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This column was written by Larry Kudlow.
For nearly a fortnight, French students repeatedly have taken to the streets in protest of a modest labor reform proposed by Prime Minister Dominique de Villepin. It seems that Villepin had the audacity to suggest that companies hiring workers under the age of 26 have the ability to fire those workers in the first two years of employment. Villepin's far-from-Draconian reform is a reaction to the country's government-planned entitlement state, overregulated labor laws, and sky-high jobless rate.
But French students apparently prefer their little worker's paradise just the way it is. The overall jobless rate in France hovers around 10 percent, so-called "youth unemployment" is 23 percent, and in some of the Muslim-heavy suburbs, joblessness is nearly 50 percent. Some paradise.
In France, you see, companies don't grow because it's too costly to hire while it's against the law to fire. Hence, since they rarely add jobs, French businesses under-perform, under-produce, and under-employ. Think of it: It's awfully tough to increase output without a growing workforce to produce it.
The Villepin reform, of course, would make it a lot easier for firms to hire since they would no longer have to lock-in high wages and benefit costs without first confirming worker productivity, at least for two years. But in response to this mild capitalist reform, a reported 500,000 students have emerged in angry protest. There's now even a threat of a general strike, with government unions, trade unions, and student unions possibly teaming together to shut down the entire French economy (or what's left of it).
Of course, it wasn't all that long ago that young Muslims rioted and vandalized urban centers across France. Their beef was cultural in nature, but it was also rooted in the fact that France is anti-opportunity, anti-wealth, anti-jobs, anti-markets, anti-work, and anti-capitalism.
Indeed, at the heart of the French problem is a statist-run socialist economy that is massively overtaxed and overregulated. France's public government sector, for instance, accounts for more than 50 percent of GDP. In other words, private business in France is in the minority.
Added to this, France's top personal tax rate is 48 percent, with a VAT tax of nearly 20 percent. So that means French laborers face a combined 68 percent tax rate on consumption and investment. No wonder France has created less than 3 million jobs over the past twenty years, compared to 31 million in the United States. Economic growth in "cowboy capitalist" America has exceeded that of France's worker paradise by nearly 50 percent.
In a dramatic speech to the European Parliament last summer, British Prime Minister Tony Blair hit the mark when he criticized all Western European economies for their inability to compete on an acceptable global level. Asked Blair, "What type of social model is it that has 20 million unemployed in Europe? Productivity rates falling behind those of the USA? That, on any relative index of a modern economy — skills, R&D, patents, information technology — is going down, not up?"
Financial Times international editor Olaf Gersemann blames French and European unemployment on high minimum-wage requirements and overly strict employment-protection laws. Gersemann, who scathingly criticized Western Europe in his book "Cowboy Capitalism," says these labor-market regulations have created millions of involuntary unemployed throughout Europe, affecting immigrants in particular. He writes, "Most French, German, and Italian voters simply refuse to accept the necessity of a Thatcher-Reagan style economic revolution." He notes that per capita income in the U.S. now exceeds that of France by close to 40 percent, with Germany and Italy lagging even further behind.
All of this is reminiscent of the British disease of the 1960s and '70s. Back then, striking labor unions closed down the English economy again and again, and it took until the early 1980s for Margaret Thatcher to put an end to it. At one point, the Iron Lady actually called in tanks and troops to stop the print unions from shutting down Fleet Street. (This is what turned media-magnate Rupert Murdoch into a pro-capitalist Thatcherite.)
Is there a Thatcher that can save Gaul? Perhaps. French Interior Minister Nick Sarkozy is a strong law-and-order man. He's the one who ended the Muslim riots. More, he is reputed to be pro-market and pro-American. The question is, can Sarkozy wake up this nation of economic sleepwalkers and bring them into the 21st century? He ought to take a big paddle to the collective French fanny. They sure need it.
Larry Kudlow NRO's Economics Editor, is host of CNBC's Kudlow & Company and author of the daily web blog, Kudlow's Money Politic$.
By Larry Kudlow
Reprinted with permission from National Review Online