the forced employment and the elimination of the basic right of a company to fire an employee were among the key detailed features of communism ...
.
Dear Lubos this is not an accurate statement.
Actually the company, ANY company and even more so the local secretary of the communist party had an unchallenged right to fire immediately anybody without any kind of justification.
And they actually used this right often and intensively.
.
What was the key feature was that the reasons (that always remained unstated)were in that order :
- the job was needed for a relative of the company boss or a relative of any random communist party aparatchik.
- the person in job did not show proper communist consciousness. F.ex she made jokes about comrade Novotny.
- the person in job refused to do a service for the director when he asked for it
- the person had an unreliable and actually anti socialist background. F.ex my cousin teaching english was fired from the Prague university because her mother fleed to Germany.
However you are fully right in one point - as unemployement didn't exist, she got a job as a cleaning woman. Ah and yes, even if one wanted, one couldn't refuse a job once one was imposed anyway.
The alternative was Pankrac :)