Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the
Speaker 1: global economy to you. Talking of the global economy, I
Speaker 1: wonder have you thought much about France recently. I met
Speaker 1: the last time you really paid it any attention was
Speaker 1: about the second half of last year. Watching pictures of
Speaker 1: angry French people in high vis jackets. There's Le Jeune
Speaker 1: rioting on the streets and generally causing trouble for President
Speaker 1: Emmanuel Macon. His pole ratings collapsed and many decided that lomacronism.
Speaker 1: He ended up giving in to some of the Jean's requests,
Speaker 1: including an extra ten billion euros worth of targeted tax cuts.
Speaker 1: Nice for the recipients, but not a great result for
Speaker 1: the Western leader who was supposed to be turning the
Speaker 1: tide against populism. But that was then. This week, the
Speaker 1: French had been hosting the G seven meeting of finance
Speaker 1: ministers and sent for bank governors, and you have to
Speaker 1: say that France and the French economy are looking better
Speaker 1: than most. I went to Paris beginning of this week
Speaker 1: to find out more. In this episode, we're going to
Speaker 1: play you two interviews from that trip. The first with
Speaker 1: the French Finance minister himself, Bruno Lemaire, and the second
Speaker 1: with Laurens Boone, the extremely smart chief economist of the
Speaker 1: O E c D now Monsieur le Maire is known
Speaker 1: for being a mischievous finance minister. He sometimes likes to
Speaker 1: make a splash. I think when I spoke to him
Speaker 1: in his grand office at the French Treasury, he didn't
Speaker 1: want to make many waves with the G seven coming
Speaker 1: to town. But see for yourself. Listen to first the
Speaker 1: edited interview with him, and then hang on for a
Speaker 1: more candid take on France and the state of economics
Speaker 1: from Laurens Boone. I wanted to talk about President Macron
Speaker 1: and where he stands in the global stage. When he
Speaker 1: became president, he did seem to be in confronting one
Speaker 1: of the big challenges that people face, populism. He was
Speaker 1: going to be a role model for for the free
Speaker 1: world in showing us how to defeat populism. If you
Speaker 1: were looking at the last year or so, you'd say, well,
Speaker 1: the lesson of the example that MCCA is setting is
Speaker 1: you need to give in to the populace. And then
Speaker 1: you do find is that is that the lesson of
Speaker 1: the response to the yellow vests last year. I think
Speaker 1: that the right response to the yellow jackets movement is
Speaker 1: to take into account the difficulties that many people, either
Speaker 1: in France or in any upan country are facing. The
Speaker 1: rise of inequalities among developed countries is a key issue.
Speaker 1: The differences between the highest wages and the other wages
Speaker 1: is a key difficulty. The fact that some of the people,
Speaker 1: either in France or once again in any other country,
Speaker 1: are not able to leave from their earning is a
Speaker 1: key question. And I think that the yellow jacket movement
Speaker 1: is not only a French movement, but it's also the
Speaker 1: evidence that varies a problem with the capitalism as it stands.
Speaker 1: We need to improve capitalism, and I think that the
Speaker 1: fact that we have decided to stick to the path
Speaker 1: of reforms by taking or shoe into accounts the requirements
Speaker 1: of all the people that are asking for more fairness,
Speaker 1: for more justice, is the best way of dealing with
Speaker 1: that issue. They took their concerns to the streets, including
Speaker 1: with violence, and the response of the government was to give.
Speaker 1: In was to give. I would not say that we
Speaker 1: are not giving to a violence. We are against any
Speaker 1: kind of violence, of course, but even if the movement
Speaker 1: of the Yellow Jackets has transformed at the end into
Speaker 1: a violent demonstrations and violent including attacks against the policeman
Speaker 1: and story stores on the streets and so on. I
Speaker 1: think that we should not undermine what is behind the
Speaker 1: yellow jacket movement. Behind the yellow jackets movements, there are
Speaker 1: men and women that are not living distantly from their
Speaker 1: jobs and from their earnings, and they are just asking
Speaker 1: for a kind of distancing. They want to have a
Speaker 1: decent life, they want to leave from their jobs, and
Speaker 1: all our policy is trying to give a concrete response
Speaker 1: to that fair requirement. We want work to pay and
Speaker 1: that's it' that's at the heart of our economic policy
Speaker 1: and in pushing your version of the right economic model,
Speaker 1: the French economic model and what they believe Europe should
Speaker 1: look like. Is it going to be easier if and
Speaker 1: when you can ever get rid of the UK, if
Speaker 1: the UK finally does achieve brexit. No, I really think
Speaker 1: that the fight, that the fact that the UK is
Speaker 1: leaving the EU is a pity and I'm sad about that.
