FRENCH SOCIALIST TRADITION: LOST & CONFUSED

You've got to feel bad for the French. Like most Western European countries, the population of native French is in decline and will be in the distinct minority by mid-century. In addition France is not an economic, military, diplomatic or political player on the world stage. The great French era of influence was, alas, very long ago.

And now this story that follows.

The strong socialist tradition in France has apparently caused a complete and total lack of understanding of the impact of competition on prices. As you will read, the French are distressed about increasing prices while at the same time very much opposed to increased competition in the marketplace that would in turn offer choices and force suppliers to compete for customers.

They suffer from a severe free market disconnect.

Or maybe they are simply too arrogant to recognize how well a competitive market works elsewhere in Europe or, for that matter, around the world. Given the rapid decline of France, if it finally falls it won't have far to go.

C'est la vie!

Purchasing-power disparity
From The Economist print edition
French shoppers want lower prices, but not more competition

THAT coffee or cornflakes are cheaper in a German supermarket than a French one is bad enough. That French-owned products, such as Danone yogurt, Vittel water or Riches Monts cheese, are too is an affront. A basket of identical items costs 30% more in France, says a study by La Tribune, a daily.

Rising fuel and food prices are worrying consumers all over Europe. Concerns about purchasing power are an especially hot issue in France. President Nicolas Sarkozy's unpopularity owes much to his failure to boost it as he promised. Inflation, at a 17-year-high, is not the only problem. This week, he dropped in on a Yoplait yogurt factory to declare that “there is no reason why we should have the highest prices in Europe.”

Yet if voters want lower prices, they are less enthused by more competition.
Christine Lagarde, the finance minister, is promoting a new law to inject more competition into retailing. It would make it easier to build out-of-town hypermarkets, and would scrap a rule stopping retailers from selling below cost. In many places, hypermarkets have de facto local monopolies, and so are protected from competing with each other or with the big discounters, which account for only 13% of food retailing, next to 30% in Germany. Nor can hypermarkets negotiate freely with suppliers, which retailers say allows big brand-names to impose high prices.

So why are consumers not cheering on the new law? The Socialists say the fringes of historic towns will be destroyed. Deputies in Mr Sarkozy's own party, lobbied by food producers and small shopkeepers, want to dilute the text. When asked by Ifop, a pollster, how best to raise their purchasing power, only 42% of respondents picked out more retail competition. Some 85% preferred a cut in the sales tax, and 72% a rise in the minimum wage. Scepticism about competition has deep roots, ranging from a lingering influence of Marxism to a fear of American capitalism trampling the French way of life. Above all, voters see competition through the eyes of producers—as a menace to jobs and factories—rather than consumers.

This may explain why Ms Lagarde's new law does not touch other regulated areas, such as pharmacies, taxis and notaries. Supermarkets are still not allowed to sell non-prescription drugs. E.Leclerc, a hypermarket giant, was recently taken to court by pharmacists for running a television advertisement claiming that it could sell household medicines a lot cheaper if it were allowed to. The court ruling against the advertisement was overturned on appeal. But the pharmacists' monopoly remains—with Mr Sarkozy himself ruling out any change on the ground that pharmacies are not a business but a “public service”.

Comments

That's the only cure in the liberal mind, raise minimum wage. This only speeds up inflation because the businesses that have to pay those wages have to increase the prices of their products and services to cover the costs of those higher wages which means the raise they just got through legislation means nothing except everybody is dealing with higher numbers in and higher numbers out of their pockets. Higher production is the only answer to challenging economies.