Protectionism in Europe

May 5, 2006 at 8:43 pm (Europe, Society)

Eiffel TowerFor those of you who didnt follow the youth riots in France, earlier this month, let me explain in brief. There was a labor law reform in France that would allow employers to hire and fire freely young employees, under the age of 26, for the first two years of trial period, which is felt as a ncessary reform for modern companies to work. But, riots erupted so much that the deal was throw out and the main architect of the deal – de Villepin's (French PM) political career is doomed.


Unemployment among youth is extremely high and this not only generates riots, but also worsens the impact of already ageing country. If more than 25% of youth are unemployed and the average population is well past middle age, France is in deep trouble.

In this context, comes the CPE (First Job Contract) which would allow employers to fire their workers in the first two years of trial period, if they are under 26. The things surprizing for me is why only till 26 and why only 2 years of trial period. While, the rest of the world has come to terms with jobs where there is no guarantee that anyone will be retained for any length of time, I find even the CPE is a bit unrealisitc and not-enough reform. But, the French people surprize by having an enormous extent of riots and strikes that de Villepin (French PM) was forced to take back his policy. This is a crucial event that might dictate the future of this country.

First, France is not going to get any modern industry, without basic protections for the employers. How do you expect Yahoo or Google to give an employment for life, when they cant predict what will be their future in the next 5 years? Already, the French are ageing and so the modern companies dont find much market to sell and have little choice of workers. Thus, all the wealth generating modern companies will go to emerging markets with lighter labor laws, and French will be saddled with old-age companies.

Second, the defeat of de Villepin (who has been victimized for this policy and could lose his Presidential ambition) will dissuade the French politicians from talking reality to their subjects. They would be forced to tell the people, what they want to hear – a modern welfare economy, and this could spell disaster for the country.

Third, riots will worsen. The French people were rewarded for their unjust riots. Now, they will get the feeling that they can stop the govt. by indiscriminately goin on riots. As France starts to go down with a sagging economy the riots among both citizens and immigrants would rise and will bring France economy to a halt.

The problems are not just isolated to France. They are present in similiar or different forms in the rest of the Europe, where left wing socialists join hands with right wing nationalists to stop the countries from accepting reality and join the modern economy. During 1998-99 German govt. was forced to stop hiring more of Indian computer engineers, which significantly affected the growth of German s/w companies compared to their American counterparts. Last year, they(French and Dutch) stopped the common Euro constitution, which would allow the tiny continent of Europe to unite, as it gets impossible for them to make their voice heard in this world of giants.

France, like the rest of the Europe, is surging with opposing currents of leftists and rightist wing nationalists both of whom have marginalized the logical politicians. While the leftists try to promote more of isolationism and protectionism, in the name of labor rights, the rightists believe that France has a special place in the world and promote racialism and harsh treatment of immigrants. While we could understand the problem posed by indiscriminate entry of immigrants in the form of refugees and low-paid workers to add with the problem of poorly skilled second-generation kids of immigrants, we have to Agree that France has done preciously little to solve the actual problems.

France, along with the rest of Europe and to some extent Japan, is unable to come to terms with the modern economy and globalization. They are unable to understand the mammoth changes visible on the horizon, with India, China and to some extent Brazil and Russia rising as massive economies. They still dont realize that their wealth was mainly earned with the majority of the world was sleeping and chained in imperialism where they got cheap resources and labor supplies and got markets without much competition. Otherwise, a relatively small country tucked in Europe, without much of mineral resources and historical heritage, compared to many Asian countries (like India and China) couldnt have become a great economy. They had progressive policies, when rest of the world were riddled with the chaos of monarchy, clanism and communism.

Now, the rest of the world has started to wake up. Countries like India and China demand their fair share of world resources and wealth. Thus, France has to come up with reality. They cant expect their yesterdays to be same as tomorrow. They built up an overly welfare state on top of wealth, which wouldnt have come had they not interacted with the rest of the world. Now, there is no choice for them. They cant afford to close their economy. Their companies cant afford to be big by having only tiny markets of few million people, while giant Indian, Chinese and American companies drive them out from the rest of the world. At some point they have to realize that the only way Europe can prosper is by competiting with the rest of the world and thus there is no way they can avoid globalization and tuck themselves into the cozy blanket of protectionism.

Let us hope that they will realize Reality, before it gets too late.

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