Oxford University Press's
Academic Insights for the Thinking World

Macronomics En Marche

Emmanuel Macron has completely upended French politics. Just over a year after founding a new centrist political party, En Marche (“On the move”), the former investment banker and Minister of Economy and Finance was elected president of France on 7 May by an overwhelming majority. Within the next few weeks, En Marche fielded a full slate of candidates for elections to the National Assembly and, on 18 June, won 350 out of a total of 577 seats. Given Macron’s popularity and commanding political position, he may well succeed in pushing his economic program through Parliament.

France has the sixth largest economy in the world and, after Germany and the UK, the largest in Europe. A healthy French economy will contribute to the revitalization of the European and world economies, and so it is worthwhile to take a closer look at ‘Macronomics.’

At the very top of Macron’s agenda is labor market reform which his Prime Minister, Edouard Philippe, has pledged to enact by September. French employers have long complained about the inflexibility of labor law which sets wages on an industry-by-industry basis, mandates overtime for anyone who works more than 35 hours per week, and makes it nearly impossible to fire workers. These factors have led employers to get around the restrictions by using fixed-term employment contracts, some for as short as one month, and are widely seen as an obstacle to increased productivity and economic growth.

Macron has advocated increasing labor market flexibility by decentralizing the wage-setting process, allowing individual firms to negotiate with workers over working hours and pay rather than be bound by sector-wide agreements.

Despite his popularity and parliamentary majority, labor reform may prove tricky to implement. Labor union leaders are cool to these reforms and, unsurprisingly, have urged the government to proceed slowly and with caution. Previous attempts at labor market reform have backfired on the presidents who proposed them. Macron’s immediate predecessor, François Hollande, abandoned a modest labor market reform in the face of strikes and parliamentary opposition in 2016. President Jacques Chirac was forced to back down on a 2006 youth labor law reform in the face of widespread opposition. Following through on this campaign promise will be an early test of Macron’s ability to lead France.

 Given Macron’s popularity and commanding political position, he may well succeed in pushing his economic program through Parliament.

Macron famously campaigned on the slogan, “neither the right nor the left.” And on fiscal policy he brings a bit of both to the table. From the right, he has promised to bring France’s budget deficit down to three percent of GDP, in line with the European Union’s target for member states. He has pledged to reduce spending by €60 billion per year and to cut 120,000 civil service jobs through attrition. He has also called for cutting the corporate tax from 33% percent to the European Union average of 25%, and to reduce some individual taxes and social insurance contributions.

From the left, he has promised to increase public spending by €50 billion over five years on training, energy and the environment, transportation infrastructure, health, and the modernization of the government services sector. His plans envisage reduced class sizes, particularly in poorer areas. He has called for recruiting another 10,000 police officers and increasing the number of prison spaces by 15,000. This agenda will completely satisfy neither left nor right, but if he can pull it off, it may reinvigorate the French—and European—economies.

In terms of governance, Macron supports tougher regulations on parliamentarians, banning them from doing any consulting work and from employing family or friends. Presidential candidate François Fillon’s chances were sunk when it was discovered that he had paid his wife more than €800,000 as his parliamentary assistant over the course of 15 years. Such a reform is long overdue.

Finally, Macron is both a staunch Europeanist and, more generally, a globalist. Distinctly different from Marine le Pen, his opponent in the presidential run-off election, Macron is fully committed to the European Union and more open immigration policies. He has proposed increasing the fiscal powers of the EU, giving it a finance minister and debt-raising capacity, a proposition which is not likely to appeal to German Chancellor Angela Merkel, who remains suspicious of any moves that would leave Germany on the hook for the budgetary messes of its EU neighbors.
Macron has proposed bringing France’s defense budget up to 2% of GDP to meet NATO’s target for member countries (currently only the United States, Greece, Estonia, the UK, and Poland meet that target). And he supports the Comprehensive Economic and Trade Agreement (CETA) between the EU and Canada, the US-EU version of which was killed by Donald Trump.

Emmanuel Macron has set out an ambitious and sensible agenda, including labor market reform, reducing the size of government, targeted fiscal expansion, and government reform. Perhaps most hopeful is that he is pursuing an emphatically globalist path. With recent retreats from openness, as illustrated by Britain’s Brexit folly and America’s ill-advised election of Donald Trump, we can only wish Emmanuel Macron bonne chance.

Featured image credit: Macron President, Emmanuel Macron campaign poster, Paris by Lorie Shaull. CC-BY-SA-2.0 via Flickr.

Recent Comments

There are currently no comments.