TCS Daily

Bureaucracy and Baksheesh

By Nidra Poller - October 31, 2005 12:00 AM

There is much talk these days in France of the French Economic Model. Is it an exquisite example of the "French exception," to be preserved at all costs, or a last ditch effort to stave off globalization? If it doesn't work, whose fault is it?

Naysayers who voted down the project for a European constitution last spring included, in unspecified proportions, determined proponents and opponents of the French Economic Model. Since that watershed vote, some timid soul searching has crept into public view. Certain analysts have observed that a system can't be called a "model" when no one follows it. Especially, they add, when it doesn't even work on its home ground. This does not prevent the Model's advocates from using the code-word as a banner to claim superiority over heartless "Anglo-Saxon" capitalism, and as a bludgeon to force society to stick to a system that is visibly collapsing.

The most recent episode in the battle to preserve the Model was triggered by the shipwreck of the SNCM ferryboat service, a state-owned commercial enterprise with a public service mission to provide a link between France, its overseas territory of Corsica, and the former North African colonies. The conflict rapidly degenerated into insurrection in Corsica, with rocket attacks against the Prefecture, and total paralysis of the port of Marseille by strikes and picket lines. Corsica was cut off from the continent for three weeks, at least 40,000 jobs were put in jeopardy, incalculable economic losses were incurred in a rear guard battle by unions to hang onto a "public service" that is disdainful of the public it is supposed to serve.

The public sector exerts a negative effect on the French economy, discouraging the creation of wealth, eating up what little wealth is created, undermining the private sector, and constantly disrupting the economy. Who will come to the rescue of the small businesses pushed to the brink of bankruptcy by the closure of the port of Marseille?

Jacque Chirac's dauphin, Dominique de Villepin, whose glowing countenance and springing step bespeak inordinate self-confidence of a presidential future, has promised to solve the disastrous problem of unemployment while preserving the French Economic Model. Invited to show his stuff on a new political program on state-owned France 2, Villepin managed to talk about jobs, promise jobs, claim that jobs are his government's top priority, repeat the word "jobs" as if it were an open sesame, and never say a word about the economy, let alone economic development. This too is the French Economic Model: a stingy peasant attitude that perceives jobs as a scarcity to be jealously hoarded and parsimoniously distributed. The idea that the government should either find a way to stimulate the economy and let it produce wealth, jobs, opportunity, and satisfaction or else step aside and let the economy stimulate itself is relegated to a thin sliver of the right wing. And no one knows if the free marketers will ever come to power or, once in power, ever be able to apply their remedies.

Villepin is going to find jobs one by one, like picking potatoes. Incentives will take the form of the usual bureaucratic measures that eat up whatever benefits they might theoretically bring. An employer who offers a job to someone who has been unemployed for X months (or years) will be entitled to a deduction of X percent on social charges for a period of X months (or years) and, in the event that the unemployed person is a senior, the percentages will be modified by a factor of X, whereas if the jobless person is a youth, the factor of multiplication will be X minus Y divided by B. What if employers just hired the best person for the job and got the show on the road? Non, monsieur. That is too simple.

If hiring is complicated, firing is sinful. In the 21st century, with the Chinese economy growing like Jack's beanstalk while economic growth in the euro-zone is dismal and the French economy is trudging into its fourth decade of endemic unemployment, the French Economic Model is still pacifying the work force with illusions of lifetime employment. And jobs keep going down the tubes.

Where everything is illusory, flexibility comes in the form of a new employment contract that would give employers a bit of leeway for firing workers for legitimate reasons during a two-year probation period. This is a minor variation in an endless series of rigid measures that supposedly protect the rights of employees but actually strangle the economy. In reality, everyone from the local greengrocer to dynamic young IT entrepreneurs expresses the same complaint: no one wants to work, no one wants to accept the constraints and obligations imposed by the métier, no one wants to be accountable, you can't fire anyone without the risk of getting dragged into the Prud'hommes and forced to pay a kind of labor-blood money. Employers spend an undue proportion of what should be productive time filling out forms conceived by bureaucrats who, on the contrary, are held to no standards of productivity. And employees who do perform can't get any compensation for extra effort. The Model is egalitarian to a fault!

