france in turmoil

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France in Turmoil

October 22, 2010 | 1155 GMT

STRATFOR

Unrest in France sparked by protests against the government continued Oct. 21. The turmoil

is ostensibly over proposed government pension reforms, but it is about much more thanthat. The protests themselves are a confrontation between the government and unionized

labor ² older generations that want to protect benefits hard won in the 19th century andenhanced in the 1970s and 1980s. At the same time, another group of French citizens ²

disaffected youths, many of immigrant Arab and African descent ² are protesting not for employment benefits, but for employment itself.

The two groups have different economic and social interests, but they are coming together in their angst toward the government and in their anger toward President Nicolas Sarkozy.

This presents a dangerous situation for Paris, as it has the potential to spark wider societalunrest unless the government moves to satisfy one of the groups.

The French Social Contract

Every country has policy issues that tap into deeper sentiments. Federal taxes get

Americans¶ blood boiling, whereas in most Western countries they are understood as anecessary evil. In Iceland and Norway, defending one¶s right to fish is so important that it

determines which geopolitical groupings and alliances Reykjavik and Oslo join. Icelandnearly went to war with a fellow NATO ally, the United Kingdom, over cod. In Germany,

opposition to nuclear power and the Cold War spawned the most politically successful,coherent environmentalist movement in the world, with the Green party entering governing

coalitions and now taking its place as the second-most popular party in the country. Themere mention of softwood lumber turns Canada, a country of moderates, into full-blooded

nationalists. In France, the social welfare state is such a policy issue; it transcends mere



policy and is seen as a fundamental part of the social fabric.

The origins of the French welfare state go back to the 60-year period of nearly constantturmoil following the 1789 French Revolution. The revolution was followed by the 1793-94

Reign of Terror; the White Terror of 1794; Napoleon Bonaparte¶s rule from 1804 to 1814,

which included an almost uninterrupted period of pan-European warfare; another WhiteTerror in 1815; and two more revolutions, in 1830 and 1848. The 1848 Revolution took ona particularly socialist tinge, as a nascent working class that was growing amid the

country¶s industrialization united with the peasantry in protest of their conditions.

Napoleon III, Bonaparte¶s nephew, came to power following the 1848 Revolution, and itwas under his populist reign that the French state began to expand social welfare benefits to

workers and the peasantry as a solution to the constant social upheavals of the previous 60years. The state instituted controls on the price of bread, state subsidies for worker and

artisan organizations, and an early form of a pension plan and insurance. French workersreceived the right to strike in 1864 and the right to form unions in 1868. Social welfare was

also seen as a way to unify the country: Before the French Revolution, only about one-fifthof the population spoke the Ile-de-France (Parisian) French dialect, and considerable

linguistic and ethnic differences existed across the country. Paris saw social welfare, amongits other uses, as a way to turn all these disparate populations into Frenchmen as part of its

active nation-building process.



Under Napoleon III, social order was largely restored for the next 20 years ² to bedisrupted by the war against Prussia in 1870 ² but more importantly, the French social

welfare state became a crucial part of the government¶s social contract with its citizens. Inorder to pacify and unite its restive population, the state vowed that it would take care of its

citizens from cradle to grave.

Workers Protesting for Benefits

The violent history of French social welfare means the current strikes and protests are notmerely about entitlements or a resistance to retiring two years later. The French, in other

words, are neither lazy nor illogical. The protesters see the reforms as a threshold that, if crossed by the government, could undermine the foundation of the last 150 years of French

society. Thus, while only 7-8 percent of the working population belongs to a labor union ² the lowest percentage in the EU and even lower than that in the United States ² nearly 70

percent of the population supports the ongoing strikes and believes they should continue if the proposed reforms pass, which they likely will by Oct. 23.

The social welfare state strengthened as the French working-class population increased

during the post-World War II industrial expansion, or the Trente Glorieuses (³The Glorious30´), the period from 1945 to 1975. France averaged a gross domestic product (GDP)

growth rate of 5.8 percent from 1960 to 1973, greater than both West Germany (4.4 percent) and the United States (3.9 percent). During this period, the working class grew as

the farming population moved to the cities, particularly Paris.

Despite a cozy social welfare state, even by European standards, relations between the

government and labor were not always perfect. Labor unions joined the 1968 May student protests but withdrew from the unrest when they gained concessions from the government.

The oil shock of 1973 effectively ended the boom years for French industry, and thesubsequent opening of the French economy to its European neighbors in the early 1990s via

the common market has exposed its industry to competition from nearby Germany and,globally, from East Asia. The manufacturing sector decreased to remain competitive, from

39 percent of the workforce in the 1970s to 25 percent in 2000 and 15 percent today.

Despite decreasing numbers, the working class still takes its welfare state seriously, andeven the non-working class supports them due to the perception that the welfare state is part

of the country¶s social contract. Today¶s protests echo the two-month-long 1995 strikesagainst the newly elected conservative government, which sought to minimize spending on

social welfare in order to meet the European Union¶s fiscal rules established by the 1993

Maastricht Treaty and to cut the budget deficit from 5 percent of GDP to 3 percent. Thestrikes were very effective in halting all transportation in France and ultimately ended whenthe government backed away from retirement reforms. The workers therefore have a

template for success, only 15 years old.



The context of the 2010 unrest is therefore not very different from 1995. The French budgetdeficit is forecast to hit 8.2 percent of GDP, and Paris is being forced by Germany to rein in

spending to conform to the EU¶s fiscal rules. Germany is making EU-wide fiscal discipline

an essential condition of its continued support for EU institutions, a message that waselucidated during the Greek sovereign debt crisis but understood to apply to everyone.Since the government¶s pension expenditures are forecast to account for 13.5 percent of

GDP, the second highest in Europe, Paris is going after that expenditure first.



