A New France?

Fareed Zakaria has an interesting piece on how French President Nicolas Sarkozy is in a position to make significant reforms in France. The fact that he’s won his first round against the French railway union suggests that Sarkozy isn’t afraid to fight his battles against the entrenched French union system. As Zakaria explains:

The street is an odd element in France’s Fifth Republic, very much part of the system. Charles de Gaulle created a political order that he accurately characterized as an “elected monarchy.” There are few checks on the president’s power. The prime minister tends to be significantly less important than key presidential advisers, and Parliament is a joke. The only real debate, opposition and counterbalance to the president comes from the street, and so it has become part of the French way of politics, one that the public seems to understand and accept. But this time, the president is banking on the fact that the public wants change, and will, for once, side with the palace and against the street. He appears to be right. Public sympathy is not with the strikers. Timing is everything in politics, and Nicolas Sarkozy’s greatest distinction might prove to be that he has arrived at just the right moment.

If he is able to win this battle, Sarkozy will be able to press forward with a series of reforms, each begetting the next. The cumulative effect of these changes could unleash a wave of optimism, which is itself hugely beneficial to a country’s economy. France would embrace the new global economy rather than fretting about it.

President Sarkozy is in a unique position to remake France into the engine of European growth, but it won’t be easy. Zakaria argues that France’s structural problems aren’t as great as they seem, but the opposite is more likely true. France suffers from the same demographic decline as the rest of Europe, and even solid growth can’t erase the gap between economic performance and future liabilities. That demographic shift also has cultural effects: France is already having trouble assimilating it’s Arab and Muslim populations, and those problems will only continue unless something is done.

The good news is that France isn’t over the edge yet, and Nicolas Sarkozy seems to be the right man at the right time. He has a daunting challenge ahead of him in reducing the barriers to entrepreneurial activity that keeps France’s economy from taking off. He’ll have to fight the political and union interests that have every interest in keeping the status quo no matter what. None of those things will be easy, especially in a country where unions might as well be another branch of government. However, if Sarkozy is willing to stick to his principles as he did in making overtime tax-free, he has a singular opportunity to restore vitality to the French economy.