Listen to their friends

Perspective is a funny thing. Changing your perspective can lead to interesting insights. One way of changing the perspective is to go over and read how propaganda agencies like the Iranian IRNA are reporting matters compared to how western media are reporting things. IRNA's reporting is obviously very far from unbiased, truthful, fair and objective, and every report they produce is in the blatant self-interest of the despotic theocrats in charge of that country. It is exactly this propagandistic slant that gives an insight into what's going on there and what they think is important. So it's particularly interesting to read a story from IRNA headlined "France, Iran stress UN role in post-Saddam Iraq:"

Iran and France on Thursday underscored the role of the United Nations in post-Saddam Iraq, with President Mohammad Khatami warning of many problems if Iraq's fate is not immediately left to its people to decide.

"I believe what happened in Iraq is not over yet and if the fate of this country immediately is not left to the Iraqi people (to decide), America, the region and the world will face many problems," he told French Foreign Minister Dominique de Villepin here.

"The United Nations must have a fundamental role in disarming Iraq and establishing a legitimate government there as well as reconstructing Iraq," de Villepin, who arrived here on a one-day visit early Thursday, said.

[...]

The president hailed France for leading the world's anti-war front and hoped that "France, given its position in the world, will make more efforts to promote peace, global coexistence and justice in the international scene".

He also praised Paris' stance on guaranteeing just peace and security in the occupied Palestinian lands. "An enduring peace in the Middle East will not be achieved without restoring the legitimate rights of all Palestinians," Khatami said.

It does not even surprise me to see de Villepin visiting the next doomed fascist dictator that he wants to be chummy with. And the theocratic thugs running Iran at the moment obviously are delighted to have French support for their regime. I'm sure de Villepin enjoyed being in the reality-distortion field of like-minded people. When Khatami praises the French efforts to "promote peace, global coexistence and justice," what he really means is that he's grateful that there's still someone stupid enough to stand up for dictators like him.

Note to the French: if you're in a hole, stop digging. Throwing themselves wholeheartedly into the war on Saddam's side, they are now apparently trying to repeat the same mistake again with Iran. Perhaps they're just trying to get into the Guinness Book of World Records as the country supporting the greatest number of fascist states? The country choosing the losing side most often? I'm willing to donate any surplus shovels to the French government, though.

While this visit to Iran may not have made the front page in the western press, I have a suspicion that it did not go unnoticed in the White House.

Montana sells French stocks

The publicly run pension fund in Montana recently decided to sell its French equities. It was billed as an investment decision:

"We couldn't figure out why France would be so adamant in keeping a murderous dictator in office," Klawon said. "The only thing we could surmise is perhaps French companies have been doing business with Iraq against U.N. sanctions."

If there were illegal dealings by the French, Klawon said that would add to local investment risk.

"If we were helping French companies that were indirectly contributing to terrorism, what would the people of Montana think?" he said.

With a total of around $15 million in stock, the amount is puny and is not going to make the slightest difference in French stock prices. Although the rationale given is investment-based, it's obvious that the underlying motive is political. While I've been avoiding French products myself, it's a rather more dangerous thing to do for the trustees of a pension fund. They have a fiduciary duty towards their shareholders to protect their investments and to take decisions that are in their interests. Failing to do so runs the risk of serious jail time. While I sympathize with the sentiment, the Montana trustees are opening themselves up for a potential legal liability here.

However, the investment-based case is not entirely without merit, as French companies have been dealing with Saddam. It's not clear though how much of an impact these deals have made on aggregate profitability of corporate France. The most flagrant of these is probably the deal that TotalFinaElf made with Saddam to develop the Majnoon and Bin Umar oil fields (these are known as "supergiant fields," with estimated reserves of 10 billion barrels of oil, and production capacity of 1 million barrels per day). That deal was thought to be worth in the order of $50 to $75 billion dollars. I don't know how these estimates were made, but it when people are talking about the worth it's like to be in terms of revenues rather than profits. TotalFinaElf currently has about $100 billion in revenues a year, and that $50 to $75 billion is probably a lifetime number, not an annual one. Still, it would have added perhaps $5 billion a year in revenues, and that would translate into $500 million to $1 billion in extra profit, depending on how much of a sweetheart deal TotalFinaElf got from their friend Saddam. But even that does not necessarily move stock prices.

