The original article from Paul Fabra is available here: La contradiction du Medef - Les Echos
Paul Fabra - Published on February 2. 2007 at 01:01
In its best passages, the booklet entitled Besoin d’air (“In Need of Air”), which the Medef has published “under the direction of Laurence Parisot”, also lets air in. It can help light the fire in a country that needs a little more light and warmth.
The proof is the accuracy of the definition it gives of its subject, which is the subject of us all: “The essence of the market economy is exchange. And, in the market economy, the essence of exchange is the labor of men.” This apparently simple sentence rings like a break with a whole current of thought that poisoned the teaching of economics throughout the last century (nothing is more urgent than to be done with it once and for all!). In that current, economics is the art of managing “scarce resources”, and the exchange value of economic goods (the “commodities”) is determined by the intensity of the desire to possess them, and so on.
Laurence Parisot’s formulation is almost philosophical in its simplicity (the “essence” of…). It points spontaneously to a conception that is much more modern, though older. Strictly speaking, the laws of the market apply to goods (and services) “reproducible at will, provided the necessary labor and capital are devoted to them”. This definition, owed to David Ricardo, dates from 1817252. It heralded the developments of capitalism up to our own day and, evidently, beyond. It expressly rejected the overused concept of “scarcity”. In reality, scarcity is nothing but a pseudo-scientific transposition of the myth of the lost paradise, in which man is condemned to labor after losing, through his own fault, the supposed original abundance. Scarcity belongs to a logic not of production and exchange, but of sharing out, and therefore of withdrawal into oneself.
The Medef’s booklet is valuable because, without fear and without seeming to, it approaches the economic debate from above, and along the way it lays down a number of premises. It falls to us, if need be, to hold the employers’ organization to them, should it happen to turn its back on them or fail to give them the place they deserve. For example, the definition of the enterprise given by the Mouvement des entreprises de France and its current head is not among the happiest. It states that “the very definition of the enterprise is to be an association for profit”. Far more consonant is the definition proposed by one of my correspondents, Dominique Michaut. He sees in the enterprise a confluence of markets, that is, of exchanges. Profit is certainly found there at every level, but, as it should be, as a by-product necessarily included in the exchange253.
The booklet exposes us to a call to order in another way, and, where appropriate, the Medef runs the same risk itself. Its principal author shows an uncommon ability to denounce the faulty reasoning on which the “French exception” has too often relied. Two things stand out: on the one hand, the refusal stated from the outset (page 15) of “lines of thought that are satisfied with their own coherence”; on the other, by contrast, this magnificent declaration with Spinozist overtones: “We love reality.”
In particular, the question of “reality” arises with the perennial employers’ argument about the excess of “charges” weighing on production. The Medef orchestrates it, with apparently unchanged conviction, in a booklet that is otherwise so often innovative. As usual, taxes and social contributions are lumped together. Both are presented as charges “levied” on “production”. But is this amalgam legitimate? Another way of looking at things is to regard social contributions as an “input”, inherent in the act of production. A welcome recommendation of the Medef invites this interpretation. The employers rightly ask that the amount of the employer contribution appear on the payslip, next to the employee contribution, so that the wage-earner becomes fully aware of the complete “cost of labor”. By definition, this cost to the enterprise is, for the wage-earner, his complete wage.
But if some of the so-called employer contributions (in particular for health insurance) are abolished or lightened, may one not see in this an uncompensated cut in the wage? Admittedly, the operation should result, all other things being equal, in lower prices of commodities, and hence in some compensation of purchasing power. But that purchasing power will be drained, in turn, by the shift of the Social Security budget onto taxation. What the Medef recommends, without quite knowing it, is an economic engine running at reduced speed. By lowering the presumed “social charges”, the input will have been reduced. Yet its value was recovered through the very process of exchange. Henceforth, the same value will be raised by the tax levy. The impoverishment the Medef so dreads will necessarily follow.
What is true is that, over time, the gap (called the “tax wedge on labor”) has become too wide between what the wage-earner receives directly (his net wage) and what his employer pays in the double form of that wage and the associated social charges. But is this not due to the relative stagnation of wages over the past two, if not three, decades? To finance health expenditure that has, fortunately, risen sharply, Social Security has had to increase its percentage share of the complete wage. The Medef is right to judge this “wedge” excessive, but its solution is a solution only in appearance. With equal expenditure (the truth is that it will rise), lightening the charges results in a greater call on the taxpayer and greater State control.
The true solution lies in a freer economy that breathes better, as the title of the booklet excellently puts it. This requires a less stifling State, freed from all kinds of anti-economic constraints and expenditure (systematic welfare dependency, including handouts to enterprises such as employment premiums, is part of it), and therefore freed from debt. To get there, the employers have their part to play. They must bring themselves into line with the excellent principles they advocate.
PAUL FABRA