Gordon Brown, Sarkozy and the economic crisis.
The entente cordial is in trouble once more. The President of France in a well-publicized and lengthy television interview publically criticized British Prime Minister, Gordon Brown, and his economic policy towards the recession. Downing Street was not much amused by the statements made though they were made in the context of Sarkozy defending his approach to the recession and the development of French government policy. Sarkozy is intent on boosting state infrastructure rather than manipulating demand directly. Brown, who is on the political slide again, was irritated and Sarkozy’s own performance was seen to be weak and incoherent. Sarkozy’s broadcast was an attempt to gain back some popular support and to reassure the French that his government was actively pursuing the right policy for France. There was none the less a certain amount of diplomatic activity to smooth down ruffled feathers in London as Sarkozy vowed to avoid British government mistakes. Is there anything in this that needs reflecting upon?
France and the UK have different approaches to economic life, not just in the recent past. France has in essence a state directed approach to economic life (even if Sarkozy has set out to modify this before the current recession) and the UK has had a more flexible approach. Sarkozy currently is hankering after protecitonist thinking capable of putting France and French manufacturing first. The UK’s model for economic life has been not the United States as a whole but perhaps more the Californian economy, known for its flexibility and innovation and an economy in which British investment is high. The UK has benefitted from this flexibility but how the UK economy works is often misunderstood in the rest of Europe. True, financial services and services in general are of huge significant to the UK’s standard of living and the recent problems (which originated in the United States) mean that the UK is suffering sharply, especially in the financial sector. Sarkozy insisted that the crisis was caused by the “Anglo-Saxons� (a curiously old-fashioned reference to the United States and the United Kingdom, but one that has a degree of popular appeal in France) and made significant swipes at the Americans, stating, more or less that the United States should be responsible for its own debt. In some ways the attack was more pointedly against the United States. Brown is very aware of the need top avoid the retreat of banking into lending defined mainly by national boundaries and for continued international cooperation. London needs international financial markets to operate.
But the UK economy is not the “post-industrial economy� that many Europeans and Sarkozy seem to imply. Apart from the problems in the banking sector, failure in the current economic climate is located mainly on the demand-side of the economy. The big problems are on the High Street or are directly consumer-credit related. The UK is not a “post-industrial society� in any dramatic sense and manufacturing still has its part, and a significant part, to play in national economic life. Brown’s tax cut is certainly not dramatic and there are those in the UK who would argue, as Sarkozy has done, that the approach will not get anywhere. Nonetheless, reducing tax on purchases, keeping the interest rates low and the falling exchange rate will help the UK economy. The country is experiencing both recessionary pressure and a tug towards growth and recovery. The UK could argue that quick in/quick out will be the growth pattern and that the Euro-zone is yet to experience the full impact of its economic problems.
Sarkozy is faced with the need to stabilize the economy and to pursue his program of reform essential to change the economic balance in France. In trying to do both, he is choosing for himself a very hard road. The whole capitalist system world-wide has taken a turn towards “state capitalism� hitherto seen as the preserve of Russian and China and certain developmental economies in South Asia. This may be only a temporary phenomenon though the phenomenon may continue even after the present need has passed, in which case Sarkozy may need to fight a different battle.
Both Brown and Sarkozy are in significant political difficulties. Brown’s image recovered when he seemed to be taking an international lead in the development of policy towards the ailing financial sector. Sarkozy is attempting to fight off the prospects of further action in the streets against his government’s policies. Leaders in Parliamentary democracies are very vulnerable (as has already been witnessed in Iceland) during times of economic crisis. This is how such systems and their associated politics work. We must expect some further thrashing around though such swiping from one head of government to another is probably best avoided.