Overcoming inner populism: 3 economic lessons from elections in France

Author : Oleg Ustenko

As the experience of other countries demonstrates, too many voters cannot resist the sweet promises of populists
18:32, 27 April 2017

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The country, which suffers from high taxes and excessive state influence in the economy, should make a choice between populist, promising mountains of gold, and a realist, who offers to tighten the belts.

This story is about today's France. Not just two individuals, their charisma and vision meet in the second round of presidential elections, but also fundamentally different approaches to economic policy.

Based on the results obtained by the candidates after the first round of voting, Emmanuel Macron appears to win. However, given the "unpleasant surprises" that have emerged in the last election in the US, the results of the second round still remains an intrigue.

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However, we cannot completely exclude Marine Le Pen’s economic program.

Moreover, as the experience of other countries demonstrates, too many voters cannot resist the sweet promises of populists, not thinking about the consequences of the implementation of these commitments.

That is why elections in France might provide some lessons for the Ukrainian citizen.

Lesson 1. In order to please people, a clear economic program is not needed.

But if your economic program is not a clear or controversial, be prepared to answer uncomfortable questions of those who understand the controversies. Furthermore, be prepared for the consequences of your ignorance and populism.

Both main candidates for the post of the head of the country have clearly sustained economic programs.

Both programs have elements of populism. But, of course, the program of Le Pen has more than enough populism.

Lesson 2: Do not offer voters a beautiful life, starting from tomorrow. Most likely, it would be impossible.

Very often those who have been on the political Olympus before you, also wanted to improve lives of their constituents, but in fact there were no real opportunities for this.

However, this is not about today's France. During the presidency of Francois Hollande country has significantly improved public finances. Budget deficit, which in 2012 was equal to almost 5% of GDP, was reduced to just over 3% on the results of 2016.

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This improvement can be instantly lost when joining the presidential office of Le Pen, supporter of stimulating fiscal policy.

When the treasury is not enough money, and the country has to borrow, every increase in the deficit is associated with increasing debt. This means that if Le Pen wins, the national debt of France might soon significantly exceed the gross domestic product.

Even if the cost of borrowing is low, about 2% of what the country earns in a year, would go for paying for services of already dialed loans. Le Pen is not to increase the budget deficit to almost 5% of GDP. Clearly, it is common practice of the populists. Who of them is thinking about the long perspectives, when they want to be liked by the voters now?

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In contrast, Macron is absolute conservative. He very clearly articulates his desire "to live within the pocket."

It instantly turns him away from that part of voters who would like to live "in a big way." His economic logic is rather conservative: to reduce the deficit to 3% of GDP already in 2018, with a further decline.

The goal is clear and straightforward: the accumulation of additional debt is something very bad. Threats of future generations of French citizens should be withdrawn.

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Lesson 3: The people can live better only in terms of the economic growth.

Not by "increasing its importance as the titular nation", not through conventional redistribution of resources. But due to economic growth, for which conditions are created by democratically elected politicians.

Macron hopes to be able to increase the rate of economic growth in the country through structural reforms. Le Pen clearly articulates the idea of "new French protectionism." This is basically impossible if the country remains part of the EU. That is why the political part of Le Pen’s program is ready for Frexit. Its economic program does not give it any backlash for maneuver.

Would the French candidates "improve" the lives of their voters right now? Very doubtful.

The current high unemployment rate of 10.5% is likely to increase, or at least would stay at the same level (for the next few years) is Macron wins as a president. And would unlikely drop if Le Pen does.

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But those unemployed voters would not go into details of the economic logic difficulties. They are "bought" by the preferences for the French labor market and additional payments to the poor, which very clearly articulates Le Pen. Therefore, the major part of her voters are to some extend the unemployed.

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