Economic proposals (3/6)

SERVICE IN ADMINISTRATIONS
How do the French see administrative services?
The system is complex;
It’s time consuming;
It brings nothing but trouble;
And to top it all, it’s expensive!
This is the exact opposite of what they think of the Internet world that works so well these days, hence bringing real added value to that world:
It’s simple;
It’s fast;
It’s useful;
I am more than willing to pay because I’m happy with it.
In order to bring citizens and companies closer to administrations, not only in terms of positive evaluations but also for a very real economic benefit, each administrative task needs to bring a service-added value rather than simply entail a threat of legal and/or financial retaliation for careless work.

For instance, when answering a questionnaire “in good faith”, assumed by default since administrations are responsible for proving “bad faith”, the guarantee of insurance or legal aid is offered to the citizens.
Another example: a tax or social audit financed by the entrepreneur or state officials to verify the legal or accounting compliance of the firm. Conformity would be paid by the entrepreneur, without any administrative penalty costs, within a period to be negotiated depending on the type of breach (12 months or more). This counseling role of administrations already functions in other European states.
Yet another example: in the event of a move, registration and deregistration with the municipal services, voters’ roll, CNAM, CNAF, post office, EDF, gas, telecommunications services, etc. would be automatically processed for free or a token sum. And then: Online processing of a maximum number of administrative services, forms, administrative documents, pedagogic PowerPoint slides on legal and procedural matters, promotion of the interfacing of administrative and private sector software.
Finally: Interfacing administrative databases with the aim of simplifying all the various declarations/registrations and, doubtless, checking them …

OPERATING VIA PROHIBITING/EXCEPTIONS OR COST INCENTIVES?
French reasoning is fond of the notion of equality, hence persists in creating legislation and economic regulations that apply without distinction to all, regardless of the reality; inevitably, then, there are very many exceptions. Indeed, so as to avoid the Procrustean effect (Procrustes mutilated those who were either too tall or too short to fit into his bed), the legislature allows for inevitable and numerous exceptions. This reminds me of Basic, the archaic programming language that was used in the absence of a holistic and structuring view. Educated through this logic of egalitarian processing, young French people are well prepared for science and information technology, but not for business and economy issues. To follow the IT terminology, command of the France system appears to be an all or nothing yes/no.

There is, however, another mode of reasoning, one that is based on Anglo-Saxon predilection for individual freedom and freedom of choice. This type of economic reasoning is based on the notion of maximizing goals and accepting to be guided by cost functions that are not necessarily linear.

- In the Juppé/Rocard book, one suggestion involves regulating the weekly working time through entrepreneurial arbitration, with the employees’ agreement, leading to the cost of social charges being inferior to the one currently used for the first 32 hours of work, and then a cost-plus method for the following hours. I believe that this should result in establishing two teams working in shifts: the week team working from Monday to Thursday, and the team working over the weekend from Friday to Sunday (the latter would be ideal for those who do not, or no longer, have dependent children).
- Sweden has established a pension system whereby the pensionable age is not fixed, and allocations are calculated on the basis of the contributions paid (period of time, level) and the remaining life expectancy (not the same for manual workers and senior management). This system has been analyzed by Picketty.
- In his book Et si la France s’éveillait (What if France woke up), Gérard Colomb suggests a flexible system of territorial management, one with different levels: Paris, the city – world; regional centers, including Lyon and Marseille, Toulouse, Montpellier, Strasbourg, etc., which structure their territory; medium-sized towns, networking the country; and rural “départements”. In this anti-Jacobian system, départements exist in rural territories only; this de facto introduces a dissymmetry between large cities and the countryside in terms of territorial management. This constitutes an example of the system whereby the regulation is adapted to fit the reality, rather than the reality being adapted to fit the regulation! However, it is then necessary to follow this logic to the end and introduce a different break-down of public policies for healthcare centers, justice facilities, the SMIC, public service institutions and facilities such as postal services, EDF, GDF – all depending on the 4 types of territories. In short, it is essential to do away with the current system that treats all issues in the same way, regardless of whether people live in Paris, or a medium-sized town, or a rural area that is being depopulated.
NB: Prescribing a SMIC that is higher in Paris and lower in a small town would encourage manufacturers to relocate their plants in the provincial préfectures and sous-préfectures, to the great satisfaction of workers who would gain in the quality of life stakes (living standards, much lower rentals, weekends enjoying sports and nature, emptying the ghettos in high-density housing developments).
- To end the debate on cost functions, Gérard Marseille suggested, as in other European countries, a flat tax, a single tax with a single rate of tax = proportional tax. Thomas Picketty suggested to the Socialist Party a single tax that would be progressive (piecewise linear) to take into account considerations of social justice/redistribution. So, we see that the cost function that is chosen in order to maximize optimization will in fact direct us towards the optimum that we wish to privilege depending on its prior ideology. In other words, the cost function encodes ideology, guides towards the optimum statistically reached through the law of large numbers, all without imposing an a priori choice on people who can choose of their own free will.