It all depends on what kinds of expectations have been priced in. It's all a relative game and any newsflow affects stock prices to the extent that the newsflow differs from the expected, priced-in newsflow. That's how companies can report a huge profit but still see their stock price decline, if that profit did not match expectations. It does not look as though TotalFinaElf's megadeal with Saddam was priced in to begin with, so there are unlikely to be any losses stemming from the unwinding of the deal. On the other hand, there is a huge loss compared to what might have been.

The way French stock prices might be affected is by the marginalization of French companies by American consumers, be they private, corporate or government consumers. If the anti-French feeling persists for long enough, then French companies will be feeling the pinch eventually. But it's unlikely to be a short-term effect. Although there is plenty of anectodal evidence for Americans boycotting French products, the effects have thus far not been quantifiable. It'll be interesting to see how that shakes out. The much bigger worry for French companies is the poor state of the French economy, which really could put a big dent in their earnings.

How to hate the French

One of the tools of my trade is a Bloomberg terminal. Those who work outside of finance may know Bloomberg TV or radio, or the web site. A Bloomberg terminal provides a staggering amount of real-time data and information, and it's easy to just wonder around the system looking at yet more stuff. It's a bit like the Web, only much more expensive. Some of the material also appears on the web site, so I can link today to a column I came across. How to Hate the French: A User's Guide by Michael Lewis (of Liar's Poker fame) examines how best to stick it to the French.

Berkeley, California, April 9 (Bloomberg) -- It's astonishing how much easier it has become in America in just the last few weeks to hate the French, even for those who shouldn't.

A random sampling of three friends who disapprove of the war in Iraq and enjoy a good Burgundy reveals that all of them are inclined more than ever to detest our former ally. Trouble is, they don't know how to do it.

(RTWT: Read The Whole Thing.) His main argument is that what the French are really after is not respect or admiration, but importance. They don't care what we think of them, as long as we think of them at all. Well, they certainly got our attention, which was the whole purpose of the pro-Saddam stance that France had taken. I don't think it's that simple as Lewis describes, but the yearning to be seen to be relevant is an important aspect of the French national psychopathology. Commercial interests and shady dealings with Saddam also played a role.

The French have never come to terms with their declining influence and relevance. It should have been obvious after the second world war, which ended all pretense of France being a world power. The Vichy government also removed any claim to the moral high ground, although we did allow the myth of the Resistance to swamp the reality of the Collaboration after the war. Perhaps it was necessary, as a deluded non-communist France was preferable to a France under serious threat of a communist election victory.

The French response to declining geopolitical relevance and the abdication of the moral high ground was brazen denial. By repeating to themselves that they were indeed important and morally superior they almost convinced themselves of it. The hypersensitivity where these issues are concerned shows that they never quite succeeded in vanquishing the cognitive dissonance this produced. It seems like Chirac and de Villepin did come to believe their own propaganda though, which led to their overplaying their hand dramatically. It would not have mattered too much, but it did give the downward spiral that France finds itself in another push.

Although I don't entirely agree with him, I'll end by quoting Lewis again:

Americans have long suspected that they don't actually like the French but it isn't until this war that those suspicions have been confirmed. Now they must learn how to express that dislike.

I have spent only a bit of time among the French and cannot offer the most expert advice. But I would say this: To wound an important French male with words, you must chose them carefully. Taking the French out of fries will do nothing but reaffirm his view that he is your natural superior.

Jed Babbin, a former U.S. deputy undersecretary of defense, spoke well when he said that ``going to war without France is like going deer hunting without an accordion.'' In a sentence he isolated and insulted the vanity of the powerful French male while at the same time conveying an admirable air of indifference toward him.

Those of us who cannot summon such wit would do better to remain silent, and pretend that the important French male does not exist. Otherwise we risk giving him exactly what he wants.