The problem for the government, as it was in 1995, is that its agreement with Germany tocurtail spending goes against the social contract that the population believes it has with the

state. This is the first reason for the current protests.

Youth Protesting for Jobs

In addition to protests from the French middle classes and workers demanding acontinuation of the established social contract, there are protests from French citizens who

feel they were never offered that social contract in the first place. This latter group hasalready protested violently in the banlieues ² multiracial suburbs of Paris and other cities

² in the 2005 and 2007 riots.

The Trente Glorieuses period was not just characterized by rapid economic growth. It also

saw an influx of immigrants to France, three-fifths of whom came to the country from its

former colonies, particularly Algeria. The French foreign population rose from around 1.5million after World War II to almost 2.5 million in 1975. Many of these migrants received jobs in the burgeoning manufacturing sector and were settled in newly designed suburbs

intended to house the influx of manufacturing labor from abroad and from the countryside.

Immigration from the colonies for labor purposes was curtailed after the 1973 oil shock ² although immigration continued via the family reunion route as it did in the rest of Europe

² and today French citizens of Arab descent account for about 10 percent of the population, which is also roughly the percentage of Muslims in France. Neither figure is

reliable, however; the French state refuses to collect data on its citizens¶ ethnicity, race or religion.

The immigrant population initially benefited from ample manufacturing jobs that required

little to no visibility in society. However, the large factories where migrants worked on theassembly lines in the 1970s have given way to service sector jobs. The sons and daughters

of the North African and African migrants are finding it much more difficult to land those jobs, in part because of the poor education offered to them in the banlieues and in part

because of outright discrimination. Like Germany, the states efforts to integrate migrantswho initially came for labor purposes have failed to make them feel like part of the host

society.

This problem is only compounded by the rigid labor market ² at least by the standards of

the United States or Germany, if not of Spain ² that has led unemployment for those under 25 years of age to climb from 15.5 percent in 1997 to around 25 percent in the last quarter

of 2009 (compared to the U.S. rate of 19.1 percent in June 2010). The rate is suspected to be double that for youths of migrant descent, though again, no official data is kept on ethnic

groups. This explains the large number of high school students venting their anger over issues not directly related to pension reform, as well as the rioting in the banlieues

throughout the last decade.



Two Protests United

The protests of the last couple of days in France have seen both groups pour out onto the

streets. The rioting and violence are still not in any way at a level that could be construed asthreatening to the government; both the 2005 and 2007 riots were more intense. However,

the protesters are using more strategic tactics, targeting the country¶s energy infrastructure,and hence are less reliant on drawing out the masses to the streets. These new tactics couldvery well force the government to back down at a later point, perhaps even after the vote in

the Senate passes. Furthermore, the recent protests are distinct from the banlieue violenceor labor strikes in 1995 and student protests in 2006 because both the disaffected youth and

ordinary French citizens are protesting. This is a dangerous combination that could coalesceinto a strong anti-government movement, if not today then potentially in the near future.

While the high school students and the French of migrant descent are supposedly

supporting the unions and workers during the current unrest, their interests are diametricallyopposed to those of the workers. The youth need a flexible labor market and thus would

need substantial portions of the French welfare state to be eroded if their employmentsituation were to be remedied. Therefore, Paris will have a hard time satisfying both groups.



The threat of coalescence is dangerous for Paris. Even though the two groups have differentinterests, they are strongly united in their vehement opposition to Sarkozy. The last time a

similar situation occurred was during the May 1968 revolution, started by university andhigh school students demanding better educational facilities as well as a social and cultural

revolution, and later joined by workers demanding higher salaries and employment

benefits.

The reasons for the 1968 revolt by the two groups were largely unconnected. The workers

had little interest in advancing women¶s rights, for example, and students only ideologicallyhad an interest in a higher minimum wage for workers. However, the fusion of their

protests brought the French Fifth Republic as close as it had ever been ² or has been since ² to serious government instability. President and founder Charles de Gaulle sought refuge

in a French military base in Germany for two days during the height of the unrest, with hisown prime minister unaware of his whereabouts. Ultimately, the workers rejected the

extreme student demands for a socialist revolution and reached a settlement with thegovernment. In other words, the government used the opposing interests of the protesters to

divide them, and the result was not a change of regime, but an actual strengthening of it ² France remained de Gaullist for another 35 years, even if de Gaulle himself resigned a year

later.



Ultimately, the commitments Paris has made to its people over the last 150 years are

incompatible with the commitments it has made to Berlin in the last 20 years. Something

has to give, and the government currently seems to be willing to break its commitments tothe people, as it is crucial for France to satisfy Germany¶s demands and keep the Franco-German alliance together. France is not ready to let Germany rule Europe alone, nor is it

ready ² at this time ² to challenge Germany for leadership of Europe. Therefore, Francemust keep Germany willing to work in tandem with Paris, and for that, it needs to follow

Berlin¶s fiscal rules.

However, the French state has a very clear history of conceding to its population¶s

demands. At the very least, it is inevitable that Paris will have to give in to one of thegroups, either by admitting that the social contract cannot be changed or by offering it in an

amended form to the disaffected youth and citizens of immigrant descent. It is likely that it

will give in to the more established group ² the workers and middle classes ² since theyhave shown with their tactics that they have the ability to seriously threaten the Frenchstate¶s efforts to function by targeting its energy infrastructure. Simply moving forward

with a policy that three-quarters of the population rejects is unsustainable. At the pointwhen Paris gives in to one side, however, France may cease to be at conflict with itself and

instead come into conflict with Germany.

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