A professor at the Massachusetts Institute of Technology (MIT), Daron Acemoglu is one of the most influential economists in the world, and some predict a Nobel Prize in the near future, having already received the prestigious John Bates Clark Medal in 2005. A long-time student of the role of institutions in the economic and political development of countries, he believes that the engine of the economy is politics, and that what leads to shared prosperity is the democratic system. Co-author of the best-selling Why some countries do better than others*, THE Turkish-American professor makes the following observation: since the 1980s, liberal democracies have not sufficiently kept their promises in terms of employment, economic stability and public services. Recalling however that “on most issues, democratic governments have done better than non-democratic governments”, his fascinating work constitutes an important key to understanding why, by rejecting the “system”, more and more workers in industrialized countries left by the wayside have taken the bus of the extremes.
Daron Acemoglu strongly urges governments to build shared prosperity and reconnect with the aspirations of their citizens, otherwise the bond of trust between the latter and the institutions will be definitively broken. Attentive to the latest tremors of French political life, Daron Acemoglu takes a positive view of the economic reforms carried out by Emmanuel Macron. And if the RN did not succeed in the Matignon bet on July 7, this polymath assures us: the problems that the French establishment will have to face remain the same.
Macron’s good points
“The economic reforms implemented by Emmanuel Macron since 2017 have generally borne fruit. Although it is still high compared to the European average, youth unemployment has not been this low for about twenty years, more jobs are being created and there are signs of economic recovery. Not all of Europe has yet returned to a normal situation since the financial crisis of 2008 and there are still lingering effects of the Covid crisis, but the French economy is doing much better today than it was ten years ago, even if it is true that Macron has not resolved certain fundamental problems (low productivity growth as everywhere in Europe, France is not yet creating enough quality jobs, etc.).
Despite its good performance, this policy has not been recognized at its true value by the French, perhaps because Macron has not managed to convince them, as on the pension reform that he was right to do but that he imposed in a disorderly manner. It is probably also due to his personality and the way in which the French political situation has been shaped in recent years, at the time of the yellow vests in particular, a turbulent period during which his leadership style did not really work.
In light of the results of the legislative elections, Macron has in a way succeeded in his gamble of dissolution, but this should not mask the fault lines. First of all, a considerable number of French people are so dissatisfied that they turned to the National Rally during the recent elections. Economic difficulties, immigration and this impression they have of not being heard in the corridors of power remain problems that the French establishment will have to face. Because the RN, for its part, is interested in the same questions that are being asked or are causing problems in many countries today. Marine Le Pen, for example, emphasizes the protection of workers and the protection of the people against globalists. This is exactly what Trump says and we see the same thing in the Netherlands, Hungary, etc. This message resonates all the more because of the stagnation of wages and perhaps also because of immigration that the populations consider uncontrollable.
Putting the package on work
Overall, democratic governments have done better than non-democratic governments on most issues in recent decades, but they have not done as well as they promised, and they have not communicated well to the public. If you look at the industrialized world as a whole, you see that almost every country is experiencing a trend toward increasing inequality. In fact, people’s attitudes toward democratic institutions have deteriorated markedly. You have to understand that people are much less enthusiastic about democratic systems when inequality is increasing or when they feel that their conditions are not improving. Conversely, most people support those same institutions when they have direct experience of a democracy that produces, among other things, public services and decent wages. If you look at the United States, about half the workforce has not experienced any real wage growth over the last forty years! We can see traces of this phenomenon in France, but to a lesser extent due to better regulation. It is therefore essential to build shared prosperity.
This dynamic is further exacerbated by the fact that the last forty years have been marked by highly technocratic policies that, when they impose certain reforms on citizens and these fail, produce the worst possible results. The population ends up turning its back on democracy and more particularly on the most centrist candidates, the very ones who have been in power for most of this period. Surveys conducted around the world show that young people are less in favor of democracy. They say they are more open to other forms of government. And where things get complicated, in countries like France and the United States, is that antidemocratic politicians now speak the language of democracy. For example, Donald Trump and Marine Le Pen claim to be true democrats.
Reorienting technologies
One of the solutions that would meet workers’ expectations is to implement decent wage increases that are broadly shared across demographic and skill groups. But because there is no magic bullet – I mean you can’t say, “Okay, I’m going to create a lot of jobs and I’m going to pay them 50% more” – the solution also has to involve more structural change. By that, I mean using technology in a way that is more worker-friendly and increases worker productivity, not just capital productivity. The European Union can do that, and it has been quite active on some of these issues, but it has not prioritized the necessary direction of technology in a more worker-friendly direction. Artificial intelligence can be a tool to improve workers’ decision-making, to help them get better information when they’re trying to solve problems or deal with more complex situations. If we just prioritize the development of automation technologies, it will be very difficult to create high-paying jobs. However, the use that is made of AI today is only a continuation of the acceleration of this automation.
Do not underestimate the “immigration” effect
If you look at Sweden, for example, wage inequality has not increased and the country does not have a major unemployment problem. However, Sweden is under pressure today because it has experienced the highest per capita increase in immigration in all of Europe in recent years. Now on this issue, I think there has been a disconnect between what public opinion wants and what the left and centre-left parties have implemented. Of course, for humanitarian reasons, especially when people are fleeing war zones, it is very difficult to decree the closure of our borders to people who are coming to save their lives. On the other hand, the mainstream media and the left have ignored the reactions of the population. In the United States, immigration is the main reason for Trump’s presence in the spotlight. It is also probably the number one issue that has made the RN a mainstream movement in France in recent years. There are two aspects to this. The first is economic. On this point, the literature does not speak with a consensual voice, but it is clear that immigrants do not “take” all jobs and do not create disorder in the economy. On the other hand, they “take” some jobs that, if this had not been the case, would have been better paid to attract local workers.
The other part is cultural: working-class people are not always ready to welcome immigrants, especially in large numbers, especially in the form of enclaves. So politicians have to find a way to address these issues, not just skim over them. They haven’t started the kind of conversation that’s necessary to convince voters to figure out under what circumstances we should welcome refugees, what limits we would want to impose, what other restrictions we should put in place. Take Germany, for example. Former Chancellor Angela Merkel initially refused refugees, and then she did a complete about-face, but it was not communicated very well and it was done in a very haphazard way. On humanitarian grounds, I think her decision was the right one, but it probably should have been handled better. A much more open discussion would say, you know, on humanitarian grounds, we should welcome the following people, but we’re going to limit other forms of immigration. Its consequences on the labour market should also be considered and communicated. It would therefore be a question of concluding a sort of deal with the populations so that they participate in this process and do not have the impression that something is being imposed on them from above.”
* Markus Haller, 2015, 640 p.
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