Speaker 1: Frankie speaking, Francis says hosting this G seven, and it
Speaker 1: looks like luck is on on France's side. At the moment.
Speaker 1: There are things that have been failures in the past,
Speaker 1: like failures to to boost exports significantly over the years,
Speaker 1: a failure to reign in borrowing in debt, and now
Speaker 1: if we look this year, both of those things look
Speaker 1: like strengths. Frances is less exposed to the trade wars
Speaker 1: and actually has loosened fiscal policy potentially, just as other
Speaker 1: people are starting to say their economies need a bit
Speaker 1: more support. So are you Are you a model for
Speaker 1: the rest of the world or just very lucky. I
Speaker 1: would not say that we are modeled, and they would
Speaker 1: not say that we are lucky. I would just say
Speaker 1: that we are strongly willing to improve the competitiveness of
Speaker 1: the French economy. And I think that with em Macon
Speaker 1: we have taken the right decisions. We have taken the
Speaker 1: right decisions by transforming or taxation system, by improving or
Speaker 1: laberal market, and by taking all the required decisions to
Speaker 1: support or enterprises and samese. So I think with that
Speaker 1: we're on the right track. We have very concrete results.
Speaker 1: I mean, that's the level of growth easier satisfying one
Speaker 1: even if we can do more, and that we can
Speaker 1: improve that situation we are reducing the level of an
Speaker 1: employment in France or we are on the right track,
Speaker 1: but we are fully determined to stick to the path
Speaker 1: of reforms for the sake of having better results. When
Speaker 1: you think about the things you want to change, it
Speaker 1: does look like the summit is going to be hijacked
Speaker 1: by the big Internet companies. There's been much discussion around
Speaker 1: from Donald Trump tweeting criticizing the French proposal for taxing
Speaker 1: these big internet companies on their trade in the country.
Speaker 1: But also you have talked about that the concerns around
Speaker 1: Libra and the Facebook's proposed new currency. So do you
Speaker 1: think that's going to end up dominating everything. I think
Speaker 1: that's a key issue and it will dominate not only
Speaker 1: the summer, but I think that all these issue of
Speaker 1: the digital giants will dominate the economic debate for the
Speaker 1: next decade. I think that's a key issue. And you
Speaker 1: should also mention the fact that the US administration has
Speaker 1: decided to impose a penalty of five billion dollars on Facebook,
Speaker 1: which is a clear signal of the necessity of putting
Speaker 1: more regulation among the Internet giants and the necessity to
Speaker 1: build together a fair regulation for the Internet giants. Then
Speaker 1: there is a question of the currency, the so called Libra,
Speaker 1: the project from a Facebook. I think that we have
Speaker 1: to be very cautious and we have to avoid this
Speaker 1: proposal Libra becoming a kind of a sovereign currency. I
Speaker 1: don't want a private company to take the whole of
Speaker 1: a sovereign state and having the power of in storing
Speaker 1: a sovereign currency. I think that it would be a
Speaker 1: threat for the sovereignty of the states, and it would
Speaker 1: not feed our idea of what a sovereign currency should be.
Speaker 1: There's a lot of opposition to this proposal, but I
Speaker 1: wonder in practice how easy is it going to be
Speaker 1: to prevent Facebook from introducing this proposal. I mean, it's
Speaker 1: one thing to set themselves up as a bank, but
Speaker 1: having just a method of payment globally, arguably they already
Speaker 1: have the capacity to do that. If it doesn't if
Speaker 1: it is only a method of payment, fine, But if
Speaker 1: that method of payment becomes a sovereign currency, it might
Speaker 1: be a parliment. We also have to ensure to all
Speaker 1: citizens that there is no problem with money lundering, for instance,
Speaker 1: or the funding of terrorism. So we have to give
Speaker 1: all the insurances to our citizen that this way of
Speaker 1: exchanging goods is sticking to the same kind of commitments
Speaker 1: that everybody is obliged to take. You could say this, actually,
Speaker 1: even this opposition and debate shows how dominant these companies
Speaker 1: have become in their influence on the discussions at global levels.
