French Economy: Good Numbers and Bad Feelings

France held the first two rounds of parliamentary elections on Sunday, and its “far-right” party won a big win. I put that in quotes because right-wing parties in Europe can be different from the far right in the United States—the ethno-nationalism that scapegoats immigrants is no less ugly, but the economic policies are less hypocritical.

Let me explain. But before I do, what are the consequences of the strong showing of the National Rally? As I understand it, it is still unclear whether the National Rally (formerly known as the National Front) will win a majority of seats and whether it will be able to form a government, and more generally it is not entirely clear how France will function given the diminished Emmanuel Macron, who will remain president.

Let me be a typical American and explore what events in France might portend for the United States. The first thing to say is that the outcome of the French election may have less to do with ideology than we might think. French voters, like voters across the rich world, are in a bad mood and are directing their anger at the politicians currently in power, whether on the right, left, or center.

Britain, for example, holds its own election on Thursday, and the Conservative Party, which has governed the country for 14 years, may be headed for a bigger defeat than Macron’s centrists. So why are voters so angry? That’s not an easy question to answer. By usual measures, Macron has been a fairly successful manager of the economy. France’s unemployment rate has fallen sharply under his watch, while the employment rate for young adults has risen.

Like almost every other rich country, France has seen a wave of inflation as the global economy has recovered from the Covid-19 pandemic—indeed, by similar measures, prices in France have risen roughly as much as in the United States. But as in America, inflation has fallen rapidly without a jump in unemployment, and the economy is in pretty good shape by historical standards.

On the sidelines: Thursday’s presidential debate overshadowed the latest US inflation figures, but the news was actually good: at 2.6% year-on-year, inflation is only marginally above the Fed’s 2% target. The surprise change in inflation earlier this year now looks like statistical noise, and there’s a good argument to be made that inflation has essentially been beaten, and that the Fed should start cutting interest rates. Back to France.

The French economy is doing pretty well, but the French people aren’t feeling it, or at least they tell pollsters they aren’t. The numbers may be good, but the sentiment is bad. Despite high employment and fairly low inflation, household confidence in the economy is well below its historical average. This should remind you of the situation in our own country, and the parallels are almost uncanny. Still, French workers have some reason to be dissatisfied.

Macron has tried to be a good technocrat, raising France’s very low retirement age in the name of fiscal responsibility. He has also tried to reduce carbon emissions by raising fuel taxes, sparking widespread protests, while ending a wealth tax that he claims is hurting the French economy—a move that has led many to dub him the “president of the rich.” On economic policy, the National Rally has campaigned against Macron from the left. It has promised to lower the retirement age for many workers while cutting the value-added tax—essentially a sales tax—on energy. How will he pay for these measures? By cutting benefits for immigrants.

And if you’re wondering: No, the numbers don’t help. But if you leave the math aside, the National Rally has actually positioned itself in favor of big government and generous social benefits, but mainly for people of right-wing ethnic background. The contrast with Trumpism should be clear.

MAGA (Make America Great Again) shares the French right’s hostility to immigrants and general xenophobia. But Donald Trump, much more than Macron, has actually been a president for the rich, cutting taxes for corporations and the wealthy while trying unsuccessfully to cut health benefits for millions. If Trump returns to office, there is no reason to believe he won’t do more for the rich at the expense of ordinary Americans. Notably, he has floated the idea of ​​replacing income taxes with tariffs—that is, taxes on imports. As with the National Rally ideas, the math won’t work, but any attempt along these lines would lead to big price increases for the vast majority of American workers while delivering big income gains for the top 1 percent. That’s why I’ve spent years arguing that we shouldn’t call Trump a populist.

Yes, it caters to some popular prejudices. But its economic ideas are all about making workers worse off while enriching America’s oligarchs. So yes, the French right is bad, and its rise is worrisome. But MAGA is worse, because it combines the badness of the European right with the astonishing hypocrisy and contempt for its supporters. Paul Krugman*

*Nobel Prize laureate in economics.

Published in collaboration with The New York Times