Once upon a dime...

High with Hollande.

One too many palavers are mixing up in the bakery aisles of Brussels and not enough pavlovas; but fear not, because a pâtissier by the name of Francois Hollande is set to cook up a storm. Francois Hollande is the first ‘Socialist’ President to be elected to Élysée Palace (the French equivalent of No. 10, but with a lot more “Joie de vivre”) in 17 years. Apparently he possesses many attributes such as consistency, likeability and tediousness – let’s hope this bodes well for the ‘sort-of-special-but-historically-strained’ relationship between the UK and France.

I’ll be the first to hold my hands up and admit that I haven’t really been following the Presidential bake-off in France. The most I knew was that the seldom exciting and somewhat expiring Sarkozy was almost a sure-bet (if there is such a thing) – the puppet played so wizardly by German Chancellor Angela ‘Austerity’ Merkel, with her state being the single strongest economic unit in Europe. The markets in the rest of Europe have lapped up the promise of austerity like a lamb suckling the teat of its mother, but now this lamb is dejected, contemplating a slaughter as more countries become increasingly keen to wean themselves off it; namely, France.

Has anyone heard of Dominique Strauss Kahn’s insolent activities by the way? That’s about as much I knew in regards to these presidential campaigns, the ‘gentlemanly’ 62 year old who has been allegedly involved in a string of sex parties, sexual assaults and most recently, prostitution (though, not of himself, apparently he isn’t that desperate since he left the International Monetary Fund… yet); was once the favourite for Hollande’s position, but based on the aforementioned, it’s hard to see why he never came to the… erm… fore. And with a stroke of luck, Hollande be-came the socialists favourite.

Due to a variety of reasons, the once highly acclaimed AAA France recently had its credit rating downgraded which left a bitter taste in the mouths of the masses, despite Sarkozy managing to navigate it through a time when doughs weren’t rising, icing was non-existent and loafing of austerity was abundant. A lot of the ingredients for what once made a beautiful choux pastry were chopped and changed to produce something more like a digestive biscuit, that has now become an slumgullion-esque gooey mess at the bottom of your tea. This wasn’t good enough for the French, who were now less avant-garde and more bon voyage Sarkozy! And without trying to sound racialist or even xenophobic, the French have an innate ability to radiate this air of cool and suaveness, but really, cool and suave were immiscible- it was more hot and contemptuous- understandably so. Saying this, to give him his due, Sarkozy never really had the time frame to fulfil his promises of something better; as the financial crises of late are, in the scheme of things, pubescent and fundamentally not understood comprehensively enough, such that it has needed great effort to release one from its poisonous and drunken swathes.

As noted before, Hollande is a socialist. Socialism, thought by many as the unobtainable but highly desirable past time of the hippy, but also the tool many a dictator has carefully adopted to control the ‘proletariat’, boasts equality as if everyone gets paid the same flourly rate regardless of their input into the recipe. Socialism is a sensitive subject (Just say the ‘S’ word to any American and I bet you they will wee themselves with fear, you will then be subsequently faced with the crucifixes of the church to hoard off the devilish spirits within that preach this utter madness). Let’s be clear, it isn’t communism, so do not panic.

In fact political ideologies don’t actually mean much in today’s society, unless you fully control society like how Kim Jong-Il did and how his son Kim Jong-Un will, because ultimately you cater to the needs of the masses, otherwise you won’t be voted in, but if you’re the only party then chances are it doesn’t really matter if you get one vote or a billion. Theoretically, socialism ‘gives the people the power’, it ‘socialises’ the means of economic production (factories etc) for shared economic benefit. Socialism is a huge umbrella term and within there are many variations. In addition, once upon a dime, political ideologies were all developed out of angst for a particular situation, in retaliation to oppression or vice versa; hence the relative nature of them. So please, do not panic!

Hollande may be a socialist, but how many of his ideals that will be translated into the real world is yet to be seen, like It isn’t surprising that ‘Stalinism’ of the early 20th century (a form of communism) didn’t succeed as the world around it modernised, you could say that it was Stalin around I guess. They are just theories; none are perfect, just like capitalism which is one of the overlords of the financial crisis. Major difference comes down to materialism. In the west, generally, we like to have bigger & better things than our neighbour due to our competitive natures, whilst to be a socialist you have to be content on being equal, not as George Orwell put it in Animal Farm, “more equal than others”.

Those that preach perfection and have the audacity to claim a perfectly utopian society are frankly, chatting shit. Socialism is what you call ‘left’ but again how far left you go is down to the individual interpreter, for example some forms of socialism back markets over central control (bet you didn’t know that) and profit can be proportioned to individual effort, thus entrepreneurs and business people still have the scope to flourish. In regards to communism, (made most prevalent by Karl Marx) it is the polygamous asexual father of numerous theories; Marxist-Leninism, Trotskyism, Maoism, Taoism and more. Most show some relation to the leader who imposed it, their personal stamp if you like.

What was I attempting to get at? Well, Hollande’s victory has the potential to trigger a slothful and tentative reaction from the entrepreneurial sector. At a time when financial markets are being castrated like the homeless dog that embellishes its physicality by endlessly humping anything remotely tangible; businesses need credit in order to grow, and Hollande doesn’t so much want to castrate, he may even go as far removing sexuality all together.

