For Emmanuel Macron’s historical companions, the awakening is rude. In 2017, the great specialist in growth theories Philippe Aghion, professor at the Collège de France, had largely inspired the young president’s economic program. Seven years later, and while the French have punished the presidential camp in the second round of the legislative elections, the economist takes stock of a torn France, in which populism feeds on a blocked social elevator. Public services, taxation, sovereignty and innovation… the roadmap for a peaceful France?
L’Express: In the second round of the legislative elections and while the New Popular Front came out on top ahead of the presidential camp and the National Rally, what portrait do you paint of France?
Philippe Aghion: A contrasting portrait. On one side, the France of those who succeed, a France of metropolises, which creates jobs, reindustrializes, becomes attractive again for foreign investors and boldly launches into technological revolutions. On the other, the France of those who succeed less, those who remain stuck in areas that are no longer breeding grounds for jobs as before. This France feels a sense of stagnation, abandonment, downgrading, contempt on the part of the elites. It is this lack of prospects, this blocking of the social elevator and this feeling of being without power to influence those in power that fuels populism.
But all Western countries have been confronted with these two shocks – globalization and technological revolution – and yet France has suffered more…
Yes! Because in France, these shocks have gone hand in hand with massive deindustrialization since the mid-1990s. On the one hand, Germany has managed to preserve control over part of the productive segments of its production chain: in particular, thanks to social dialogue, which led to the Hartz reforms. [NDLR : accords emplois-salaires] on the job market, and also thanks to a close connection between school and business which has made it possible to train a large number of what I call “semi-skilled workers”, that is to say, specialized technicians. At the same time, France introduced the 35-hour week indiscriminately and encouraged its industrial companies to massively relocate their activities abroad. You do not have desertification across the Rhine as you observe, for example, in Lorraine. We are today paying the price for these past choices. Reversing the trend will take a lot of time.
How do you explain this need for protection that materialized in the ballot boxes, when France has one of the most developed welfare state systems and social spending relative to GDP is among the highest in the world?
Still the consequence of the desertification that has affected many regions of France. In recent decades, in many villages, the post office has closed, as have grocery stores, and in many small and medium-sized towns, some medical care has become inaccessible (notably a large number of maternity hospitals), fueling a feeling of abandonment in these territories that materialized during the yellow vest crisis. In addition, the general quality of public services has also deteriorated, and less than ever we have the culture of evaluating the service provided and the concern for the efficiency of public spending.
This is particularly true in two public services that are essential to the lives of our citizens. Education and health. We spend as much as the Finns on education as a percentage of GDP, but we score poorly in the Pisa tests for assessing educational achievement in reading and mathematics. Some reforms have been launched, such as reducing the number of pupils per class, but this is not enough. Teaching needs to be refocused on core subjects – reading, grammar, mathematics – textbooks need to be restored to their former glory, schools need to be given more autonomy, drawing on good practice elsewhere. Furthermore, we have not sufficiently upgraded the teaching profession and, as a result, the level required to become a teacher has fallen in the competitive examinations. In hospitals, the organisation is clearly failing, because it gives too much power to administrators and forces doctors to spend too much time doing paperwork. Caregivers are therefore frustrated and fleeing to the private sector. In total, whether at school or in hospital, a two-tier system has developed. Between those who can afford a good service and the others. All this fuels this need for protection.
There was a lot of talk about migration policy during this lightning campaign, how do you judge these debates?
My colleagues Emmanuelle Auriol and Hillel Rapoport have put forward very relevant ideas for an intelligent migration policy. Like the Canadian points system, for example, which makes it possible to control the number of migrants each year. The problem in France is that, under pressure from the RN and its cronies, the debates have focused on the wrong questions: should immigrants and French people be given the same rights? Should the right of the soil be eliminated? Should dual nationals be treated differently? I am in favor of France giving itself the means and instruments for an intelligent and dignified migration policy.
Isn’t the result of this election also the failure of “whatever the cost”?
It is a fact that the French have not realized everything that the State has done for them, especially during Covid. But this short-sightedness can also be explained by the verticality of decisions. The “I know what is good for you” no longer works. The French need democracy, debates, they do not want to be treated like children. The pension reform is a good example, more dialogue was needed and I think the CFDT was ready for it. Various opportunities for dialogue in recent years have not been exploited. Look at the secrecy in which the dissolution was decided, right up to the presidents of the parliamentary institutions and the Prime Minister himself!
Would you say that the abolition of the ISF was a mistake and do you support a new taxation of wealth?
I take responsibility for it: I pushed for the abolition of the ISF, because I wanted France to align itself with other European countries. I approved these tax reforms and I am not going to defend the opposite today: this has helped to increase the attractiveness of France and increase our tax revenues. But there has undoubtedly also been a lack of social justice in the implementation of certain reforms in recent years. The pension reform mainly affected people who started working early and stopped earlier, which is not the case for people who, like me, started working late! Similarly, when the government realized at the end of last year that the deficits would exceed 5% of GDP, it mainly targeted the unemployed. It gave the impression that it wanted to either protect its electorate or spare those who could block the country. I am in favor of the effort, but it must be shared.
Can the welfare state be repaired and public finances restored without increasing taxes?
I was in favour of a modulated blank year to protect the most vulnerable categories of the population. In the longer term, a new pension reform will be needed – based on points? – more targeted at people who started working late. The State will also need to be reformed. There are still too many administrative levels. Cap 2022 tried to tackle the problem, but the administrative millefeuille project was not addressed.. On taxation, we may have to lift the taboo on increases in certain taxes. For example, why not align our treatment of family holdings with what is done in the United States. But, for me, the main instrument for restoring our public finances remains growth. We need to reduce certain operating expenses to better invest in growth expenses (AI, energy transition, etc.). The Italians did this with Prodi and Draghi, and Italy is now generating a primary budget surplus (i.e. excluding payment of interest on the debt). This is how we will resolve our budgetary problems. Certainly not by massively increasing taxes, as proposed in the New Popular Front program.
Are we not today confusing economic sovereignty and nationalism? ?
It is legitimate for a country to want to aim for excellence, to be competitive, to generate trade surpluses. This, in my opinion, is the right form of sovereignty. Because trade surpluses provide room for maneuver, give influence at the global level, and allow borrowing on the financial markets on better terms. And this export capacity is obtained by innovating. By making better products that will sell better! The problem is that sovereignists do not recognize the role of innovation and prefer to brandish the banner of protectionism. I do not support free trade in an angelic way, obviously, because other countries – the United States, China, etc. – have protectionist industrial policies and we must defend ourselves.
But if France bristles with customs barriers, the first consequence will be a reduction in the purchasing power of citizens since they will pay more for the products we import. The second consequence: a reduction in the innovation capacity of companies, which will no longer be able to export their products abroad as before: in response to French barriers, many countries will close their markets to French products, which will mean less profit for companies and therefore less capacity for investment. For a country the size of France, excessive protectionism is, in my opinion, a loss of sovereignty.
What danger for the economy of an ungovernable France?
This is a France that watches the trains go by. I recently submitted a report on artificial intelligence. Today, we need political will to implement it. We cannot wait, otherwise we risk missing this revolution, while we have everything in France to become a country at the forefront of AI. I could add the green revolutions… The challenges are considerable. We will need a political consensus to push new projects and, therefore, we will need a Prime Minister capable of negotiating political agreements on these crucial issues. Paralysis would be suicidal for the country.
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