Could Paddington leave the train?

It seems that the UK debate as to whether to leave the EU, a possibility known as Brexit, pauses only for moments to be thankful that we didn’t join the euro. The latest and somewhat surreal development is that the Institute of Economic Affairs has awarded its Brexit Prize of 100,000 euros (!) to a 30-year old Foreign Office employee, Iain Mansfield, for his outline “blueprint for Britain after the EU”. According to a piece in The Times Diary (TMS) (£) on 11 April, Our Man in Coventry*, William Hague is “said to be furious” about the award and Mansfield has “seemingly since been silenced”, deleting his Twitter account and personal website.

This personal website has in the past touched on the possibility of France leaving the eurozone. For example, last year I posted about an article by Philippe Villin in Le Figaro Magazine which was a spoof of the speech which François Hollande would give when the time came. And back in 2011, I commented on the way that some till receipts in France still show the price that would have been paid in francs. Now I’m beginning to wonder whether the UK debate is being framed in the wrong way. At the end of Tom Stoppard’s play Jumpers, George, a Professor of Moral Philosophy, observes that “… all the observable phenomena associated with the train leaving Paddington could equally well be accounted for by Paddington leaving the train …”. Or, in this case and putting it another way, rather than Britain leaving the EU, what if the EU were to leave the euro?

This is the suggestion being made by François Heisbourg, an énarque like Villin, but writing much more seriously in the current issue of Survival: Global Politics and Strategy, the journal of the IISS (Heisbourg is Chairman of the IISS Council). Last year his book, La Fin du rêve européen (The end of the European dream) was published in France, but so far it has only been translated into Greek! We can probably assume that his article, The EU Without the Euro, conveys the essence of his ideas.

Put crudely, Heisbourg believes that however unpleasant the abandonment of the euro might be, the alternatives are worse:

There would be no need to contemplate an economically risky, technically tricky and politically backward-looking option such as the orderly dismantling of the euro if more promising policies were at hand.

He rules out the creation of fully federal Europe capable of underpinning the euro as politically impossible. On the other hand:

… the actual set of policies currently followed, sometimes described as 'muddling through', [would be] more aptly called 'muddling down' in terms of its effects on growth and mass unemployment.

What he wants to avoid is a disorderly break-up of the euro, better “a deliberate and orderly unravelling of the euro in the framework of a preserved European Union”. His comments on the current situation are interesting:

… there are now two eurozones. One, composed of Germany, Finland and Austria enjoys limited unemployment … an early retum to pre-crisis levels of GDP … and great impatience with efforts by less fortunate states to transfer their liabilities to the EU level. The other eurozone has yet to recover to pre-crisis levels, with mass unemployment and long-term joblessness creating a 'lost generation', and unbelievably patient electorates who have not at the time of writing, voted in latter-day fascists or Bolsheviks. France falls squarely in between these two blocs. In short, muddling down does not look good.

Post-euro, Heisbourg would prefer a return to the European Monetary System with each country having its own currency and aspiring to stable exchange rates, to the alternatives of sub-euro common currencies:

Some have gone further by suggesting, facetiously or in earnest, the creation of a northern euro - a 'neuro' or, worse 'Bis-mark' - eventually balanced by a southern euro, or 'sudo' (as in pseudo'). It is not clear why countries that would have dismantled the euro to recover a degree of monetary autonomy would want to jump into another straitjacket.

Heisbourg sees the challenges in a “return to national currencies [which] would be universally considered a humbling setback” as being political rather than technical. He identifies precedents which support its feasibility and observes that disagreements with the suggestion he first made in La Fin du rêve européen were not mainly based on its technical difficulties. However political support from both Germany and France would be a necessity in his view. Making the best of the consequences of having to walk back from the euro (he quotes Churchill on Dunkirk – ‘wars are not won by evacuations’), he suggests that “the fact of being seen as acting decisively and competently will redound, Dunkirk-style, to the EU’s credit”.