Not to worry. With a wave of his magical wand, Villepin has created a series of "poles of creativity," designated areas of the country where productive forces will coalesce to move forward in designated spheres of activity, from high-tech to milk cows. I spare the reader an explanation of how, once again, the government thinks it will produce economic progeny by forceps.

All of the above, believe me, is upscale compared to the widespread practice of bureaucratic baksheesh ingrained in the French economy. It's not the crude kind of baksheesh you find in undeveloped countries, where you have to hand out a few coins or bills to buy a postage stamp, get a doctor's appointment, or smuggle cocaine legally. In France we have proper baksheesh instituted by successive governments housed in those gilded palaces that make everything look so deceivingly stable.

The most telling example of the practice is the Contribution Sociale Généralisée, thought up by a Socialist government in 1991. The idea was to pass around the cup and ask everyone to drop in a few coins, and put the Social Security system in the black. Imposed, over and above income taxes and VAT, on all forms of revenue including retirement pensions, financial benefits, royalties and what all, the CSG was supposed to be a short term measure based on simple mathematics. This much is missing, collect it, put it in the gaping hole, and get a fresh start. In fact the CSG is here to stay, the rate has gone from 1 to 7 percent and rising. And it has given birth to a baby CSG, the CRDS, contribution au remboursement de la dette sociale. Another coin collector to fill a hole that grows bigger the more you pour into it. But that's not complicated enough. The CSG, and now the CRDS, are neither entirely deductible nor entirely non-deductible from taxable income and SS-taxed income. Which leads to procedures that look more like embroidery than accounting. A stitch here, a stitch there, take one, drop one, add two, divide by three, carry over...

Far from discouraging the brilliant governments that follow each other in a left, right, left, right alternation that seems to keep producing the same bizarre economic contortions, these baksheesh measures are being extended to new branches of the same old problem, namely a Social Security system that is going bankrupt because the sluggish economy generates insufficient income and excessive demand. France's excellent health care system is crumpling under the weight of this merciless equation. Reimbursement for medical bills undergoes a series of operations whereby the €60 paid for a consultation with a surgeon are reduced to a "conventionalized" €23, which undergo other drastic reductions, leaving €15 actually paid back to the beneficiary of "free health care." Let us not forget that the beneficiary and his employer are paying in many thousands of euros to cover this free health care.

And now there's a €1 franchise on every medical consultation. It's the same mentality as the CSG. Here's a hole, fill it up and everything will be just fine. Well, not fine enough. So now there's an €18 franchise on every "costly" medical procedure performed on a hospitalized patient.

The French economy may be in a bit of a slump, but think of the starving children in the rest of the world. Lest someone suggest that it is high time to develop a rational approach to these economic-political-cultural ills, Chirac has jumped in and applied the French remedy: a baksheesh on airplane tickets. You understand? Overprivileged people who can afford to pay hundreds of euros for international flights fork out a flat fee of €15 to feed the starving masses. For domestic flights it's €5. Flying around your own country is not so overprivileged as going abroad...for whatever reason: one person might be off to Saudi Arabia or Iran to sign a juicy contract, another might be flying to the US to visit family, another might be going to Morocco on vacation, and another might be going to Syria and then on to Iraq to wage jihad...they all pay the same €15 contribution sociale internationale. And you can expect it to increase yearly.

Not all the baksheesh comes out of taxpayer's pockets. At least one lump sum is going into the pockets of French citizens who heat their homes with oil; provided their income is below taxable level, they will receive a one-time payment of €76 this year, representing their share of anticipated excess government revenue from taxes applied to skyrocketing fuel prices. Calculate, if you will, the cost of implementing this measure. How much paperwork will it take to determine which households are eligible, and then pay out the €76? It probably would have been cheaper to invite them all to dinner at the president's table.

Today, the French Economic Model reveals its true nature; it is not the kind of nurturing mother needed by every newborn child. It is the hysterical mother who threatens to die of a heart attack every time her 42 year-old son gets interested in a lady friend.

The author is a novelist living in Paris.


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