Speaker 1: I mean, this is a G seven meeting of finance
Speaker 1: ministers and one proposal by one company. It sounds like
Speaker 1: it's going to take quite a big chunk of your discussions. Yes,
Speaker 1: but you know it is not any company. It is
Speaker 1: not the smallest company of the world, which is one
Speaker 1: of the biggest company of the world. So I think
Speaker 1: that it's our job to define the regulatory framework that
Speaker 1: is necessary to avoid any risks linked to the creation
Speaker 1: of such a libra. That's what we try and get
Speaker 1: into the issues as well on the Stephanomics podcast. So
Speaker 1: thank you very much. Thank you. So that was Bruno Lamaire,
Speaker 1: the French finance Minister, speaking just before the G seven
Speaker 1: meeting of finance ministers and central bank governors that he
Speaker 1: was hosting in Chauntily in northern France. Now here's Lawrence Boon,
Speaker 1: chief economist at the o e C. D. Laurence welcome
Speaker 1: to stephanomics. UM. I was talking to the Finance Minister
Speaker 1: Bruno Lamaire earlier. He's very focused on the G seven,
Speaker 1: but I and he meant he said that he thought
Speaker 1: maybe France was a model for other countries. I thought,
Speaker 1: if they are a model, it's by luck. You know,
Speaker 1: you've had years of not managing to really significantly increase
Speaker 1: their net exports and their success in the global trading system,
Speaker 1: not really getting on top of their debt, and they're
Speaker 1: borrowing as abc D and others have often told them
Speaker 1: to do, and most recently giving into the populist giving
Speaker 1: them quite a lot of money to make them go away.
Speaker 1: Do you think that is a model that the rest
Speaker 1: of the world should follow. Ignored ignored the OCD advice
Speaker 1: on lots of things, and you'll end up coming smelling
Speaker 1: of roses. So there's one thing which I think is true, UM,
Speaker 1: is that, as you were a leading to, France is
Speaker 1: much less dependent on global trade and expots than many
Speaker 1: other your area countries. Whereas you will see that in Germany,
Speaker 1: for example, about twenty percent of the value edits coming
Speaker 1: from manufacturing, in the frant sits on the ten percent.
Speaker 1: So when the same as the UK, although the French
Speaker 1: were always saying that they're much bigger manufacturing what they
Speaker 1: have their own brands and your kay, it might not
Speaker 1: be always the local brand, but so that's true. That's
Speaker 1: when when the economy is going down because of a
Speaker 1: contraction in trade or slow down in trade, and FRONTS
Speaker 1: attempts to feel much less than the other. You saw
Speaker 1: that in twenty or nine with the Big crisis, where
Speaker 1: the decision was about half what it was in other countries.
Speaker 1: But conversely, when the rest of the world is booming
Speaker 1: on the back of expansion expansion every trade, then France
Speaker 1: is going less fast all in normal Fronts comes as
Speaker 1: a welfare farming country in twenty nineteen UM, but it's
Speaker 1: still one in the quarter of GDP. Growth is you know,
Speaker 1: not exactly a boom salm, but in France we like
Speaker 1: to be put well, but it is striking in years
Speaker 1: of people pointing to Frances. You know, now, I think
Speaker 1: debt public debt ratios a share of the economy, the
Speaker 1: very large share of government spending in the economy include
Speaker 1: something like six if you're also including the industries that
Speaker 1: are owned by that both the government, the o C
Speaker 1: D and others have been telling France for years that
Speaker 1: it ought to do more dramatic reform, that it was
Speaker 1: stuck in the past, that it was going to face
Speaker 1: and have to face the music at some point. It's
Speaker 1: never really had to face the music. In fact, as
Speaker 1: I say now, it seems to be doing quite nicely
Speaker 1: relative so I think it had to face the music
Speaker 1: in a sense with what happened in December, and then
Speaker 1: that was quite a big wake up call about them French.