Pension reform in France

Last week massive strikes paralyzed France. The labor unions still have a powerful hold on the country, and whenever they don't like what the government is doing, they shut down the country. Amazingly, strikers in France have enjoyed widespread support in the past despite the disruption that they've caused. And even today the strikers still seem to be able to count on sympathy from the suffering public. Some people are getting fed up, as mentioned in this story, but the disenchantment with the unions has not reached the level yet where the government would feel comfortable in taking them on. The same story also quotes a student saying that "people must strike to defend their interests, it's part of our culture." It's a culture of infantile entitlement, the countrywide equivalent of a brat stamping his foot and demaning that he get his ice cream now. This culture has slowly beend draining the productive resources of the French economy to the point where it is now in a ramshackle condition. It's not as bad as Germany's predicament, but the long-term secular growth rate has been declining, and even that trend rate of growth has not been attained in the current cyclical downturn. In other words, the French economy is not doing very well, but it's not in a state of imminent collapse.

The biggest beneficiaries of the tax-happy French governments of the past can be found in the traditionally least productive sector, the civil servants. This is also where the labor unions are strongest. French civil servants lead an easy life, with excellent job protection and lavish retirement benefits. But as the economy struggles and public finances are in trouble, the government is trying to look for ways of cutting back on spending. Add to that the demographic problems of an aging population and action is becoming urgently required. France is highly vulnerable to aging as it has adverse demographics, a very generous public pension system an no capital-funded pension provision at all. (France actually has more favorable demographics than many other European countries, but its lack of an affordable and funded pension structure account for its aging vulnerabilty). Now the government is trying to reform the system in order to stave off a financial catastrophe in the coming decade.

Demographics are relentless. Forecasting 50 years ahead is a tricky exercise, but you do know with a fair amount of certainty what's going to happen in the next 20 years. Even if there's a sudden upturn in birth rates in the next five years, the benefits are not going to flow into the labor force until much later. And looking ahead by 20 years, France has a serious problem. Its entire pension system is a pay-as-you-go system. That means that current retirement benefits are paid out of current taxation, so even though contributions are labeled as "social security," they're not actually your contributions, but they're used to pay someone else. This is no different from Social Security in the United States, but at least the US has a wide range of funded supplementary pension provisions. Pay-as-you-go systems are state-run Ponzi schemes, and with a declining birth rate and an increasing dependency ratio, the end for the system is in sight. Either taxes will have to go up dramatically, or pension benefits will have to be cut.

The big strikes that paralyzed France revolve only around a tiny portion of the wider pensions problem. Specifically, the government wants to bring civil servants into line with private employees in requiring them to pay contributions for 40 years in order to reap the largest benefit from the national Ponzi scheme. Currently they only have to contribute for 37.5 years, so we're talking about an extension of 2.5 years here. This will make a difference, but it hardly addresses the root of the problem, which is a lack of funded pensions. Transitioning from a pay-as-you-go to a capital funded system is not cheap either, because you have continue to pay pensions for a while under the old system while also contributing to the new funded system. But there are ways around that, so the obstacle is not insurmountable.

The big problem for France is that if even such a small change in the pension system is causing so much protest, then a real reform that would institute funded pensions is very far off indeed. But time is running out, as the dependency ratio in France will start to increase substantially over the next five years and keep rising as far as projections go. It's already too late for a relatively painless reform, and the longer they wait, the bigger the problem is going to be.

What's making matters worse is the poor state of the economy, brought on by decades of dirigisme, the stultifying French brand of state-directed pseudo-capitalism. The dependency ratio is already higher than it would have been had the economy been performing well, because those in work have to support not only the elderly but also the unemployed. "Young, French and Jobless," as the Australian Financial Review put it:

For Alexandra Duprey, a member of France's "Generation Aix," unemployment is a growing crisis.

"We're afraid for the future," says the 23-year-old student at the University of Aix-Marseille. She and hundreds like her were at a government-sponsored seminar last week in this coastal city aimed at encouraging young people to become entrepreneurs.

