Another French update

france flagIn every language, there are words that people use without truly understanding their exact meaning. Oftentimes, “austerity” is one such word. When one asks someone without a degree or background in economics about its meaning, the answer given is often imprecise. In economics, when a government undertakes an austerity policy, it is an attempt to revive the economy through supply. To accomplish this, the government tries to reduce public spending as much as possible in order to allocate funds for offsetting debt; this is achieved with budget cuts in certain sectors, particularly those with a social focus (education, healthcare, etc.). But austerity also means cutting government spending. Indeed, liberal policy advocates reducing taxes to raise private companies’ profit, thus inciting them to hire more in order to produce more; this effectively revitalizes supply. The employees’ new salaries in turn revive demand, and subsequently the economy itself.

The problem arises at the point where companies are meant to raise production and hiring. If demand isn’t on the rise, why should there be more production? Consequently, additional profit goes into the pockets of stockholders, and potential employees never see the money.

On Thursday April 9th, 4 unions called for a strike against the austerity. They claim that they are “against the austerity and for reforms differing from the government and the Medef (French union of the directors): increase of the salaries, reduction of the number of working hours, and anything that ensures the development of the employ” (secretary of the CGT).

However, many contradict this: there is no austerity in France but only “measures that have been taken during the past years and that show the will of the government to improve the purchasing power of the workers”, said the Minister of Labor François Rebsamen. Other unions such as the CFDT do not agree with the purpose of this strike. The secretary of this union declared on March 16: “Efforts are being made, some people suffer but there is no austerity in France.”

It is not very clear if there is austerity in France. But anyways, is austerity the solution? This is still an important question because in France, the crisis is far from being over: there is still deflation, a low growth… The government still has to review his policy.

– Emma P.