Do political changes have an effect on growth? What form of coalition would be preferable from a strictly economic point of view? While political wrangling drags on to build an alliance and propose a name for Matignon, economist Vincent Pons, professor at Harvard Business School and winner of the Best Young Economist Award in 2023, dissects the recent sequence.
L’Express: You have analyzed thousands of elections over decades and on all continents. What consequences do you draw from political alternations on growth?
Vincent Pons: Indeed, we collected with other researchers the results of presidential and legislative elections around the world since 1945. Then we compared the economic performance of the country in the years following the election, when the incumbent party remained in power, to those achieved when the incumbent party was defeated by the opposition.
On average, these electoral transitions are quite beneficial for the economy. Trade with other countries is stronger, inflation and unemployment are lower, reforms are launched, and even indicators of the quality of democracy, such as the level of corruption, improve. Historically, electoral alternations are therefore rather a good thing for the countries in which they take place. This result is reassuring, since these alternations are a central component of what makes a democracy: it is one of the key differences between real democracies and superficial democracies, in which the same individual or the same party is reelected from election to election.
In the case of France today, this political alternation is also a leap into the unknown since there is no absolute majority in the Assembly. Would a technical government be better for the economy?
Three options are possible today. A coalition firmly anchored on the left with the New Popular Front as its center of gravity; a coalition ranging from the left to the Republicans, which would resemble the “Grand Coalition” that brought together the SPD and the CDU in Germany from 2005 to 2009 and then from 2013 to 2017; and a more technical government. In terms of pure management, a technical government, composed of experts, could reassure the financial markets and therefore limit the interest rate paid by the State on sovereign debt. This is what happened in Italy, with the technical governments of Mario Monti in 2011 and Mario Draghi in 2021. But, on the other hand, this choice risks fueling the anti-elite discourse.
In Italy, the last government of experts fell to make way for a coalition dominated by the far-right party of Giorgia Meloni, the only one to have refused to support this government. A government of experts may therefore seem satisfactory in the short term, but in my opinion it is a democratic trap, especially when the elections are marked by the defeat of the party in power. In France, let us recall that the candidates of the government coalition Ensemble pour la République obtained only 20% of the votes in the first round, i.e. 6 points less than in 2022 and 12 points less than in 2017. The centrist camp has also lost more than half of its seats in seven years. It now only has 26% of the deputies, compared to 61% in 2017.
Is a coalition composed exclusively of the New Popular Front possible?
No, the distribution of seats in the National Assembly is such that a coalition could not mathematically last without the at least implicit support of a large part of the deputies of the Macronist bloc. This means that the NFP will not be able to implement its entire program. It will therefore be necessary to learn to govern with coalition agreements. This is a new feature in the French system, since the two-round single-member constituency had until now favored the emergence of absolute majorities. But the tripartition of the electoral space has upset the old opposition between two blocs, on the left and the right of the political spectrum.
From now on, the survival of democracy requires that parties from different camps find an agreement, which will require abandoning some of their proposals and accepting some of their coalition partners’ proposals. Such negotiations are common in our neighboring countries. In Germany, for example, in the absence of an absolute majority, the norm is that the party that comes out on top in the elections takes the initiative to form a coalition. Government action is then defined on the basis of a “coalition contract” and framed by the regular holding of a “coalition commission” to resolve disagreements.
Is France ready for this type of coalition?
That is the big question. I think that the two-round election proved that our political actors know how to act out of a sense of duty. I was pleasantly surprised by the very large number of withdrawals that took place on the left in favor of candidates from the center and vice versa, in order to avoid three-way races and block the National Rally. Similarly, the voting instructions were rather well respected by voters from the left and the center, a very high proportion of whom agreed to vote for candidates from a camp different from their own. It is now imperative to succeed in creating a coalition government, because France needs reforms. A poorly governed France would be a stepping stone to a victory for the far right in the next elections. Especially since today, the RN, due to its very large number of deputies, will benefit from increased financial resources to train its executives. In this context, we must expect that during the next elections, the RN will present more candidates without skeletons in their closet, capable of answering questions and debating…
The budgetary issue with the construction of the Finance Act for 2025 will be the test of fire for the next government. Do you believe that an agreement can hold when the paths put forward by the left and the center were diametrically opposed?
There can be no lasting coalition if the proposed spending is not funded. So reforms and a comprehensive program will have to be proposed. But I think that an agreement on some public spending is possible if the revenues to match are found. That is where economists have a role to play.
You talk about expenses and income but never about savings…
Because a coalition agreement cannot be built with the left if it only relies on reducing spending. It will undoubtedly be necessary to reduce certain expenditures, but it will also be necessary to talk again about tax increases, particularly on the wealthiest. In the world, the vast majority of successful budgetary adjustments in recent decades have combined reductions or redirections of expenditures on the one hand, and increases in taxes on the other.
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