Speaker 1: Of the social economic background in France. Um, it was
Speaker 1: a big wake up call in terms of yes, fronts
Speaker 1: is a highly redistributive country and you alluded to it.
Speaker 1: Fifty seven percent of g D people expending is the
Speaker 1: u c D record. But these massive redistributions actually not
Speaker 1: enough to advise people concern and I think would happen
Speaker 1: in December should really shed light on the structural issues
Speaker 1: that FUNDS has, which is mostly a huge inequalities of opportunities. Um,
Speaker 1: we've just published our flagship publication, Going for Growth, which
Speaker 1: monitors reforms on product market, label market, and I think
Speaker 1: we can barely say that there's still a lot to
Speaker 1: do in Funcy. Even so I must say that that
Speaker 1: reforms have been proceeding for the past few years, even
Speaker 1: in sometimes in small steps, but where it's it's the
Speaker 1: beginning of a journey. I have to say you mentioned
Speaker 1: that report, um I have I've probably been doing this
Speaker 1: job too long, but I've had a lot of read
Speaker 1: a lot of similar reports from the cd UM and
Speaker 1: which normal we publish it with. Yes, that's right and well,
Speaker 1: but also in sort of other fields. And of course
Speaker 1: you've not been a chief economist for for all of
Speaker 1: that period. But I was sort of struck that the
Speaker 1: description of the problem changes in these reports. So in
Speaker 1: your you talk about the need to particularly the sort
Speaker 1: of inclusive element. We need to raise opportunities for all
Speaker 1: challenges of globalization, digitalization, aging, environment is more front and
Speaker 1: center than it has been maybe in the past. But
Speaker 1: the solutions that the o c D sees to all
Speaker 1: these problems seem to be much similar to the ones
Speaker 1: they saw before. And we always need to have structural
Speaker 1: reform of product markets and labor markets. I mean, some
Speaker 1: people would say it was doing some of those reforms
Speaker 1: in some of these countries that cause the political backlashes
Speaker 1: which governments are now dealing with. UM I think in
Speaker 1: a sense some of what you say is is Some
Speaker 1: of which you to is actually right. Um, if you
Speaker 1: look at the headline of the reform we recommend, they
Speaker 1: look pretty much the same. But when you look at
Speaker 1: a more granula level and looking for in that's something
Speaker 1: we want to do math, they've actually evolved quite significantly.
Speaker 1: Let me take the example of the mean mum wage
Speaker 1: um fifteen years ago, twenty years ago. I'm not'm sure
Speaker 1: you were reading it already. Invite you know any farming
Speaker 1: ly the O E c D would say minimum wage
Speaker 1: bad for employment and label market. I think when you
Speaker 1: look at what we do now, and it's visible in
Speaker 1: going far ways other job strategy, we are much more
Speaker 1: pre size and it deepens a lot more on the countries.
Speaker 1: There's definitely been a change of attitude across the well
Speaker 1: certainly across a lot of economics economists on the minimum wage.
Speaker 1: But I was thinking, for example, of the sort of
Speaker 1: structural reforms you talk about, reforms to boost competition in
Speaker 1: markets for goods and surfaces, opening up markets to entry,
Speaker 1: competition and foreign trade is essential for innovation. You have
Speaker 1: all this stuff, but when you do that, I mean
Speaker 1: the way that it changed. The way that it increases
Speaker 1: innovation and increases efficiency is by forcing some companies to
Speaker 1: close down and forcing some people out of work and
Speaker 1: putting them into other things. And it's precisely that kind
Speaker 1: of actual change that a lot of those yellow vests
Speaker 1: would have been, at least at some level complaining about
Speaker 1: they feel already that the economy has changed too much
Speaker 1: and that their old lifestyle has been threatened. It's true.
Speaker 1: So if let's look at it in sequence, higher competition
Speaker 1: will boost innovation. There's there's a little doubt for that.
Speaker 1: Now there are two consequences we should take into The
Speaker 1: first one is higher competition and intellectual property right, and
Speaker 1: never look at one policy in isolation. It's higher competition
Speaker 1: and a regulatory regime for property right that will allow
Speaker 1: the innovator to keep a bit of the rent of
Speaker 1: the innovation it's making at the beginning, but not too long.