Ironically, these should be giddy days for Duprey and her peers. The number of French workers retiring each year should rise by about 250,000 by 2006 to 750,000. But far from being plied with offers of work, they can only watch helplessly as the sky-high rate of youth unemployment climbs ever higher. Youth unemployment, 20.9 per cent at the end of 2001, rose to 21.7 per cent last year, among the highest in the euro zone and well above the common-currency region's 16.3 per cent average for that age.

Meanwhile, older French workers fare much better. For those between 25 and 49, unemployment was 8.4 per cent at the end of 2002, up 0.2 percentage point from 2001. For those over 50 it was 6.2 per cent. Still, French President Jacques Chirac last week called for a "national mobilisation" for employment, and asked for "specific measures to favour employment for those over 50".

Not only are young people out of work, the labor unions and the older generation are making sure that they stay that way. Chirac's response as quoted above is also symptomatic of the confused policy response to the problems, and betrays a fundamental lack of understanding of how the economy works, and more specifically, how real jobs are created, the kinds of jobs that actually help the economy grow and generate a profit. You can't pull an economy out of a slump by government decree, national mobilization or specific measures to favor employment. It is much more likely to create further distortions in the economy.

The French government sees the liquidity problem of the current system coming, and the current reform is aimed at mitigating the cash crunch. But it still does not address the fundamental pensions problem in France, which is the pay-as-you-go Ponzi scheme that masquerades as a pension system.

"Vive Chirac. Stop The Jews!"

The peace movement has never been known for its moral fortitude, although they have always regarded themselves as morally superior, as if the single-minded pursuit of peace at all cost is the sign of a more advanced intellect. It is in fact the opposite, as it provides a seemingly easy way out of real life dilemmas, and ignores the real life costs of pursuing peace at all cost. The lesson of the 1930's has been completely lost on them. Appeasement does not work. Sometimes the peace won in the short term begets much more serious problems in the long term, but I guess if you're a sophisticated thinker such reasoning can be shot down easily.

But that's just the charitable interpretation, as the so-called "peace" movement has a long history of serving as the useful idiots for foreign regimes guilty of horrific human rights violations. In the 1980's it was the Soviet Union, now it is the likes of Saddam who find support on the left. But these peace-movements, together with the rise in Islamic influence in Europe (see also recent experiences in Denmark) a new element has been added to the "peace" movement's canon: anti-semitism. This has been mirrored by the rise of anti-semitism in the incubators of far-left radicalism on American campuses.

In France the toxic mix of Islamofascism from the Arab immigrants and the anti-Americanism of the French governments is leading to a dangerous environment if you happen to be Jew in France, as the Washington Times reports on the latest attacks of Muslim youths on Jews there. Of course, the fact that these Jews were protesting the war too made no difference to the Arabs. As the Washington Times writes:

The French government was forced to appeal for calm after protesters, some of them carrying pictures of Saddam Hussein, burned the Israeli flag and turned on Jewish students, attacking one of them with an iron bar, during a series of antiwar rallies.
Officials fear that antiwar sentiment, supported by President Jacques Chirac, may be running out of control and could ignite widespread violence. Banners at recent demonstrations have shown the Star of David intertwined with a Nazi swastika, while protesters shouted: "Vive Chirac. Stop the Jews."

That last slogan really sums it up. "Vive Chirac. Stop the Jews." And what does the celebrated Chirac do? According to the Washington Times, he's keeping quiet.

To be fair, the police are setting up a new unit to investigate racist and anti-semitic crimes. It's a bit late to focus on that only now, as anti-semitic violence has been increasing in France was several years now. The article also points out the potential for civil unrest in France, where millions of unassimilated Arabs live in the vast and depressing suburbs of French cities. The embers Chirac has been fanning may yet rise up into a firestorm.

Flying the tricolor

Fearful of the anti-French sentiment that is brewing the the US, the French hotel group Accor has decided to stop flying the French flag at its American hotels. I guess they'll replace those empty flagstaffs with the France's other national flag, the one that is all white. (They've already hoisted that one at the hotels they run in the Middle East.)

