Streetwise Professor

January 5, 2019

Vox Populi v. Vox Domini Super Eos Electos

Filed under: Economics,History,Politics — cpirrong @ 7:27 pm

For weeks France has been wracked by the “gilets jaunes” protests directed at President Emmanuel Macron. The protests had slackened recently, but today they flared up again, perhaps due to the arrest of a gilets janues leader. (Was this just stupidity, or does Macron want to stoke the protest? Dunno.)

The French protests represent yet another battle in the global war between the hoi polloi and the elite. The catalyst for the French protests was a quintessentially elitist policy initiative: a tax on motor fuel, with the stated purpose of combating climate change.

Even on its own terms the tax is stupid. Even assuming a very high temperature sensitivity to CO2, the reduction in emissions resulting from the tax would have a vanishingly small effect on global temperature. Furthermore, like most of Europe, French gas taxes are extremely high, and almost certainly far above the level that would efficiently address externalities arising from motor fuel consumption.

The protestors may understand that the tax does not make sense as a way of addressing climate change. But their interests are far more down-to-earth. This is another tax imposed on the most heavily taxed country in the OECD. Further, it falls most heavily on the rural population, and the working population, and has little impact on the metropolitan elites. It is, in a sense, the straw that broke the camel’s back.

With consummate tone-deafness, Macron galvanized the protestors with remarks that would make the fictional Marie Antoinette (“let them eat cake”) blush. Hey, if driving costs too much, just carpool! Or take the bus! Yeah. He actually said that (unlike Marie and the bit about the cake).

After the initial shock, Macron caved, and shelved the tax. But the protests continued, with varying degrees of violence around the country (e.g., torching toll booths). This is because the tax’s significance was more symbolic, relating to the excessive taxation in France, and the sneering indifference of the elite to the fate of non-elite France, which Macron has personified all too well. So, as is often the case in coordination games, once people became aware of each others’ dissatisfaction, the protests took on a life of their own even after the initial catalyst was removed.

Today the protestors gathered in front of the Paris Bourse, demanding Macron’s resignation. Surely, he won’t, but his evident unpopularity will hamstring his ability to govern for the remainder of his term.

The government response has been somewhat amusing. One tack was that police resources were inadequate to deal with both the protests and terrorism. “France Doesn’t Have Enough Cops.” That is, the government of the most heavily taxed advanced economy in the world cannot perform the primary duty of the state: to secure the safety and property of its citizens. So don’t protest, because that make it impossible to combat terrorists.

But of course they should be given more money and power.

In the United States, there is also an outcry against the president, but it is the inversion of the one in France. Whereas in France it is the ordinary people taking to the streets in opposition to the governing elite, in the US the governing elite is taking to the media and the bowels of the state to oppose Trump.

There are no widespread protests on the streets of the US (Antifa freaking out in Portland doesn’t count), and especially lacking are protests by ordinary citizens against Trump. And why should there be? For most Americans, the last two years have been pretty good insofar as bread-and-butter issues are concerned (as epitomized by yesterday’s job report, both on the number of jobs and wage growth). No, the frenzy in the US has focused on issues that ordinary Americans don’t give a rat’s ass about, but which drive the governing class into paroxysms of fury–e.g., alleged (but completely unproven) allegations of “collusion” between Trump and Putin/the Russians.

These allegations are merely useful cudgels with which to beat Trump. The fury of the governing class really stems from his running roughshod over their presumptions and privileges. He’s just not one of them. He insults them. He tramples their amour-propre. He does not worship their idols. Indeed, he trashes them. Icky people like him.

So whereas the ordinary French have taken to the streets, the governing class has taken to pulling the levers of its power–the FBI (even before the election), the American star chamber (aka the Mueller Investigation), incessant and hopelessly biased media coverage, and now, threats of impeaching “the motherfucker.” (To which I say–be my guest. Look at how well that worked out in 1998-99.) There are even those who have advocated a coup.

I daresay that the governing class in the US sees what is going on in Paris and other places in France, and shudders. It shows how deeply loathed the governing class is, and how a seemingly small spark can ignite a political firestorm against them. They have certainly questioned the protests’ legitimacy, at times in their desperation succumbing to the last refuge of the idiot–blaming it on the Russians. Case in point, the pathetically hilarious Max Boot (hey, Max, can you do a pushup?) who at one time pined for an American Macron, only to be subjected to ruthless–but completely warranted–ridicule when the French protests erupted. In a nauseating attempt to rationalize the complete popular repudiation of his man crush on Macron, Max insinuated that although the Russkies may not have caused the protests, they fanned the flames through their diabolically clever exploitation of social media.

The condescension here is palpable, and reflects a pattern that I’ve pointed out going back to 2015. Rather than acknowledging that widespread popular dissatisfaction with the elites–as epitomized by Brexit, the Trump election, various European elections, and now the protests in France–were due to repeated elite failure unsullied by any success, they add insult to injury by accusing their opponents of being stupid, unwitting pawns of their current bête noire.