There was great emphasis in the UKs March budget and predecessor budgets about the need for growth to be led from the private sector and namely, small to medium enterprises. As part of Hollande’s manifesto there are number of striking economic policies which provide the antithesis to Sarkozy who represents a more capitalist, free-market perspective. One such point is that Hollande wishes to impose the idea of a 75% income tax rate for earnings above 1m euros (£820,000; $1.3m). Interpret this how you like… It seems grotesque right, but if you get taxed on 1m euros and you’re left with a measly 250,000 I think you’d eventually get over it. Though, I’m not sure if Hollande has realised that if I earned 999,999 euros, I’d fall into the 45% band, thus I’d have an after-tax salary of around 550 grand. It sounds terribly populistic doesn’t it? Have the economic consequences actually been thoroughly thought about, or the ability for one to quickly alter how much they get paid to pay less tax? It’s an attention grabber, a slam-dunking headline slammer to empathise with the vast swarms of the ordinary, but shaken Frenchman.

Not only could it be detrimental to the sector which he will eventually be focusing on in the near future, it is also unsustainable. The thing about Hollande is, throughout his whole campaign he never really mentioned ‘austerity’, if at all, and instead he gave the opposite, a term that had almost been gathering cobwebs and frostbite in the bars and strip clubs of Brussels & Luxembourg – ‘growth’. A mere grumble of this word evoked a plethora of emotions with the Parisians, yet, from a rational perspective where do they expect growth to come from? It will be ignorant of Hollande and the socialists to believe like our (cock and) balls shadow chancellor, that borrowing more is fundamental.

It’s a given that France will not be able to borrow as much, at the current rates, in the future, due to their lack of credibility. It’s like the naïve mum with the unruly kid, who always seemed to leave her purse out on the side of the work surface, for the gluttonous fingers of the child to help itself to the fruits of her labour. The child got itself a reputation, the mum eventually but somewhat lackadaisically cottoned on to it, and now keeps the purse in her bag, the kid can still access the purse but it’s just a little more difficult. Eventually, like Greece, the purse will end up with a padlock in Fort Knox and the child can only receive an allowance to allow it to live just above subsistence.

Is Hollande really going to make the government the architect and controller of growth through more spending? Who’s purse is it gonna dip into? The purse of the rich? Persecute them long enough, or single them out and you’ll find they’ll leave in their droves to utopian tax havens where they can bathe in the Garden of Eden. France needs to raise over 380 bn euros in the bond markets over the next two years and even then it still won’t be the owner of its debt, thus leaving it as nothing but a puppet. The only realistic, sustainable and applicable action is to drive change in the small-to-medium enterprise sector, signalling top-end tax rates of 75% act as nothing but disincentives to entrepreneurs. It’s almost like a subliminal Robin Hood tax. It could prove useful if redirected and channelled to those who need it most, but chances are the bulk will go to repaying loans and interest payments despite whatever Hollande argues.

I believe as much as the next man or woman that the rich should pay their proportionate share of tax, chances are to have achieved their bounties, they’ve made other people bankrupt by offering a better contract here, undercutting prices there etc, though, they shouldn’t be used as a scapegoat nor as a trust fund which can be dipped into when it suits governments most. Many a Frenchman have become so unenthused with politics and economics (synonymous with the rest of the world) that when someone so boring like Hollande comes along it is actually exciting for them, and there is nothing they want more than to send the beasts of corporate finance to the gallows. The juxtaposition to being unremarkable and populist. Should a country’s leader do what’s best for its people short term to the detriment of the economy long term or what’s best for the economy long term to the detriment of the people short term? The French economist Bavarez reckons that by 2025 we will “know if France still ranks as a leading nation in the world.” And that tells you everything you need to know.

Amongst Hollande’s socio-populist manifesto is a pledge for a financial transactions tax (which he claims will be directed to aiding developing nations (itself) & as mentioned before, a 45% tax on incomes over 450,000 euros. He wants to reduce the retirement age back to 60 years old if people started working from the age of 18 and have contributed (to the French equivalent of national insurance) for 41 years. He wants to ban stock options and management bonuses, will hold a heavily protectionist/interventionist stance for French exporters, will introduce legislation similar to that of glass-steagall (a provision separating retail and investment banking dating back to 1933, which funnily enough is why we have Morgan Stanley and JP Morgan who once upon a dime were the same entity), increase capital gains on banks to 15% and create 60,000 jobs for extra teachers (yeah right). This amongst a commitment to alter the fiscal growth pact of the EU, despite France losing their AAA rating from S&P (Standard & Poor the credit rating agency).

He hopes to bring the budget deficit to zero by 2017 – a manifesto pledge, despite 10% unemployment, public spending = 56% of GDP with public debt set to hit 90% of GDP this year. Hollande is what you call on the street – ‘gassed’ – not someone who has been attacked with or exposed to a poisonous gas but someone so inflated with their own self-worth they think they are supernatural. Hollande is an infamous enemy of finance, especially the private-corporate type. What the above screams is a dangerous cocktail of socialism, populism and in my view, gullibility.

I think the French are in seine.