Richard Murphy – Can France really be a neoliberal state?

The answer is that neoliberalism is not defined by the size of the state. It is defined by whose interests the state serves

Transcript

One of the questions I’m asked at the moment, because there is rioting in France, is how can France be neoliberal when its government spends so much? After all, those students, those people on the streets in Paris and elsewhere, are protesting about a neoliberal government, and the fact is that France has one of the largest states in Europe and extensive public services. So many people argue that this means that France cannot be neoliberal. But that, whilst it sounds like a reasonable point to make, misunderstands the nature of neoliberalism.

Neoliberalism is not defined by the size of the state. It is about whose interests the state serves. Neoliberalism is a philosophy that tries to define who controls economic decisions. The conventional argument is that neoliberalism wants a smaller state.

But there is more to neoliberalism than that. Neoliberalism is the politics of austerity. In economics, it is the belief that private businesses and markets do things better than governments, and that making profit matters more than meeting people’s needs. In practice, this means cutting public spending, privatising public services, reducing regulation, and keeping taxes low, especially for the wealthy.

But as it has morphed, neoliberals do not necessarily oppose government spending. They instead want markets and private interests to determine economic priorities, and critically, they want private businesses to benefit from public spending.

The result is that a very large state can, in fact, serve neoliberal interests very well indeed. In that case, France shows why the size of the state is misleading when appraising whether a state is neoliberal.

France has a substantial welfare state. It also has significant government spending. Government spending is 57% of GDP in France, the second highest in Europe, and if you’re curious, it’s beaten by Finland.

The UK has just 46% of GDP spent by our government.

But that still does not tell us who exercises economic power. To do so, we must ask: who determines how public money is used? And we must also ask who benefits from government decisions.

Financial markets increasingly influence French government policy. Bond markets influence the terms on which the French government borrows. Investors are demanding reassurance about government debt and spending in France. And EU fiscal rules are imposing additional constraints on budget decisions, limiting the options available to the French state. The EU rules are themselves neoliberally inspired.

These pressures influence what the French government considers possible. Financial priorities can therefore override public preferences in a state which might be big, but which is nonetheless dominated by neoliberal thinking. The consequence is that austerity is as real in France as in many other countries.

Austerity shows how neoliberal priorities operate.

The French government is facing pressure to reduce public spending. Pension and education cuts are being pursued to reassure financial interests. The consequences fall on people who depend on public provision. The protests are challenging these decisions and their underlying priorities. The conflict in France is then about whether people or markets come first, and the dividing lines are very clear.

There’s something else to note as well. Privatisation and outsourcing show how neoliberalism uses a large state.

Public assets are transferred into private ownership.

Public services are outsourced, but public money still pays for them.

Private companies gain a continuing income stream from public contracts.

Weak regulation then lets them extract more profit from that income.

The state stays large, but its revenues line private pockets. That’s what France is showing us.

And the French protests also highlight something else. They raise a fundamental democratic question. Should financial markets determine government economic priorities? Should EU fiscal rules override the demands of citizens? Should pensions be cut to reassure investors, and should democratic choices decide how public resources are used? These are political decisions and not unavoidable economic necessities.

Neoliberalism is not then necessarily about shrinking the state. Neoliberals might like to shrink the state, but there is now another dimension to their thinking. They also want to capture the state for private gain. France shows that a large welfare state can still be subject to neoliberal pressure. Financial discipline, privatisation and outsourcing are how that happens.

A government can spend heavily and still serve private wealth.

So the question is not how much government spends, but who it serves. That’s the lesson that we need to take from France.

France is showing us, and the experience of the UK has shown us, that in the current state of the world, where the state is large, neoliberals can still thrive, but they do so not by innovating, not by creating private-sector enterprise, not even by putting the interests of competitive markets first, but by capturing state revenues for private gain. And that is why in the UK we have so much of our government spending under private sector control. That is what we have to challenge.