It is indeed amazing to see that an incessant barrage of attacks from the governing classes have not moved the needle on Trump in the slightest. If anything, they have bound him and his supporters more tightly, because the latter recognize that an attack on Trump is just as much an attack on them.

The most common divide in polities around the developed world right now is between the governing and the governed. The self-conceived and self-congratulatory elite vs. the ordinary. France is just the most recent battleground. It wasn’t the first, and it won’t be the last. The battle is becoming more intense because the objects of popular disdain refuse to acknowledge any responsibility for creating the conditions that have spurred popular discontent.

The same thing happened in France, 230 years ago. The nobility in the ancien regime stubbornly and righteously clung to their privileges, and their conviction in their own superiority. Worked out swell for them, right? But some people never learn.

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  1. The US needs its own yellow vests to combat Antifa, the liberal elites black shirts.

    Comment by Luis DeCamoes — January 5, 2019 @ 9:35 pm

  2. In Chicago powerful 50 year alderman (term limits?) Ed Burke just arrested. Might get interesting since he was the money man

    Comment by Jeff — January 6, 2019 @ 6:29 am

  3. If we believe Stern then the correct Pigou Tax is $80 per tonne CO2-e. That’s 11 English pennies per litre petrol, perhaps 15 euro cents. There’s nowhere in Europe that doesn’t already charge multiples of this. As far as cars are concerned we’ve already dealt with climate change over here…..

    Don’t forget that Pigou Taxes aren’t to pay for damages, they’re also not on top of all other taxation. They are to correct prices for the externalities only….

    Comment by Tim Worstall — January 6, 2019 @ 7:58 am

  4. @Tim–I agree completely, which is why I mentioned that existing taxes were above those necessary to address the CO2 externality. Same is true in the US, even though gas taxes here aren’t even close to European levels.

    It always amazes me that existing taxes are almost always ignored when debating this issue. Given the level of fuel taxes, we probably consume too little of it, not too much of it.

    Comment by cpirrong — January 6, 2019 @ 1:44 pm

  5. The gilets jaunes protests are more subtle than just protests against tax rises. The French were encouraged by their governments for years to buy diesel cars, partly because of the agitation of climate change activists who claimed it had low CO2 emissions and partly by their car industry that had a lead in diesel cars. The government even subsidised rural communities to switch their heating to oil.

    We’re getting close to a similar situation in the UK. Gordon Brown encouraged a switch to diesel cars through fuel taxes because it would save the planet. My wife bought her diesel car partly because she thought she was saving the planet (I gave up that argument years ago, marital harmony trumps pointing out the lack of clothes on the CAGW emperor). Now we’re subject to higher fuel prices and emission standards so stringent that she fears her car will be forced off the road every time it has its annual inspection.

    Comment by Bloke in North Dorset — January 6, 2019 @ 2:51 pm

  6. @Bloke–The diesel fiasco is one of my standard talking points whenever I discuss the European governing classes, especially with respect to climate policy. They screwed that up horribly, but no worries, they’re to be trusted totally when they force electric cars down everyone’s throats!

    Comment by cpirrong — January 6, 2019 @ 4:38 pm

  7. Watched France24 today, and the only segment they had on the gilets jaunes was on a bunch of women in yellow vests gathering in some square to point out that women are the big sufferers in income inequality.

    When it comes to media, it’s only a real protest when women and minorities are hardest hit.

    Comment by I.M. Pembroke — January 6, 2019 @ 7:45 pm

  8. @BiND: we bought a ten-year old diesel car that was built before the current regs so that, for instance, it doesn’t have a DPF. This would, we expected, make it more reliable than more recent models.

    We were rather hoping that we’d be able to drive it until it died. When the great Germans Tell Lies scandal erupted we wondered whether the govt would give us a heap of moolah if we agreed to scrap it.

    What we don’t want is simply to be banned from driving it in many places we want to drive in but it seems to be on the cards. That would be a yellow vest moment.

    Maybe we should sell it to somebody who plans to drive it around on Dartmoor: that’s what became of our previous car.

    Anyway, is anyone really surprised that the chap who sold our gold reserves, the chap who built two pointless aircraft carriers, cocked up diesel cars too?

    Comment by dearieme — January 7, 2019 @ 6:53 am

  9. On the infra-marginality of European CO2 emissions given their sky-high fuel taxes, it turns out that even in the U.S. if you take the alarmist point of view the optimal tax is pretty low. The IMF had a study a few years ago on fossil fuel “subsidies” around the world, where they included untaxed negative externalities of pollution and climate change in the subsidy pool, and the framing and PR stressed how massive these were. But for the U.S., when I worked it out per BTU, the needed incremental tax was the equivalent of maybe a nickel a gallon (and most of the issue was ordinary air pollution, not climate change).

