TCS Daily

Profit or Loss?

By Sylvain Charat - May 13, 2005 12:00 AM

First it killed the much-needed Bolkestein directive on liberalization of services to preserve its own domination of this market. Then it shot down EU Trade Commissioner Peter Mandelson's proposal to grant to preferential tariffs Asian countries hit by the tsunami to help their textile industries enter the European market. What France will do next to promote its collectivist agenda? How about the stock market?

There is no better symbol of free market than the trading of stocks. For a state that is used to controlling markets, the ultimate temptation is to control the core of capitalism. And so President Jacques Chirac along with the French Parliament is launching an offensive against the stock exchange.

In January, Chirac declared "I am asking to the government to study specifically an adjustment of taxation, in order to tax more a person who would buy a stock and sell it quickly, but reduce taxation for the long term investor." This clearly shows a political will to control exchange operations and above all to tax profits.

But if this daring proposal is not yet echoed in the Parliament, the very notion of controlling profits is widely accepted on the French Right and especially in the President's party, the UMP. This, an old Gaullist idea that intended to organize redistribution of profits to workers. De Gaulle wanted businessmen, employees and workers to get together and decide salaries. "They would all receive by law and according to their hierarchy, a salary proportioned to the global return of the company," declared stated the former president. This collectivist economy for the market is France's third way between communism and capitalism, an idea the French Right is raving about.

And indeed, Nicolas Sarkozy, former minister of finance and now president of the UMP, is so worked up about this proposal that he vigorously defended the idea that employees have the right to "share profits" like shareholders do.

Thus, Jacques Godfrain, representative in the French National Assembly and former member of Chirac's government in 1995-1997, sent a letter to Prime Minister Jean-Pierre Raffarin and all representatives on March 16, demanding that "when a company repurchase its own stocks, a part of the profit made by the company shall be redistributed to its employees".

This idea was taken up again by UMP Rep. Patrick Ollier, president of the economic affairs commission in the French National Assembly, but in a much more socialistic way. He wants the government to create a "dividend of work" and stated: "I wish that this dividend be compulsory in all companies with stocks, whether they are quoted or not."

Quite obviously Marxist, this proposal shows a deep misunderstanding of what is a profit. The source of profit does not lie in workers or employees but in businessmen who have the abilities to create something new, to create an added value that will make the difference and bring money to their company. Therefore, only businessmen and shareholders own profits and they are the only ones to decide what they want to do with it. But the French presidential party ignores this notion and goes on with its collectivist agenda.

The next step was taken on March 23, when UMP Rep. Alain Joyandet presented a bill to the assembly in order to enact in the law this dividend of work, called in the bill a "share bonus". Because of its Gaullist roots, Chirac's party is very receptive to an idea that satisfies his socialistic tendencies. But this is no less than collectivization of profits and a denial of the free market process. If this bill is passed, French law will legitimize plunder made in the name of social cohesion.

For French members of government and parliament, profits are made to be shared, putting aside reinvestment. By rejecting the notion of profit they reject the notion of investment. Thus in job matters or financial matters, there cannot be any creation, but only sharing. This Marxist philosophy infects the French government's financial decisions. If the French government follows this dangerous path, it will certainly create a social deadlock in a country where growth is too slow to sustain a strong economy.

French authorities should be reminded of what former German Chancellor Helmut Schmidt once said: "Today's profits are tomorrow's investments, and tomorrow's investments are the day after tomorrow's employments." But the French Right sacrifices common sense economical principles and real social policies in order to calm down union pressure and beat the Left at its own game.

France is about to create an economic context hostile to companies and stocks. Far from benefiting from such policies, France may meet economic growth difficulties and social failure. This would be the result of President Chirac's core value: collectivism.

Sylvain Charat is director of policy studies in the French think-tank Eurolibnetwork.


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