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Sunday, September 25, 2016

Francois Hollande’s novel economic policies in France should be monitored closely, to see if they are successful.

The new president of France, Francois Hollande, has announced unusual new economic measures that everyone should pay attention to. They represent a decided turn away from the destructive policies of the eurozone so far, and even violate basic neoclassical economic principles. We all ought to watch closely to see if they succeed.

While almost everyone in Europe is calling for lower wages, Hollande is raising his country’s minimum wage faster than inflation. He thus has favored a view of the economy called demand-led growth, which suggests higher wages will increase demand sufficiently to promote more growth. It is a version of Keynesianism, long since dropped by most American Keynesians. I discuss this at some length in a piece for New America Foundation, called “A Case for Wage-Led Growth.”

He is also proposing a 75 percent income tax on those who make more than 1 million euros a year, and higher taxes on dividends. Many think raising taxes in a recession is anathema, but raising taxes on the rich will not hurt the nation. It will not affect their spending very much.

Thus, he stokes demand with higher wages for lower income people and satisfies the budget crisis with higher taxes on the wealthy. Not bad. There are hints he will also propose budget cuts, which would mistakenly play into the hands of the austerity advocates. We shall see.

The problem of course is that the wage increase is skimpy, to say the least. Another problem—and a bigger one—is that a higher-wage policy has to be taken broadly across Europe and led by the Germans. This is what I advocate in the New America piece. While German ministers have talked about higher wages there, they are not taking aggressive action.

Still, let’s keep an eye on the French experiment. It is a bit of fresh air in a compression chamber of stifling, self-centered economic policy-making.

Roosevelt Institute Senior Fellow Jeff Madrick is the Director of the Roosevelt Institute’s Rediscovering Government initiative and author of Age of Greed.

Cross-Posted From Rediscovering Government

The Roosevelt Institute is a non-profit organization devoted to carrying forward the legacy and values of Franklin and Eleanor Roosevelt.

  • ObozoMustGo

    NUMBER FOR THE DAY ——– 14

    The number of prominant DemocRAT politicians that are running from Obozo and the DemocRAT convention for his 2nd party incarnation ceremony. They are smart!!!

    Have a nice day!

  • ObozoMustGo

    Hey… I’ve got an idea. Let’s try something totally new. Never been tried before. It’s called Socialism! I think it’ll work great. Utopia on earth, HEEEERRRRRE WE COME!!!!

    Yeah… right…. Sure, sure!!

    Have a nice night!

    • dtgraham

      Give it a chance Boz. I was recently posting back and forth with montanaBill and expressed my own reservations about returning to the top tax rates of Eisenhower and Kennedy (75-90%) in such a globalized economy. I ended up noting that Hollande was doing this in France and we’ll see how it goes. I said, maybe he’ll prove me wrong.

      In my own home Province of Manitoba, we’ve elected and re-elected the Canadian democratic socialist party since 1999. We’ve had a long history with them in government prior to that. They’ve done many of the things that Hollande is proposing and have gotten decent results. We’ve had the second best average annual growth in Canada over the last 5 years, and actually, ahead of the country’s average annual growth. Our unemployment rate in Manitoba is 5.3%.

      We’re all free enterprise capitalists Obozo, but we all tend to subscribe to different economic theories on that system and we all have different values.

      By the way, how are your boys doing in hockey? I hope you’re teaching them to be ambidextrous stickhandlers and shooters like Gordie Howe.

      • ObozoMustGo

        The problem with the French experiment is that anyone with any money and common sense is going to leave. Their tax revenues will fall significantly because they remove the incentive to earn. We know this is true because socialism has been tried everywhere and has failed everywhere. Like Margaret Thatcher said…. “The problem with socialism is that sooner or later, you run out of other people’s money to spend”

        As to hockey, my older son is fully engaged and hasn’t stopped playing since the season ended and the next one started. He’s doing very well and averages 3+ points per game at the highest level at 16U. He’s a very good player, but I dont think he has the interest to work at it to go as far as he can. He wants to go to the US Naval Academy. My little guy hasn’t done anything, but his practices start next week. And I can’t teach them anything since I never played. We didnt have a rink anywhere near where I grew up. Now, down the block from my old house is a beautiful 2 sheet rink. I wanted to play, but no where to go.

        Have great day, dt!

        • dtgraham

          Have you heard that after Margaret Thatcher was elected, she promised the British people to safeguard the National health insurance, as she did on the campaign trail. She said that it would be safe in her hands, and it certainly was.

          It depends entirely on how you define socialism Obozo. When I see your responses to people here, I sometimes wonder who it is that you think you’re responding to. You’d almost think that the rest of us must be Soviet Politburo members from 1972 who took a hot tub time machine to get here. We all believe in the free enterprise system and none of us are Khmer Rouge communists. I don’t even know how many communists are left in the world. Hell, even the Chinese don’t believe in it anymore.

    • dtgraham

      I knew we’d get to you sooner or later Obozo. Welcome aboard! I’ll have to get back to you on when the next meeting of the socialist international is going to be in Philly.