On the subject of the UK, and pertinent to Paddington and the train, Heisbourg thinks that:

This could also be a Union in which traditional British euroscepticism would have fewer reasons to develop into full-blown, exit-prone europhobia. … Although there can be no guarantee that an EU without the euro would eliminate the risk, the probability of a British exit is much higher in all other scenarios. … an EU of which the UK is a member and whose long-term status is no longer in question would be strategically stabilising, not least as a war-shy, balancing-to-Asia United States adopts a more instrumental, tough-love attitude towards NATO and its European neighbours.

He goes on to make some interesting observations about the circumstances of individual nations in the immediate post-euro phase, and regards France as possibly being the most acutely affected in the short term. He concludes by calling for more research and debate, at which point earlier passages in his article are worth revisiting:

… upstream debate could in its academic stages be broad-ranging and systematic, with a view to assessing the most promising political avenues; political decision-making could be careful and deliberate, albeit under the conditions of secrecy called for in monetary affairs; and implementation would have to be sudden and comprehensive.

and

In order to be successful, the demonetisation of the euro and the recreation of national currencies has to occur during the compressed time frame of a longer-than-usual bank holiday, initially with a very small group of institutional actors (no more than the heads of a couple of states and the Chairman of the ECB), before the circle is broadened after the basic decision to unravel the euro has been taken.

Heisbourg’s closing words are that “the preservation of the EU must be [the] primary objective, to which the positive or negative fate of the euro must be subordinated”. Opinions, many much better-informed than mine, will differ about the practicability of adopting his proposal, but I imagine that most would accept his point that a successful implementation would be to the EU’s credit.


*Our Man in ... + Send to Coventry

Peter Gumbel on French Elitism

Énarques and Les X have come up before in posts here relating to France’s elite. So as soon as it became available last month I bought Peter Gumbel’s France’s Got Talent: The Woeful Consequences of French Elitism to read on Kindle. It had appeared in France in print as Élite Academy: Enquête sur la France malade de ses grandes écoles. Gumbel arrived in Paris in 2002 as a correspondent for TIME and began teaching at Sciences Po in 2005. Eventually he was appointed Director of Communications by the Director, Richard Descoings, who died suddenly in New York in 2012 at the age of 53. To describe Descoings’ regime at Sciences Po as controversial would probably be an understatement and for many French readers part of the interest of Gumbel’s book will be its outsider-on-the-inside’s view of Descoings and his wife Nadia Marik and the way things were run.  

Gumbel could have arranged his material more carefully to help readers unfamiliar with the anatomy of France’s elite and the grandes écoles where they are trained. The latter are introduced as:

… the most prestigious grandes écoles, especially the École Polytechnique, for science, or the École Normale Supérieure, for humanities …(location 84)

And then Sciences Po appears without description at the funeral of:

… the director of Sciences Po, who had been found dead …(location 102)

We learn a little later about ENA because Descoing:

… sat the competitive entrance exam for the École nationale d’administration (ENA) not once but three time before he succeeded. (location 129)

But it's more complicated::

… the typical French system of grandes écoles to which just 5% of young people are admitted. Even in this highly selective universe there is a strict hierarchy. Two institutions dominate: the École Polytechnique, known to insiders by the initial X, which was founded in 1794, and ENA, founded in 1945. Together the graduates of these two schools – 400 from X and 80 from ENA every year – represent just 0.057% of their age group, a proportion so miniscule it could be a statistical error. Yet they dominate the top echelons of French business and politics to an astonishing degree. (location 271)

Shortly afterwards we learn that the graduates of ENA are known as énarques (location 296). But what has happened to the École Normale Supérieure, and where does Sciences Po fit in? Gumbel makes a good case that the French system of selecting and training a small elite who then run everything is becoming increasingly dysfunctional. Partly because its entry is more about exclusivity than merit:

Just as most énarques went through Sciences Po, …

Ah!