BONUSES FOR EMPLOYEES IN A COMPANY DISTRIBUTING DIVIDENDS
The bonuses the government has decided on appear to be appropriate:
- On a practical level, performance bonuses amount to a variable cost in terms of management control. They disappear when performance is poor; hence they do not endanger the company at a time when it is already in a vulnerable situation (i.e. one does not add poor performance to bonuses to be paid). In contrast, a general salary rise can be seen as fixed cost, something that has to be paid even if business is bad.
- Implementation complies with the principle of negotiation between union partners, employers and employees. This involves stakeholders’ accountability, and the specific situation of each company is taken into consideration in the calculations of the bonuses level. However, all the employees in the same company ought to receive the same bonuses; this would signal cohesion in the company and help the lower wage earners, as the high wage earners do not need the bonus (they already have a high salary + a privileged position from which to negotiate an annual increase).
- Activating the bonuses when the shareholders’ dividends increase acknowledges that the company is doing well (there are dividends) and penalizes shareholders’ predatory behaviors (if they want to see the company’s capital and jobs grow, they will tend to reinvest the benefits through self-financing and distribute fewer dividends).
- The system does involve the small and very small companies, which are the most vulnerable.
- At a theoretical level, in today’s business world, the adjustment variable, those who bear the risk of poor results are more the employees (who risk losing their job) than the shareholders (who get artificially high dividends through share buy-back), not to mention the managers (who enjoy arbitrary golden handshakes, self-attributed stock-options, a salary committee filled with friends). In such conditions, if the employees share the risks, then they must share more fully in the performance too.

As for the Socialist representatives’ reaction, it is sheer electioneering dishonesty. They should have had a job for the 10 years they sat on the Opposition benches; then, they would have had this idea before M. Sarkozy did! Let’s hope we are now going to see healthy competition …

A CENTRALIZED CREDIT DATABASE
People are more and more tempted by too easily obtained consumer credit. Bankers no longer do their job, which is to check repayment ability. Reasons involve competition among banks, bonuses given to bank employees per signed credit agreement, and near-loanshark rates that enable banks to be reimbursed anyway.
A sensible step, easy to implement, is to set up a centralized database for ongoing credit agreements; bankers would systematically check it up before granting a credit request, and they would be legally responsible if they granted credit improperly – that is, outside trade standards, that would be determined through negotiation between the State and banks. Thus, default on an excessive debt repayment would be borne by the bank involved. Banking behaviors would soon be self-regulated.

EDUCATING PEOPLE ON THE ISSUE OF BUDGETING
Left wingers should not abandon the issue of individual accountability, of educating people on how to monitor their family budget, instead of yielding to acute “benefititis”, driven by the current national sport, namely whining. Things have to be said out loud: there is money in this country, as is shown by the revenue figures generated in the tourism or automotive sectors, air transport, telecommunications, or the level of savings invested in housing and life insurance! The money is shared among a considerable number of citizens, but too many people are still left behind, and that is why I support the Left. The point is, though, that saying that the majority of citizens require increased benefits is an insult to my grandparents’ poverty, to my parents’ efforts when they started off after the war; at that time, the poor garnered self-respect by gritting their teeth and paying their month-end bills.

Today, wasteful consumption patterns are the norm, a 20% revolving consumer credit has become a virtue, and then people are surprised when families go bankrupt, which brings politicians to cry, then grant even more benefits.
What the Left wing needs to do, and that’s anything but corny, is to get back to the job of educating people on the issue of a well planned family budget and show the illusion of the consumer society and easy credit. Believe me, this won’t kill off our economy – instead, it will stabilize it! Consumers in good condition are the prerequisite for the proper functioning of our market economy. So what to do? Plug into the economy classes from grade 10 (the first year of high school in France), instead of making pupils speculate on the State mechanism. There should also be television broadcasts dealing with excessive debt and its consequences, consumer wastage, and, in particular, explaining in concrete terms how these situations could have been avoided.
Finally, politicians ought to speak publicly on the civic (collective) virtue of family budgeting, well assimilated by the stakeholders, namely the families, for their own, well understood, selfish benefit.

REVITALIZING THE TRADITIONAL NETWORKS OF VSEs/SMEs
It is clear that over the last 30-odd years, the French economy has modernized through giving priority to the large export industries (bringing much-needed currency); a majority of the population has not been able to keep up with the changes required on the job market and has consequently found itself excluded. Unemployment has ensued, the meeting point between the reduced demand for low-skilled work in the traditional VSEs/SMEs and the increased qualifications required in the large groups.
But why should we persist in reducing anything that is not innovative (start-ups) or designed for export (large companies)? I suggest we should revitalize the traditional economy sector characterized by geographical proximity (good for ecology) and human networks (good for the population’s morale- hence that of consumers).
Taxation for auto-entrepreneurs, VSEs, and SEs ought to encourage growth and job creation. Contacts with administrations should be kept to the minimum (see the various propositions I’ve already made). In contrast, the idea is also to make sure that the large groups are fully involved in the national effort, in particular via taxation; they have not delivered on the promise, made to all the politicians over the last 30 years, that they would push the economy forward.

ALLOWING FOR A SALARY REDUCTION FOR OLDER PEOPLE
I agree 100% with the following points made by Jean Arthuis in SOS finances publiques, Osons les vraies réformes (Public finance SOS –Let’s have the courage of real reforms):
“Unlike current practices, a salary reduction for older people needs to be examined. As people get older, children are no longer dependent upon them and most of the loans have been reimbursed, their income needs are reduced […] Our practices are in contradiction with people’s real needs. There is no reason why salaries should automatically rise based simply on seniority. A day comes when the older people are too expensive. Regulations, once more, damage those they were meant to protect!” (pp. 116-117). Older people are less productive (reduced motivation, outdated training), and there’s the extra cost brought by the absurd rule of salary progression based on seniority – hence the plans for massive layoffs of older people who ought to be able to stay in the company. Jean Arthuis is right: we need to revise the counterproductive rule that stops salary reduction in terms of services effectively rendered.