The global capitalist economy seems in disarray. From increasing inflation to vulnerable supply chains, from endangered food production to energy transition and crisis – complaints and warning calls rise at nearly every chapter and branch of the world economy.
United World International thus has started a new series of articles and interviews that will shed light on the situation of the global economy from the perspective of different national economies.
Above all stands the question, whether the world is heading towards a new global great depression, as witnessed in 1929.
Today, we have interviewed Jacques Cheminade, President the French political party Solidarité et Progrès. He also candidated in the past for his country’s presidency.
How do you evaluate your country’s economy currently?
To evaluate the French economy, one needs to put it in the context of its integration to the European and world economy. Since the “Acte unique” of 1986, the principle of the free circulation of physical goods, services, human beings and capital flows has been accepted under the rule of the European Union (EU). Progressively, the French protective tariffs have been reduced and then practically dismantled, resulting in a shift from a protected, planned economy to a neo-liberal model foreign to the French tradition.
“France cannot recover within the given neo-liberal financial order”
France kept part of its “administered economy” within this system thanks to a permanent debt increase, from about 25 % of the GNP forty years ago to 113 % now, an increase which locates its economy closer to the Mediterranean model than to the German. In this framework, a process of de-industrialization took place, an industrial cutting sale reducing the proportion of industrial labor and income from about 20 % of the gross national product forty years ago to about only 10 % now. The industrial producers left the French territory to find cheap labor in Eastern Asia.
One of them, Serge Tchuruk, from Alcatel, promoted twenty years ago the dogma of “a fabless firm”, without the embarrassment of factories! Since 2008, 936 plants of more then 50 workers shut down in France, according to the Trendeo experts. The French workforce decreased to 2.7 million workers, compared to 7.5 millions in Germany. More generally, the French firms kept their centers of conception (brain value) in France or Europe, while “externalizing” their production sites.
This dream of a “qualified services economy” collapsed during the Covid period, when France not only lacked all from masks to paracetamol, but also witnessed shortages in piles and semi-conductors. Now the challenge is not only to repatriate the means of production, at least in part, but also to produce highly qualified, value added goods beyond the middle-sided sectors of present French productions.
The common agricultural policy within the EU, originally very favorable to the French producers, turned into an ecological and non-productive orientation, while on one side Germany was able to recruit at low costs workers for its slaughterhouses and Spain dump fruits and vegetables onto the French market. The European “Field to fork” program calls for a less productive approach while at the same time, given the conditions now prevailing in the international markets in the context of the Ukraine war, farmers are called to produced more! Their disorientation is worsening because the price of fertilizers and material needed for production has widely increased, while the crisis in the milk, beef and poultry production is squeezed in a costs/prices scissors crisis. So the agricultural sector is divided into a minority, producing top of the line products (wine, cheeses) and a majority, working 14 hours a day and earning barely to live. Each day there is now at least one suicide of a desperate farmer!
Globally, since more than thirty years, the French political ruling elite, right and left, has welcomed the coming of the Euro with enthusiasm without understanding its implications in terms of competitiveness. Moreover, the consequences of China joining the World Trade Organization in 2001 and the integration of Eastern European countries into the EU in 2004 were not anticipated. It is for this lack of anticipation that the French economy is paying now.
This does not mean that everything is bleak in the French economy. Beyond the sector of luxury consumption goods, the nuclear, aerospace, automotive and skilled labor niches are its main assets. Also, per hour of work performed, the productivity of French labor is the highest in Europe, even if the hours of labor per year are among the lowest.
All considered, France has all the means for an industrial and agricultural recovery but it cannot occur within a neo-liberal, financial order that by its very nature is becoming anti-productive. It demands a political will from the French government and elites, both in their national and international policies, something which is until now missing. Vision and anticipation should replace a mere other-directed adaptation to a financial order.
“A world crisis of the deregulated economy”
Do you observe signs of an economic crisis in your country? If so, based on which indicators?
The crisis in my country is an aspect, a symptom of a world crisis of the post-Breton Woods Western deregulated economy. Hervé Hannoun, a former counselor to president François Mitterrand and director of the cabinet of former Prime minister Pierre Beregovoy, quite accurately evaluates it as a crisis of a speculative economy, a “debt plus bubbles” model that the French authorities have not tried to avoid but to instead to adopt, against the very model of the Gaullist productive economy.
Such a productive economy gave us a banking model serving industry and agriculture, in opposition to the reverse situation now, where banks bet on the financial markets with the algorithms of the high frequency trading protected by the so-called Greenspan’s everything put, a state bail out guarantee. The now deceased American economist Lyndon LaRouche described it in the form of a triple curve, a functional whole, with a tendency to exponentially increase the level of money issuance to feed financial bubbles, instead of promoting a positive, productive economy. The French economic crisis takes place in that context.
The present negative indicators are unfortunately many. During the first quarter of 2022, the French GNP decreased by minus 0.2 %, the productivity rate also decreased and the purchasing power of the per-unit households’ income went down by 1.9 %. The inflation rate went up by 5.2 % in the first quarter of this year and would have reached at least 7 % without measures taken by the government to help the consumers. But such measures are just compensations and do not tackle the structural causes. In such a context, there is not enough national production to satisfy the induced consumption, and not only the French debt to GNP ratios has increased to reach 113 % but a much higher figure is widely expected and the foreign trade deficit has reached 31 billion euros during the first quarter, the second worse figure ever.