… so it is that the overwhelming majority of students at École Polytechnique went to just five classes préparatoires – two-year cram schools that prepare for the grandes écoles and are an ultra-selective alternative to a regular university. Three of them are in the 5th and 6th arrondissements of Paris, the lycées Henri-IV, Louis-le-Grand and Saint-Louis, and the other two, the lycées Hoche and Saint-Genevieve (better known as “Ginette”), are in Versailles. Every year, Ginette alone sends more than 80 students to Polytechnique, out of the 400 who are accepted. By comparison in Britain, students from the top 100 schools only make up one third of those who get into Oxbridge. (location 365)

So whose children get access to these exclusive prépas?

… children from well-off families still account for almost 70% of registered students at Sciences Po, and the proportion of students whose parents are managers or work in an “intellectually superior” profession actually increased between 2005 and 2011. (location 1883)

Their choice of bac subjects, by the way, will be influenced by the coefs (coefficients, weightings in the overall score) which they carry. Difficult subjects like maths and the dreaded philo have the highest. The only UK equivalent I’m aware of is Cambridge University’s list of “suitable” A levels. The dominance and self-perpetuation of this Parisian elite would be no surprise to Charles Murray whose analysis of diminishing social mobility in the USA, I posted about last year.

In due course, for some lucky énarques and Les X (as polytechniciens are known but Gumbel omits to say), glittering prizes await:

… the VIP treatment accorded to the alumni of these two schools after they have graduated. For the 15 ENA graduates and the 60 or so polytechniciens who come top of their year, the reward is membership of the grands corps d’État (grand state corps) – the Conseil d’État, the Cour des comptes and the Inspection générale des finances (the General Inspectorate of Finance – or of the exclusive technical corps, especially the Corps des mines, the mining corps. Those who join these corps are given entry-level jobs that are already very lofty, and their careers thereafter are fast-tracked. This world of the professional corps, with its entrenched system of privilege, simply doesn’t exist in other countries. (location 402)

Things are changing:

… thirty years ago, about 200 of the 320 graduates joined one of the prestigious state technical corps, in the first place the Corps des mines or the Corps des Ponts et Chausées. Today the total number of French students is up to 400 while those joining a corps has dropped to about 60-70. (location 1843)

Largely because they go on to private sector jobs instead. By the way, as explained here last August, the corps des ingénieurs des ponts et chaussées has become the corps des ingénieurs des ponts, des eaux et des forêts, and also the corps des mines covers a much wider range of technology than mining nowadays.

The main thrust of Gumbel’s book, to which he devotes a whole Chapter (6 – The Small World Phenomenon) is that, however well this institutionalised elitism may have served France in the past, it is increasingly inappropriate and he cites various analyses and numerous statistics to support his view. He goes on to describe some of the changes that are needed, particularly in the grandes écoles and some of the reforms that are already in place. His final warning is:

That the most powerful elites can be brought down if they fail to adjust to a changing world. That arrogance and defiance won’t guarantee longevity, or even courage. That even the cream can turn rancid. (location 2227)

I’m not sure that Gumbel, who taught journalism at Sciences Po is as au fait with the École Polytechnique, the technical corps and ParisTech as he is with the world of the social sciences. About 15 years ago I got to know some young French corps members who had spent time at MIT and Caltech on Master’s degrees, a recent development in Sciences Po apparently. As to whether the following is a bad thing:

The election of President Hollande in May 2012 sparked days of scrambling as the ministerial cabinets started to be constituted. One friend was in the thick of it, juggling calls from hundreds of people who were pitching their candidacy. The most striking, he recalls, was the call that came from the Corps des Mines. The message was “this is the name of the technical adviser for your cabinet”. There was no discussion of who this person was and whether he would be suitable for the post. (location 429)

Well, the iron grip of the technical corps would never allow France to get into the situation of the USA with its 70,000 structurally deficient bridges. Again, it is EDF Energy, majority-owned by the French government, that the UK is having to negotiate with for the construction of new nuclear power stations. According to the Financial Times (£):

