The French have now elected a socialist government. This event should be instructive to us.
France currently has a government that absorbs more than 50 percent of its economy. They have a cradle-to-grave employment system, where once you have a job it is virtually impossible to lose it no matter your level of performance.
With these types of policies, it would seem difficult to imagine what a socialist government would change. But there is still room for movement to the left, according to the folks who are running.
One candidate, who was eliminated from Sunday’s runoff but whose ideas linger on, proposed that all income above $350,000 should go to the government. A cause célèbre of the campaign has been a $22 million euro bonus which reflected in large part accrued, deferred compensation paid to the head of one of France’s fastest growing and most profitable companies that has added hundreds of new jobs.
It was considered by all the candidates for the French presidency to be excessive compensation that should be taxed away.
The reason this is instructive is that it reflects the fact that there is a point of critical mass. If a culture gets to a position where your vote establishes your income, then it becomes rather reasonable to expect a massive growth in government, the outer limits of which have not even been reached in France.
The effect of this will not be apparent for a while. But the outcome is inevitable.
First, the government runs up massive debts to pay for its expenditures. When adding debt can no longer be done conveniently, it turns to a dramatically progressive tax policy. Both of these steps, when coupled with an irrational retirement system, lead to a dramatic drop in the productivity of the society and an inevitable resulting drop in the standard of living for all.
Ironically, all this is done under the banner of “fairness and equality.”
It is obvious that voting for one’s living is a great deal easier than working for it. It is easier to blame someone else who is wealthier for a reduction in the standard of living than to look in the mirror and ask hard questions about the nature and effect an expansionist government has on the quality of life in a society in general.
The driver of this process is at its most basic level envy. In a democratic system it is very simple to claim, for what seems like a long time, that if you just take more from your neighbor, you will be able to live better.
But in the end reality has a way of setting in. Countries that choose this path see that, rather than all the boats rising on the incoming tide of massive government expansion in the name of goodness and light, the boats actually start to wallow and the wealth of the society as a whole begins to erode significantly.
Rather than being lifted up through greater productivity and economic growth, the society becomes mired in finger pointing where the many, through their politicians, blame the few.
It has been a long time getting there, but France now seems to be on the final leg of this journey of self-delusion and self-destruction. The world is becoming more and more competitive, with no time for the self-indulgent as nations seek better lifestyles for their people. The politics of envy and the real reduction in competitiveness of the French society is clearly placing France and many nations in Europe at a tipping point.
They have dealt themselves a losing hand. We should simply observe, note it and hopefully choose not to play the same cards.
Judd Gregg is a former governor and three-term senator from New Hampshire who served as chairman and ranking member of the Senate Budget Committee and as ranking member of the Senate Appropriations subcommittee on Foreign Operations. He also is an international adviser to Goldman Sachs.