The meaning of President Hollande – Part II

Written by: Jeremy Cliffe on 7 May, 2012
Filed under Democracy, Economy, Foreign Affairs

Read the first part of Jeremy’s argument here.

One rainy winter’s afternoon a few years ago, I found myself in a large 19th century townhouse in the chic 17th arrondissement of Paris, interviewing a Gaullist city councillor about the upcoming European elections. At one point he rolled his eyes at the Socialists’ idealistic, crowd-sourced manifesto, attributing the document to the left’s ‘desire to put everything in writing’. There was, and is, something in his observation.

So for a political movement so fond of tracts and programmes (especially when elaborated behind the austere, ivory cover of an édition Gallimard), it is perhaps surprising that the parti Socialiste has never taken the long hard look in the mirror that it needed after the humiliation of 1983. Mitterrand abandoned the traditional commitment to state ownership not voluntarily, but with the markets breathing down his neck. Therefore the PS, unlike the German SPD, never had a Godesberg Programme. Unlike Labour, it never had a Clause IV moment. Its ideological aggiornamento was never formalised. Ségolène Royal’s 2007 defeat to Sarkozy was a bitter but predictable blow; trapped, unreconciled, between a Marxist past and a necessarily pragmatic present, the party lacked a credible, concrete vision.

Hollande, it seems, plans to put an end to this peregrination. For my money, the set text of his presidency will prove to be Michel Albert’s 1991 book Capitalisme Contre Capitalisme. Written as European communism crumbled, the work accurately outlined the next struggle: one between alternative varieties of capitalism. Albert contrasted a short-termist Anglo Saxon model (correctly predicting its ultimate failings: excessive debt, banks ‘too big to fail’ and monopolistic vested interests) with Rhine capitalism. The latter, prevalent in Germany, the Netherlands and Scandinavia, departs from the former in favouring long-term investments, firms run as a ‘community of interests’ and consensus-based politics and industrial democracy. The Rhine model, Albert argued (pre-empting Will Hutton’s 1995 work, The State We’re In) represents a ‘stakeholder’ capitalism that supports strategic investments in skills, machine capital and supply chains; all highly valuable in a globalised economy.

Hollande’s big project, simply put, fixes his party’s doctrine by resolving France’s choice. The country has long vacillated between the Anglo Saxon model (an urge best represented by Sarkozy’s 2007 campaign) and the Rhine model. This election appears to settle the matter: Rhine capitalism it is.

But the transformation does not come as easily as all that. Vivien Schmidt’s 2002 work The Futures of European Capitalism (for a good overview see here) refines Albert’s scheme, proposing not two but three core models: British (or American) market capitalism, German managed capitalism and French state capitalism. Hollande intends to shift France from the vestiges of its traditional (already part-dismantled) state capitalism to managed capitalism. The former entails – or entailed – a monarchical, adversarial, interventionist approach. The latter entails social dialogue, proportional representation, workplace democracy, cooperative skill formation and long-term finance; with the state providing strategic direction and partnership, facilitating rather than directing enterprise. Look at Hollande’s policies and you get the general idea.

So whilst the new president may reject German policies at a European level, his project centers on importing and adapting a thoroughly Teutonic, facilitating model of the state. His initiatives to nurture R&D, co-determination, patient finance and, most of all, a consensus-based partnership between business, unions, state and local government is, as the Gracques rightly note, fundamentally Nordic. The man embodies the policies: Hollande’s consultative personal style evokes less the demeanour of a Mitterrand-esque god-president than that of an eminently ‘normal’ Scandinavian prime minister. It is a far cry from the dramatic, provocative behaviour of Sarkozy, not to mention the ‘bling bling’ trappings of what L’Express writer Frédéric Martel famously termed ‘sarkozysme culturel’.

As such, Hollande’s challenge is as much about distributing power as it is distributing wealth. If he is to succeed in doing so, he must first change the political culture. Much is riding on his ability to build a culture of consensus. His comportment during the election campaign has given him a strong start; the next step is to project this culture as president, and to initiate the long, arduous process of decentralisation as soon as possible. Specifically, he will need to do the following:

  • Exemplify the case for his politics. The need to communicate the programme to the public does not stop at election day; it must go hand in hand with implementation (not least as some will have voted more against Sarkozy than for Hollande). The new president would do well to highlight the contrast in management styles. A rolling listening tour and government gatherings held outside Paris (although not, as under Sarkozy, in the Palace of Versailles) would be a good start.
  • Use these personal characteristics to build a mutually supportive relationship with Angela Merkel. Success in spurring French competitiveness is dependent on increased demand, which in turn is dependent on a resurgent Eurozone. As it happens, even elements of Merkel’s CDU are favourable towards expanding the European Central Bank’s mandate accordingly. But as the chancellor gears up for next year’s general election, her ability to save face and placate German public opinion will be her first priority.
  • Use the G8 summit in a fortnight to make common cause with President Obama, whose reelection in November would be threatened by any further European slump.
  • Make a strong gesture of fiscal discipline early on to reassure the bond markets. Reassert the deficit cutting strategy by fixing the proposed year-by-year milestones for debt reduction.
  • Use the ‘great economic conference’ pledged in the Socialist electoral programme to bring together business leaders, unions and other social partners to set a national economic strategy and establish the promised ‘pact of trust’ essential to consensus-based co-production.
  • Capitalise on the strength and momentum of the electoral mandate to rapidly implement key supply-side policies: most notably the national investment bank, tax incentives and industrial savings bank. These are crucial to economic recovery but will require political capital to establish – and time to bed in.

All this has implications for Ed Miliband. After all, he and Hollande have much in common. Both are mild-mannered social democrats who recognise, as Schmidt argued a decade ago, that different economic models reinforce the competitive advantages of different industries; the UK’s traditional market capitalism benefits a large services sector, France’s traditional state capitalism befits defence and railways, Germany’s managed capitalism is best at high-precision engineering and manufacturing. Both leaders recognise that the last of these specialisms is a particularly powerful, stable engine of growth and social cohesion in the new global economy.

There are, of course, differences. While both leaders seek to recreate the strengths of Germany’s ‘managed capitalism’, Hollande’s key challenges are to reform highly top-down political institutions and nurture co-operative economic networks in a country with little tradition of this, all whilst managing high levels of exposure to events in southern Europe. Miliband’s, meanwhile, are to revive the Labour party’s co-operative tradition, tackle a chronic lack of long-term investment and nurture new industries to rebalance the economy.

These differences notwithstanding, Hollande’s premiership will offer Labour a glimpse of the challenges it faces; a fascinating study in how (and – who knows? – maybe how not) to shift an economy towards an alternative model of capitalism. In short: watch this space.