There were three posts yesterday. The first was “The Way We Ate (Personal):”
The first time I had to cook for myself was the summer between my junior and senior years, when I was working for Bill Nordhaus on this paper (pdf); I shared a very beat-up apartment in New Haven, and tried, sort of, to do some of the cooking. To help, my mother bought me the Betty Crocker Good and Easy cookbook. And I have often told people about the, um, interesting recipes. But was my memory embellishing? Strangely, it never occurred to me to check it out on the intertubes. But I finally did — and no, I wasn’t making any of it up:
1 pound ring bologna
Cherry Pineapple Glaze (Below)
Potato Buds instant puffs (enough for 4 servings)
Cherry Pineapple Glaze
1/2 cup crushed pineapple
1/4 cup coarsely chopped maraschino cherries
1/4 cup light corn syrup
2 tabelspoons white vinegar
1/4 teaspoon cloves
2 drops red food color
1 1/2 teaspoons water
1 1/2 teaspoons cornstarch
Dear sweet Baby Jesus on a tricycle — it’s a wonder he’s still alive. The second post yesterday was “Stockholm Syndrome in Paris:”
Sure enough, President Hollande has finally shown some steel — moving forcefully to suppress critics of his slavish adherence to the austerity demanded by Germany and Brussels.
The question I would ask is, what do Hollande and his inner circle think will make the situation turn around? Europe’s austerity drive has now gone on for four years; over the course of those four years the euro area has seen economic recovery shrivel, a much-touted comeback also stumble, and now a slide toward deflation. French economic performance tends to track the eurozone average; why should anyone expect France to come roaring back?
I’ll try to produce a more systematic analysis later today or tomorrow; but does anyone think that the Élysée Palace has a well-thought-out vision of how ever more austerity is going to produce a French renaissance? It’s just stumbling along day by day, waiting for something to turn up — when it’s much more likely that everything will turn down instead.
Yesterday’s last post was “What’s the Matter With France?:”
As I mentioned this morning, France’s President Hollande, after years of passivity, has finally taken strong action – firing anyone who questions his subservience to German and EC demands for ever more austerity. But what’s actually going on in the French economy? It is, of course, a catastrophe – hugely uncompetitive, failing to create jobs, etc. etc. – that’s what everyone says, so it must be true, right?
Actually looking at the data, however, reveals a number of surprises.
Let’s start with jobs. France has low labor force participation by the relatively old, thanks to generous retirement programs, and by the young, partly because generous aid means that few need to work while in school, partly perhaps because a high minimum wage and other factors discourage youth employment. What about prime-age workers? Figure 1 compares France and the United States. It’s a good thing we know that France is the country in crisis, isn’t it? Because otherwise you might get confused by employment performance that looks much better than ours.
Still, we know that France is highly uncompetitive on world markets. Figure 2 shows the French current account balance as a percentage of GDP, which is in, um, mild deficit, nothing like the deficits the United States ran during the “Bush boom”.
It’s interesting to note, by the way, that in the great European divide during the euro’s boom years, when costs in southern Europe surged relative to Germany, creating a huge problem of adjustment, France was – as you can see in Figure 3 – right in the middle, with no particular sign of getting out of line. This puts it in a somewhat awkward situation now that southern Europe is deflating while Germany refuses to inflate, causing an overall deflationary bias in Europe. But this isn’t a French problem so much as a euro problem.
Speaking of deflation, France – as you can see in Figure 4 — is well below the conventional 2 percent target (which is too low) and falling fast. Mr. Hollande may like to say that the French problem is supply-side, but it sure looks like demand-side by this criterion.
Still, France has to worry about bond vigilantes. After all, international investors are so worried about French prospects that they won’t lend to the country without being paid … well, the lowest rates in French history (Figure 5).
OK, you get the picture. French economic data look nothing at all like the story everyone tells. Yes, you can tell stories of excessive regulation, but they don’t dominate the macro picture. Yet Mr. Hollande is meekly going along with demands for ever more belt-tightening, reserving his wrath for those who want France to stand up for itself. And the result is a sort of multiplier process in which austerity causes growth to falter, which worsens the budget prospect, which leads to even more austerity.
What’s going on here politically? Simon Wren-Lewis makes a very good point. In America, many of the people who shape economic discourse are forever living in the 1970s, when stagflation was the order of the day; in France, the corresponding nightmare is the early Mitterand era, when France was suffering from Eurosclerosis and an attempt to pursue unilateral fiscal expansion (with a fixed exchange rate) failed. But now is not then. To an important extent, what ails France in 2014 is hypochondria, belief that it has illnesses it doesn’t – and this hypochondria is leading it to accept quack cures that are the real cause of its distress.