… [HM] Treasury offered EDF a strike price of £80 per megawatt hour, while EDF had been holding out for a price of just below £100/MWh, about twice the current wholesale price of power. People close to the negotiations say a potential compromise would lie somewhere in the middle. It is understood that EDF could be encouraged to settle for a lower strike price if the government underwrote some elements of the project. This would reduce the amount of capital invested on which EDF earned a 10 per cent return, but would remove some risk from its balance sheet.

which doesn’t make the UK position sound too clever. (A MWh is 1000 kilowatt/hours which cost you and me about £130 at present).

Anyone who is at all interested in understanding the way France is run (or is negotiating MWh with EDF) should download a copy of France’s Got Talent. Peter Gumbel has done a great service in making his insider’s view available to other English-speakers – the French version will hopefully be a timely contribution to debate among les citoyennes as well.

NOTES: As usual I have put French words in italics in my text; Gumbel doesn’t, so not in the quotations from his (but elite and corps are no longer French words, I think). A Kindle download is an awkward thing to use for any serious purpose, it seems to me, by comparison with hard copy. The locations are as a consequence approximate, but should take readers to the relevant passage.

A New New Franc!

Posts here in the past have raised the possibility of France leaving the Eurozone or the euro’s collapse (eg in 2011 and most recently in 2012) but raising the subject has always seemed more “raving” than “droning”. So I was surprised to see the essay article below in the current issue of Le Figaro Magazine:

“THIS EVENING THE EURO IS DEAD…”
Speech by the President of the Republic

It was written by Philippe Villin, énarque, banker and journalist and, according to Wikipedia, a member of Le Siècle, so a man firmly embodied in the French elite. In his article Villin imagines the speech which François Hollande would give at 11pm on 7 July 2013 announcing this revolution:

Françaises, Français, chers concitoyens, l’euro est mort. A minuit, le nouveau nouveau franc, le NNF, sera notre nouvelle monnaie. …

And he goes on to explain the background to his decision to introduce the NNF* at parity with the euro. It is primarily due to the double problem of French economic competitiveness in the euro – with Germany internally and in US$ terms externally. A ‘euro of the south’ was ruled out as too weak for France and Italy and too strong for the others. France’s euro debts would be repaid in NNF.  Hollande ends with a passage reminiscent of Harold Wilson’s 1967 sterling devaluation “pound in your pocket” speech:

Demain matin, la vie sera normale: transports, téléphone, télévisions fonctionneront, les magasins seront ouverts … les vaches auront donne du lait, le soleil brillera selon Metéo France …**

There is a satirical element to the whole piece, which, incidentally, describes Villin as a staunch supporter of returning to the franc, for example its annotation as “PCC François Hollande” (pour copie conforme being the French equivalent of CC, once known in English as 'carbon copy').

I hope Villin's article gets translated and appears in the UK media.  The NNF may not impossible, but its announcement on 7 July 2013 seems highly unlikely.

* The last new franc (nouveau franc NF) was introduced in January 1960 by revaluation from 100 old francs.

** Tomorrow morning, life will be normal***: transport, telephones, television will work, the shops will open ... the cows will give milk, the sun will shine according to France Metéo …

*** In the presidential election in 2012, Hollande was sold as ‘Monsieur Normale’, in contrast with his predecessor.

President Hollande and us

I like Toby Young’s writing (he’s @toadmeister on Twitter), even though I sometimes disagree with him. Of course, his father’s books made an impression on my generation, The Rise of the Meritocracy being required reading for any university-bound sixth-former. Admittedly some of us might have interpreted it as encouragement rather than as satire. Also my having commented as ‘Western Independent’ on a couple of Toby Young’s Daily Telegraph blog posts last year still misleads some of his readers into hitting on here. For which I am grateful, even if it goes to show that he used to get many more readers than I ever will.