    Comment by srp — January 7, 2019 @ 7:33 am

  10. TLDR: The French economy is desperately uncompetitive and there will always be protests when somebody tries to correct that (in this case: reducing the taxes on investment, on primary residences and reducing social charges, but at the expense of increasing fuel taxes (which were then dressed up as an ecological tax)). The current popular discontent stems more from a lack of understanding of economics…

    Long version:
    Since I live in France, I might be able to contribute some useful additional context:
    – The reason France doesn’t have enough police (and by European standards, it does indeed have very few) is not that the elite have failed to provision them with the enormous tax take they raise. It’s that the population aren’t keen on police (A WW2 reminant?), but are keen on healthcare, social care, etc., so that’s where the bulk of the money goes.
    – When calculating the tax burden, one must take into account that although we pay higher taxes, almost nobody here needs to pay into a private pension, or for healthcare or for university tuition. For most families, that’s going to significantly narrow the difference between France and a low-tax country like the US.
    – Macron’s credibility is indeed heavily damaged, but this won’t affect his ability to govern: He has a powerful presidency and an overwhealming majority in parliment. There isn’t really anything to stop him appart from another bout of protesting, but already far greater numbers of people are getting pretty tired of a small number of “breakers and agitators” (to use the French expression) who just want to engage in property damage at the expense of the wider population.
    – In fairness to Macron, the diesel tax was revenue-neutral at government level (or so they claimed anyway), presumably to offset the reductions in corporate tax (which was making France uncompetitive internationally, though if you were to listen to the average French person, this was nothing more than a gift to rich business owners… sigh…), wealth tax (excl. property, which remains subject to wealth tax), property tax for primary residences and reductions in social charges. Unfortunately, Macron wrapped the tax hike (as you say, a naked grab for the wallets of some of those least able to absorb it) up as a noble fight against climate change… and we see how that worked out.
    – You also have to keep in mind that the motivations of the Yellow Vest protesters are not what an American would imagine: They want all sorts of contradictory things… they want a big reduction in taxes and to overturn the democratic process, but also big increases in spending on universities and the disabled. They want big tax increases on investment and no ammount of economic argument will convince them that this will reduce employment. In fact, the usual French answer to questions about unemployment is that the government should simply hire all the unemployed people. Fancy that! What a simple and easy solution! Why didn’t the government think of that before!
    – Fuel taxes are indeed already plenty high here…
    – Finally, arguments about the entrenched elite fall a bit flat when talking about this government: Those entrenched elites are the established political parties. Marcron’s government is made up of all kinds of first-timers. Granted, they are following a very elitist philosophy, but I think it is unfair (at least at this point) to accuse them of acting out of greedy self-interest.

    Comment by Hiberno Frog — January 8, 2019 @ 3:29 am

  11. Thanks, @Frog 🙂 Some good points there. I’ll respond to one now (maybe more later). In terms of wanting contradictory things–this is characteristic of populist movements. They are almost always rather inchoate and contradictory, and incorporate disparate and otherwise conflicting segments of the population. In Italy, Five Star is left-populist, LN is right-populist. The only thing that really unites them is antipathy for the EU. In the post-Financial Crisis US, Occupy was essentially left-populist and the Tea Party right-populist. Currently, American populist is more right, but even it has many contradictory elements.

    Knowing how politically and ideologically splintered France is, and always has been, it is not surprising that the populist movement is wildly contradictory in its beliefs and aims. Not to mention that it has been infected by the French statist mindset that has been around since, oh, at least Louis XIV!

    Comment by cpirrong — January 9, 2019 @ 9:58 am

  12. Wait a minute, are the “yellow vests” on the right or the left? or is this a fight on the left?

    Does France even have a right?

    Comment by Tom Hend — January 9, 2019 @ 5:22 pm

  13. @Tom: Their social/societal demands are fairly right-wing, for example they are usually opposed to same-sex marriage (funnily enough, I think that this has more popular support in the USA than in lefty France!), and they want to appoint a respected former-general as president. But their economic demands are pure left-wing lunacy.

    A major case in point is the “ISF” tax, i.e. the wealth tax (literally translated, it is the Solidarity Tax on “Fortune”, where “Fortune” can be translated as either “Wealth” or “Luck”, which I think tells you a lot about how much of a “you didn’t build that” mentality exists here – anybody with more than €1m is considered “lucky” rather than as somebody who has invested well and worked hard). Anyway, Macron abolished the ISF in a bid to keep these assets in-country, where they could be productively invested. Real Estate remains subject to the ISF, on the grounds that it is A: not a productive investment for the country and B: the French have recognised that reasonably priced housing is a criteria for social cohesion (post-Brexit UK and present-boom-China please take note!) and so they put a tax on those hoarding it (albeit with unintended victims, such as poor farmers in areas with high land prices). Anyway, the Yellow-vests take a left-wing view that reducing tax on those with large investments is just a gift to those investors (never mind that they already paid income and capital gains tax on that money!), rather than seeing this as an opportinuty to direct that investment into the country and create badly-needed employment…

    I don’t know why I’m writing this, nobody’s going to see it…

    Comment by Hiberno Frog — January 21, 2019 @ 5:05 am

  14. @HibernoFrog–I see it. Am I nobody? 😉 I appreciate your explanation. Very informative.

    Comment by cpirrong — January 21, 2019 @ 10:56 pm

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