Speaker 1: And if we look, for example, at the pharmaceutical industry,
Speaker 1: those ones have probably been there too long, so then
Speaker 1: they start inventing the welfare of people. So that's one change,
Speaker 1: and the other is competition works when if you have
Speaker 1: a label market where people who are displaced as you
Speaker 1: highlight can be put back in another job of the
Speaker 1: same level and quality of as what they were doing
Speaker 1: fairly quickly um. And that's where I think we have evolved,
Speaker 1: and actually all economies we should do a big meya coupa,
Speaker 1: because we all talk about the benefit of trade for
Speaker 1: everybody without looking and disaggregate. But that's changed a lot,
Speaker 1: and we're doing quite a lot of work actually on
Speaker 1: this to say it's there's no doubt competition openness is good,
Speaker 1: but there's no doubt either that it's hurting some people.
Speaker 1: And these people we need to take care of, especially
Speaker 1: if we look at the very low level of interest
Speaker 1: rates around the world and the fact that people expect
Speaker 1: them to remain low for for long term structural reasons,
Speaker 1: at least for a while. That has changed people's view
Speaker 1: of what is a sustainable fiscal position for a government.
Speaker 1: You know, if you've got if you're paying less for
Speaker 1: your debt quite far into the future, you can probably
Speaker 1: afford to have more of it. If you were writing
Speaker 1: the convergence criteria or the fiscal rules for the European
Speaker 1: mirror Zone now they would be very different when they
Speaker 1: I mean even just in terms of what we think
Speaker 1: as a high debt level or an unsustainable that level.
Speaker 1: So I agree with you that it would likely be
Speaker 1: different and at the very low rate for a long
Speaker 1: time change things. At the same time, I think if
Speaker 1: we're only here and off in this debate, is the
Speaker 1: initial what the initial level of debt is for some
Speaker 1: countries um, and some of them have very high debt
Speaker 1: and some of them we we still am, I think rightly.
Speaker 1: So we commented that they should actually be careful to
Speaker 1: how much debt too. They've got just put it in conte. Sorry,
Speaker 1: but just if you mentioned the Japan example, I mean
Speaker 1: your Japan, it turns out now is have you know
Speaker 1: well over two GDP debt. We've always had a sort
Speaker 1: of thing in our mind that once you get into
Speaker 1: three figures, once you get sort of hundred, that's when
Speaker 1: things start to get beyond the pale. I mean, do
Speaker 1: you think even that has changed if we're looking at
Speaker 1: the Japan situation or not. So, I think Japan is
Speaker 1: very specific, not only because that's cloth that if you
Speaker 1: look at the two GP ratio, it's it's a lot lower. Also,
Speaker 1: it's got a very spatial labor market where everybody is
Speaker 1: employed even if you know they don't have a job
Speaker 1: of the same intensity from one worker to another. The
Speaker 1: coesion of the society is very different from what we
Speaker 1: see in Europe. Um. The advantage or the comparative advantage
Speaker 1: of your should be that there is a your area
Speaker 1: which is hanging all these nation states together and means
Speaker 1: that from a whenever one acts on a policy lever
Speaker 1: then it has an impact throughout the regions and that
Speaker 1: should minimize the positive or negative reform that anybody has
Speaker 1: to do. And I think that's where governments need to
Speaker 1: get back to discuss. It's in their common interest. What
Speaker 1: surprised me talking to Bruno Lamire is there's going to
Speaker 1: be a whole chunk of the G seven finance ministers
Speaker 1: devoted to talking about just one company's proposal for a
Speaker 1: digital currency or a new global currency. The liber Facebook
Speaker 1: only produced this proposal a matter of weeks ago, and
Speaker 1: yet you have some of the most important finance mesites
Speaker 1: in the world spending quite a lot of their time
Speaker 1: focus just on that. Are we getting to the point
Speaker 1: where these companies are as important or more important than
Speaker 1: some of those G seven countries. So I think there's
Speaker 1: one valid comparison, which is in terms of the people
Speaker 1: that that this company could be could be um, the
Speaker 1: share of people are using this company's application, right, and
Speaker 1: you have something Simili in China and that's also delivering
Speaker 1: a payments esteem and so that can give an idea
Speaker 1: about what that means. Now, a proper money, as you know,
Speaker 1: has legal tender because it's backed by your state, which
Speaker 1: wouldn't be the case here. But at the same time
Speaker 1: it would affect quite enormous amount of people and it
Speaker 1: would have to be linked to the payment system. Um.