Substitutes in the shopping experience

Buying groceries is one of the more infuriating aspects of life here due to the limited opening hours of supermarkets. These in turn are dictated by various laws that restrict the number of hours that shops are allowed to open. This means that the only day that I can buy my groceries is Saturday. My usual supermarket is open on weekdays till 8 PM, which is not late enough. I seldom get out of the office in time to get to the store in time and do all my shopping by 8 PM, so I don't even try. There are a handful of supermarkets open on Sunday, but they're either far away or parking is impossible (in the center of Amsterdam). So I waste a good part of every Saturday at my local Albert Heijn (part of the troubled Ahold group; if you live on the East Coast, you're likely shopping at an Ahold-owned supermarket too.) I am always struck by a palpable sense of liberation whenever I am in the US; I can go grocery shopping any time I want!

Although it's nowhere near the size of an American supermarket, my local store does have a fairly extensive range of products, and I can get my shopping done relatively painlessly, if only on a Saturday. It also happens to be one of the supermarkets where they're testing self-scanning. You get a portable scanner to scan the bar codes of the products you're buying. This cuts down dramatically on waiting times at the check-out, because your total has already been calculated. The scanners also have an LCD screen with which you can keep track of your running total as you add (and potentially remove) items.

While scouring the cheese section last Saturday, I was adding one of my long-time favorites (Port Salut) to my cart. Then I stopped, because I realized it was French. It just felt wrong. I put it back. I've never been much of a fan of organized boycotts, but at this point I just could not bring myself to buy it. Same for Camembert. So the quest has begun for suitable alternatives. I realize it does not matter one whit in the grand scheme of things, but it makes me feel better not to buy French products.

There is also a more serious issue than just the cheese. Occasionally as I sit down at night to blog, I will fortify my spirits with some spirits (purely for medicinal reasons, of course). These can take many forms, but two variants predominate: whiskey and cognac. The former does not present any problems, obviously, but the latter does. Over the years I have unfortunately acquired an appreciation of XO cognacs. I say unfortunately because the financial consequences of such appreciation are not neglible. On the other hand, it has kept my consumption fairly limited. I may go through a bottle in the course of a year. But my bottle is running out, and this is going to leave me looking for a worthy alternative. I'll still have my whiskeys (and wine to go with meals), but surely there must be some alcoholic beverage somewhere in the world that resembles cognac? With wines I had long since relinquished any dependence on French products. They're good, but tend to be overrated, and there are plenty of high-quality alternatives around.

For the time being I'll be stuck with Gouda cheese and whiskey. It could be worse I suppose if I liked beer... imagine the horror of not being able to buy Belgian and German products. Apparently Prazdroj is good, but not being a beer drinker I can't vouch for that.

Time to finish my drink.

The new Axis Powers

An entire web site dedicated to the new Axis Powers!

I'm back

I'm back from a nice skiing trip to the Colorado Rockies, and aside from a sore shoulder, I have survived the entire expedition without any accidents. I got back earlier today, but had to go straight to the office, so I do feel a tad tired. Full-scale blogging will resume tomorrow. During my stay in Colorado I got a lot of snow, a heat wave and icy cold weather up on the mountain. When it's 15 below (in Fahrenheit) and there's a wind blowing, it gets real cold real fast. But that was just one day, and it did not impinge too much on the skiing.