I say “used to” because @toadmeister’s Telegraph blog ceased when he started to write a column for the Sun on Sunday. On 14 May, it included the following, under the heading France feeding frenzy:

NEW French president Francois Hollande has a novel theory to explain the problems afflicting the eurozone. Forget about restrictive employment laws, unaffordable welfare systems and soaring levels of public debt. And, of course, it’s got absolutely nothing to do with the folie de grandeur that is the single currency. The real reason, apparently, is because Britain treats the Continent like a “self-service restaurant”. Come again, Inspector Clouseau? What he’s trying to say is that we just help ourselves to all the goodies without wanting to pay for them. Which is quite cheeky. Our annual contribution to the EU budget has just gone up by more than £1billion to £16.6billion. How much do we get in return? Much less than that. We’ve been members of the EU for 40 years and in 39 of them we’ve been net contributors to the EU budget. So no, Monsieur le President. It’s more like an all-you-can-eat buffet in which Britain is the only thing on the menu.

The original was laid out almost entirely as one sentence paragraphs. In fact, Young’s style in the Sun is clearly focussed on what he thinks its readership has a taste for. Fortunately the distinction between pastiche and parody is unlikely to worry many of them. More analytically, the Gunning Fog Index (an Indication of the number of years of formal education that a person requires in order to easily understand the text on the first reading) is 8.61 for the piece above. By contrast his Status Anxiety article in the Spectator on 5 May had an index of 12.05 and the first section of Chapter 3 of his How To Set Up a Free School is 14.12.

But what did Francois Hollande actually say? His remarks (commented on elsewhere in the British press) come from answers to questions put by French Slate:

Vous n’avez pas non plus été reçu par David Cameron, le Premier ministre, et la presse britannique et la City n’ont pas forcément été tendres à votre égard. Sur quelles bases comptez-vous renforcer la relation franco-britannique?  

Reconnaissons que les Britanniques ont été particulièrement timides sur les enjeux de la régulation financière, et attentifs aux seuls intérêts de la City. D’où leurs réticences à la mise en place de la taxe sur les transactions financières et à l’harmonisation fiscale en Europe. Et qui s’ajoutent à une relative indifférence à l’égard du sort de la zone euro, car la Grande-Bretagne est davantage protégée de la spéculation puisque la Banque centrale peut intervenir directement pour le financement de la dette. L’Europe n’est pas un tiroir caisse et encore moins un self service.  

Je rencontrerai rapidement David Cameron pour évoquer les avantages d’une coopération plus poussée de nos deux pays au plan industriel et pour poursuivre le rapprochement engagé en matière de défense.

which can possibly be translated as:

You have not been received by David Cameron, the Prime Minister, and the British press and the City inevitably have not shown you much consideration. On what basis do you intend to strengthen the Franco-British relationship?  

[We] recognize that the British have been particularly half-hearted in the financial regulation stakes, and focussed on the particular interests of the City. Hence their reluctance towards the introduction of the tax on financial transactions and towards fiscal harmonization in Europe. And additionally a relative indifference to the fate of the euro zone, because Britain is more protected from speculation since the central bank [ie Bank of England] can intervene directly in debt financing. Europe is not a cash register, and still less a self-service restaurant.  

I will meet David Cameron soon to discuss the benefits of a more thrusting cooperation between our two countries in industrial planning and to pursue the coming together on defence matters already agreed.

(Of course, he's already met Ed Miliband).  But if the above has the sense right, it’s not the relationship between the UK and the EU which is like a self-service restaurant, but that between the UK government and the Bank of England, ie our cash register. Hollande might even be envious of it. Slate went on to ask (in English):

Mister Hollande, do you speak English?  

Yes I speak English, more fluently than the former President. But a French president has to speak French!

which was probably an énarque’s dig at Sarkozy who seemingly failed to graduate from the Institut d'études politiques de Paris (Sciences Po, one of the grandes écoles) in 1981 because of a «note éliminatoire en anglais»!