Speaker 1: So that's when it comes to Okay, if it's linked
Speaker 1: to the pavement system, how can it affect it, how
Speaker 1: can it affect other currency? What does that mean for
Speaker 1: finance stability? And in that respect, I think it's a
Speaker 1: it's not only normal, but it's for once. As you
Speaker 1: were seeing earlier, it's very rapid the reaction of Finance Minister.
Speaker 1: So it's great that they're talking about it, said the
Speaker 1: G seven. Finally, you did mention this question of whether
Speaker 1: we're responding fast enough to climate change and changing our
Speaker 1: economy around to be I think it's probably a universal
Speaker 1: agreement that we're not any of us responding quickly now.
Speaker 1: But I wonder whether you've thought about we talked before
Speaker 1: about the sort of reforms that have long been proposed
Speaker 1: to O c D and having to go back and
Speaker 1: maybe tweat them to make sure that they're not having
Speaker 1: inequitable consequences, you know, to think about the political economy.
Speaker 1: Are you also thinking about that for the environment, because
Speaker 1: it struck me that a loss of I'm not sure
Speaker 1: I know the answer to whether you know combating climate
Speaker 1: change is going to be progressive or regressive for the
Speaker 1: income scale, but I kind of I think it's sort
Speaker 1: of important to know. Now you're absolutely right, So I
Speaker 1: couldn't give you the reasons because we've actually launched this
Speaker 1: a few at least on my side, a few weeks
Speaker 1: and months ago. But what we're trying to do is
Speaker 1: exactly that we have what type of investment, which investment
Speaker 1: compared combined? So we with a carban tax, which one
Speaker 1: we know this has implication and the delusion as are
Speaker 1: here to remind us of that, and the speed of
Speaker 1: the transition, how fast do we want to go? What
Speaker 1: does it mean for people's job Because if you were
Speaker 1: in a cool mind, you're not going to do the same. Oh,
Speaker 1: in nuclear plant, it's not the same as working windmill.
Speaker 1: How do you connect the energy that when you're able energy,
Speaker 1: you're creating what implications for the territories that's and all
Speaker 1: of them are going to be affected. So it's a
Speaker 1: it's a massive work we've we've started and I'll give
Speaker 1: you the answer next time we meet. Well, I'm but well,
Speaker 1: that's very encouraging. I'll have to make an appointment soon
Speaker 1: because I am glad to hear that. But I'm a
Speaker 1: bit worried if you, with all with the greatest respect,
Speaker 1: that the O c D is not always the fastest
Speaker 1: to reach its conclusions on these grand questions. So keep putting,
Speaker 1: will look forward to get the answer. But I think
Speaker 1: it's something we're going to talk about more on this program.
Speaker 1: Laurel Spoon, thanks very much for coming on. Thank you, Steffany.
Speaker 1: That leaves so much to talk about on future podcast.
Speaker 1: Thanks for listening to Stephanomics. We'll be back next week
Speaker 1: for the last episode of the season. In the meantime,
Speaker 1: you can find us on the Bloomberg Terminal website, app
Speaker 1: or wherever you get your podcasts, and please if you
Speaker 1: can take the time to rate and review our show
Speaker 1: so it can reach more people. And for more news
Speaker 1: and analysis from Bloomberg Economics, follow as Economics on Twitter
Speaker 1: and you can also find me on at my Stephanomics.
Speaker 1: This episode was produced by Magnus Hendrickson, with special thanks
Speaker 1: to William Horrobin in Paris, Bruno Mayor Laurels Boone and
Speaker 1: Lawrence Spear of the O E. C. D Our. Executive
Speaker 1: producer is Scott Lambman, and the head of Bloomberg Podcast
Speaker 1: is Francesca Leaving