It has certainly been an eventful period. I am amazed at how recklessly the French and the Germans are frittering away the NATO alliance. That NATO would be losing relevance did not come as a big surprise, but still it's astonishing to see the cavalier attitude these two countries are taking to the alliance that has kept them free and prosperous for the last half century. The new Franco-German axis is born of desperation. The Germans are desperate because they've lost any foreign policy clout they had before the last general election, and now that Schröder has become a big loser domestically, he has to try to cling on to some semblance of international respectability. He does not appear to care where he gets his tender loving care from internationally; it's clear he won't get it from the US, so he tries to ingratiate himself with Saddam. The French are desperate too: their entire post World War II policy of trying to counteract Anglo-Saxon power and influence is in complete tatters. America is by far the most powerful nation in the world, and regardless of the merits of America's case, in French eyes there needs to be a countervailing force. Even if this means de facto support for Saddam, that's fine. It's the price one has to pay in terms of Realpolitik. So we have a new Franco-German axis born of different sources of desperation. With Schröder so weak, it's Chirac who can drive the debate within Europe, and what he's trying to do there is to transfer the traditional French paranoia of Anglo-Saxon influence to the European stage. He's setting up a simple litmus test for Good Europeans: you can't be both a Good European and sympathetic to America. The negative self-definition of French identity (i.e. defined by what it is not:American) is being foisted on Europe, or at least, the French are trying. It's not going to fly, as the letter of support by eight European heads of state showed. But it's the big chance for France to cement its vision of a European identity on the wider EU before the new entrants get all sorts of ideas of their own. And that's another reason it's not going work, because this Franco-German Axis is treading on the sensibilities of too many of the smaller countries. They won't suddenly become rabidly pro-American, but I suspect they'll see Franco-German domination within the EU as a bigger threat than anything America might do. France and Germany are painting themselves into a corner here, and getting out of it is going to become harder the more they paint. They'd be well advised to open the windows and the let the paint dry for a while before trying to redecorate again.

The big winner out of all this could be Russia. How? Tune in tomorrow. I'm going to bed now.

French U-Turn on Iraq

Good grief. The French have come around to supporting the US on Iraq.

Showdowns in France and Britain

Two governments in Europe are faced with a challenge from organized labor that threatens the economic vitality of the two countries. The strikes in France are following the well-established pattern with strikes causing maximum disruption. The truckers' strike affects not just the employers, but the truckers are actively blockading choke points in traffic, trying to bring the country to a halt. A similar, bigger wave of protest brought down the last right-of-center government in the mid-1990's. The 1996 strike is thought to have cost France about 0.6% of GDP growth, which is significant especially in slow-growth Europe. This time, the government looks to be handling the situation a bit better, by taking surprising line that the rule of law cannot be undermined by wild strikes. How the current wave of strikes will be important in determining the future course of developments in France, as it will show whether the rule of law can actually be upheld there. If the government fails to break the strikers' blockades (if necessary by sending in the army to clear them), France is in for another wave of union militancy and more economic stagnation. The blockades have nothing to do with the right to strike; they are means of depriving others of their freedom to go about their business. The government cannot allow the unions to get away with this again. It seems the government is taking a harder line, and that unions are less feisty now, so there is some hope.

Meanwhile, across the Channel, the British government is also faced with a new wave union activism. Gordon Brown's promise of a huge increase in government funds for the public sector has whetted the unions' appetite for huge pay increases. The firefighters are demanding a 40% pay rise, and are refusing to change their arcane and archaic working practices. The union is now led by a radical socialist, who traces his roots to the Scargillite union militancy of the 1970's that pretty much bankrupted Britain. It was Margaret Thatcher who broke the back of these marxist/trotskyite/leninist (take your pick) union leaders and freed the economy. The economic revival of Britain since then is in no small measure due to the reduction of union militancy and also a decline in the relevance of the union movement as a whole. This was the bedrock upon which the Thatcherite revival of the British economy was founded, and it is also the bedrock upon which Tony Blair has been able to build his reputation for economic competence (despite the many tax rises he's pushed through). If he lets the unions turn the clock back, the health of the British economy and Blair's re-election prospects are in grave danger.

So while in Britain the unions are trying to turn the clock back, in France it's a question of getting the sand out of the gears of the clock to try to get it moving again. The outcome of these battles between governments and unions will show in which directions European economies are likely to develop.

The old enemy

Here's an excellent op-ed in today's Times (of London) by Simon Jenkins speaking about Tony Blair finally meeting the Old Enemy. He starts:

Love America. Hate France. All else is local government. For two centuries this has been the guiding maxim of British foreign policy. Every Prime Minister should repeat it each morning as he shaves, and each evening as he prays. ?Love America . . . hate France.?

You know the Reynoldsian adage: read it all.

The Anglosphere lives.