Christine Lagarde, the head of the European Central Bank (ECB), acknowledged that she had undervalued the risk of inflation in Europe, and announced two things: First that the ECB is going to stop its purchasing of financial assets and, second double its interest rates at least from 0.25 % between now and September. This increase is going to be the first since 2011. It means that the so-called Mediterranean economies, including France, are going to suffer even more than during this fist quarter. At the same time, the spread (differential) between German rates for long term bonds and Italian, Spanish or even French bonds is already increasing, making the situation all the more difficult for the highly indebted economies.
Therefore, the indicators that I just gave for France are certainly not going to improve, within the present system, in the coming months or even years. We are facing in our country the effects of the “economic hurricane caused by the FED and the Ukraine war” forecasted by Jamie Dimon, JP Morgan Chase CEO. The vulnerability of our economy as a whole is worsened by the failure of our public health and education systems to meet the challenges of this crisis. For example, the French R&D figure only reaches 2.2 % of our GNP, while the average level in Western Europe is of 3 %.
Regarding the causes of the economic crisis: Which are the domestic and which are international factors that you consider are important ? How do you see the relation between these?
As I said before, the chains of value and production, on one side, and the financial fluxes on the other are so much interconnected at the European and world scale, that our economy has to be considered at the same time from a sovereign point of view and as a factor within the international economy. I feel that I have said enough in my two last answers, which could not be coherent without taking into consideration the present one.
I would simply add, as elements of the specifically French situation, that president Emmanuel Macron just stressed “we are entering into a war economy” and “are going to be compelled to organize ourselves permanently to take it into account”. This means, translated into more clear terms, to adopt a “sober approach” different from what he oddly called “the grammar of even past year”. It means that the age of easy money is coming to an end and that austerity is hitting at our doors in the present situation of submission to the financial order and sanctions against Russia, which are provoking more damage to the supply of gas, oil and fertilizers to Europe than to the Russian economy.
Structurally, the conditions in the housing, educational and health sectors are worrying. As for the housing, France has encouraged the access to property for the households thanks to the low interest rates. As a result, their indebtedness is going to create an unavoidable crisis in the sector with the coming increase in interest rates. The hospitals instead of being organized for the needs of the population have been managed in terms of costs cutting and just in time priorities. There is now in the whole sector not only a lack of investment but under undue labor pressure, doctors, nurses and care agents are quitting while not enough new ones are recruited. In the public education sector, underpaid teachers and professors are in a state of revolt while the level of studies has lowered dramatically because of the emphasis put in training for well paid competences for a service oriented economy instead than on classical culture in both language expression and physical sciences to create searchers and engineers.
Here again, in these three sectors, the projection of an “American” model on a French base without creating intelligent bridges has created dangerous middle and long-term effects on the whole economy. To solve this maybe the most difficult domestic challenge to meet in the coming years.
City of London – Wall Street and the Google-Apple-Facebook-Amazon-Microsoft complex
How do you see the future of the global economy?
Frankly, I am convinced that the so-called Western financial system is doomed. In his farewell speech of 1961, American president Dwight Eisenhower warned against a destructive military industrial complex. Now such a complex has become a military-financial-media and intelligence power which, indirectly or more often directly, has taken control of the Western world. It is not an undefined “deep state”, as often claimed, but the world of the City of London, Wall Street, the main central banks and the Google-Apple-Facebook-Amazon-Microsoft complex. It is a combination of the control of money issuance for the benefit of an oligarchy with the service of algorithms to organize the flows of speculation. Such an economy has a debt to production ratio always higher and higher – the bubble/debt monetarist system, unable to produce to maintain its present population at the level of knowledge to create and control more advanced technologies.
The failing real productivity of the global financial economy cannot then maintain a potential density increase of the population in quantity and quality. It is condemned to rule over decrease and keep its power to intimidate any force of a nature to challenge it. Hence the only physical sector really developing, with the exception of real estate speculations, is the production of weapons, the world of Raytheon, Lockheed etc.
What is your solution for the above-mentioned crisis?
The solution of the Schiller Institute and my solution are to muster forces for a new paradigm of stability and development to the advantage of all nations of the world. I am fully convinced, as our last Schiller Conference title says, that there can be no peace without the bankruptcy reorganization of the dying Trans-Atlantic financial system.
This means to implement what Lyndon LaRouche called his four laws: First to reintroduce the Glass Steagall banking separation at a global scale. This would mean to stop the bail out and the bail in of the speculative operations of the banks on the financial markets and demand the functions of credit and deposits managements to be separated from their investments on the financial markets. Second to organize a credit system for the physical and productive economy, under state supervision, excluding financial operations then considered as a liability. Third to create national banks instead of central banks, on the model the American system of Alexander Hamilton and the post 1945 French national bank, with the support of a planned economy. Fourth, the orientation of credit towards the highest forms of technological investments and R&D, like thermonuclear fusion energy for civilian purposes. Such a system of productive physical, human economy is mandatory to shift from the present monetarist system, which leads to wars of all against all into a world of peace through mutual development. To fight for its implementation is the only way to reestablish a sense of reason and moral commitment in international and national politics.