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ORIGINAL FRENCH ARTICLE: "Refonder" le capitalisme, disait-il

by Rosa Moussaoui

"Rebuild" Capitalism, He Said

Translated Thursday 3 September 2009, by Henry Crapo and reviewed by Henry Crapo

Crisis. One year after his speech in Toulon, Nicolas Sarkozy is replaying the same scenes about "the excesses of finance capitalism". Speculation, meanwhile, is once again off at a gallop.

To act as if nothing had happened would be an error of historic proportions. [1]

Thus spoke Nicolas Sarkozy on 25 September of last year, at the Zenith in Toulon, calling, as a response to the global crisis, for a "moralization" of finance capitalism. Eleven months later, the promised "rebuilding" looks more like a tune-up for the speculative machinery that pushed the world economy into the ditch. We take a look at those promises of the head of state that have taken wing and fluttered away.

— 1 — The "moralization" of finance capitalism

Self-regulation as a way to solve these problems, that’s over now. "Laisser faire" is finished. The all-powerful market that’s always right, that’s finished. [...] If we want to recreate a viable financial system, the moralization of capitalism is a priority."

Since Toulon, the G20 in London, last April, did nothing to shake up the old economic and financial order (see l’Humanité for 7 August). As for the speculative fever at the origin of the crisis, it’s off and running at a fine speed. If the banks, saved by massive injections of public money, with nothing to give in return, are once more showing profits, they owe it to "activity in the trading halls, that is, to speculation", emphasizes the American economist Joseph Stiglitz in an interview for the magazine Challenges.

A total, from now until 2010, of 5,000 billion dollars will have been mobilized to restabilize the system. But the logic of the workings of finance capitalism remains the same. Hence the flight forward that consists, at all costs, of tinkering with the stock market machine, in the hope that a return to financial profitability will automatically provoke a return to an economic upswing.

— 2 — Bonuses and golden parachutes

The modes of remuneration of top management and traders must henceforth be kept within bounds. There have been too many abuses, too many scandals. So either the professionals come to an agreement as to what practices are acceptable, or the government of the Republic will settle the matter with a law enacted by the end of the year.

Neither the oratorical acrobatics of Sarkozy nor the code of ethics of the MEDEF [2], nor the inconsistent decree promulgated last Spring have changed the basic situation: the yearly pay of top officers of companies listed on the CAC 40 [3] is 4.7 million euros, or the equivalent of 308 years at the statutory minimum wage. As for the system of bonus-malus [4] that the banks promised, at the end of their meeting on Wednesday with Nicolas Sarkozy, to apply in fixing payments to their traders, he is all the less convincing since the government excludes the use of any true instrument of dissuasion. Rules that impose constraint will create, says Christine Lagarde with alarm, "a competitive disadvantage" for French banks and French enterprises. Charged by the Elysée with the task of "controlling" the paychecks for traders, the former director of the IMF, Michel Camdessus, will in fact be granted a simple power of "recommendation". In the meanwhile, the fiscal policy favorable to big salaries remains intact. This year the state payed out an average of 116,193 euros to 3,506 of the richest taxpayers in the class of 13,998 benificiaries of the "fiscal shield".

— 3 — The banks

We must force the banks to finance economic development, not speculation.

Loans to households and businesses in the euro zone decreased in July, and their yearly rate of increase dropped to an all-time low, the Central European Bank announced yesterday.

In the face of this tightening of credit, the head of state was content simply to meet with the bankers on Tuesday for a quiet pulse-taking. In spite of the 10.5 billion euros in public funds that were given in 2009 to the six principal French banks, these banks have already admitted that they will not follow through with their promises of financing the productive economy. "The state funds must be subject to conditions guaranteeing loans at reduced interest rates to favor jobs and productive investment, notably for the small and medium-sized enterprises," repeated, this week, the CGT union. But on this score also, the government has no intention of introducing new regulations. "I hear from various sectors that we must require the reimbursement of these transfers. Surely not!", declared Christine Lagarde on 7 August.

— 4 — Rigor

In the present condition of the economy, I will not introduce a policy of austerity that would worsen the recession."

The compression of public expenditure remains in fact the priority of the government. In order to halt the increase of the budget deficit, the minister of the budget, Eric Woerth, refused, for 2010, any increase in direct income tax, but confirmed, on the other hand, a "corseting", "outside any plan for economic recovery", of the budgets allocated for the ministries. The objective of non-replacement of half the number of retiring civil servants will be maintained, which is equivalent to the suppression of 34,000 posts. After the deep cuts in 2008, the social and public services budget, the public policies will again pay the costs of the announced austerity plan.

— 5 — Fiscal responsibility

I will not accept any increase in taxes that will reduce the buying power of the French people. Because our objective is to give them back their buying power, not to take it away."

This promise fell through the trap door with the creation of the "carbon tax", which is to be paid by the households, and which will be part of the finance law for 2010. Its tax rate should fall in the bracket of 14 to 20 euros per ton of CO2 [5] emitted, acording to the state secretary for Ecology, Chantal Jouanno. This will bring the total of this tax to some 300 euros per household per year. A way of compensating, in the state treasury, for six billion euros lost with the suppression of the taxe professionnelle [6].

[1Quotes from NS are printed in italic font.

[2Employers’ association

[3An index of the main companies whose stock is traded on the French exchange

[4A proposed system of credits and demerits, for year-end adjustment of salaries.

[5Carbon dioxide, "greenhouse gases".

[6Tax on local businesses, heretofore one of the cornerstones of financing at the level of towns and villages.

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