Macron’s pathetic pension reform shows why Europe cannot be fixed

Pity poor Emmanuel Macron. It is the French president’s tragedy to be a supremely rational man in a supremely irrational world. This able leader, surely one of the best and the brightest of his generation, is ineffectually stuck yet again in the mire of his stalled domestic program. But this is not a specific French hiccup. Rather, it says far more about Europe’s signal inability to reform itself. And without reform, internal decay is an inevitability.

Macron’s controversial French pension reform proposal highlights nothing less than why the continent is in decided decline. Policy efforts are invariably too slow, too little, and too unpopular for a decadent society that simply doesn’t want to change, whatever the math or the consequences.

The math is simple enough. According to the World Bank, in 1967 (the year I was born) the average life expectancy in France was 71. In 2020 it had climbed to 82. While it is certainly fantastic that people live a full decade longer in such a short period of time, the extra burden on the state must be paid for, or the pension system will quickly collapse. The obvious way to do so is for everyone to work a bit longer in order to keep the pension system solvent. But, in terms of economics, the rational way has never been the French way.

Let’s start with the unpopularity the French public reserves for any reform that involves either math or reality. An early January poll found a decisive 68 percent opposed to Macron’s plan to nudge the retirement age from a laughable 62 to a still not-fit-for-purpose 64. Even more Kafkaesque, another poll found about 55percent desiring the pension age to stay as it is, or even be disastrously lowered to 60, in defiance of all understandings of economics.

True to form, French populists of the left and right cynically feed their constitiencies’ flight from reality. Both Jean-Luc Melenchon and Marine Le Pen, eager to further politically wound the unpopular French president, are rallying against his frankly timid reform. At least Macron has the courage to forthrightly say: “The truth is that we have to work more and produce more in our country ... if we are to keep the French social model.”His problem is that his people are allergic to the truth, as it would involve them working harder and longer. This bedrock problem of decadence explains both the slowness of European reform efforts, and their timidity.

France is effectively broke. Raising the retirement age by a few paltry years will not alter this basic and damning fact.

John C. Hulsman

Like the Greek tragic hero Sisyphus — who was punished by Hades, the god of the Underworld, by being forced to roll a giant boulder up a hill, only for it to eternally roll back to the bottom —Macron has tried to enact pension reforms before, during his first term. As ever, the hysterical and economically illiterate French street, far more than the relatively weak parliament of the Fifth Republic, shrieked with alarm. Saving face, Macron blamed the pandemic, and shelved the reform.

This time his heroic effort is even more fraught with peril. In addition to the restive street, for the first time since 1988 France finds itself with a hung parliament. Macron’s party has only 245 seats, 44 short of a majority in the National Assembly, the country’s lower house. With the next biggest groupings being Melenchon’s far-left and Le Pen’s far-right, the French president will be dependent on the much-diminished center-right Gaullists to get his reform program over the line.

Even assuming this happens, which is surely only a 50-50 chance, Macron’s reforms will not change much. Public debt stands at an astronomical 112 percent of GDP; as is true for most Western corporatist states, France is effectively broke. Raising the retirement age by a few paltry years will not alter this basic and damning fact.

The luxurious European pension model flowered in the 1960s, when the continent’s productivity was the envy of the world. A state that is rich and booming has the largesse to set up and maintain a generous safety net. But what happens when this same continent is economically sclerotic, with growth rates regularly below a meager 2 percent of GDP, productivity rates flatlining, and no new major world-beating companies being created on the horizon? It is not an accident that Big Tech (Apple, Microsoft, Google, Meta et al) originated in the more economically free US. Rather, it is the logical outcome of a freer market system triumphing over a statist one.

Without economics on one’s side, who is to tell the people the truth? Given the torpid state of Europe’s economy, its overly generous safety net can no longer be afforded. That is surely not a reality decadent Europeans are remotely ready to accept. The consequences of this holiday from economic reality are as clear as they are damning. Europe’s debt will skyrocket, as it falls ever further behind both great powers such as the US and rising ones such as India. Macron’s frustrated efforts at pension reform are just the canary in the coal mine of this larger, and fundamental, process of European decline.

• John C. Hulsman is the president and managing partner of John C. Hulsman Enterprises, a prominent global political risk consulting firm. He is also a senior columnist for City AM, the newspaper of the City of London. He can be contacted via johnhulsman.substack.com.