The Bad Social Consequences of Substantive Equality: French Edition

I am going to Paris this weekend, because the OECD invited me to present on law and technology. A visit to the city of lights should be a delight, but sadly it looks like mine will be darkened by national strikes.  Unions are trying to pressure the Socialist government to drop mild reforms to French labor laws that would make it somewhat less expensive to discharge workers. Currently, workers who are not on short-term contracts have close to life tenure. The absurdity of this regime was underscored just this week, when a French labor tribunal held that a bank wrongly discharged a worker who had caused it billions of dollars of losses through illegal trades!

The sturm und drang about moving France ever so incrementally toward a free market shows the continuing importance of a nation’s founding principles.  Our revolution and Constitution embedded principles of classical liberalism in the DNA of America.  In contrast, the French Revolution created an enduring political norm demanding substantive equality, not merely equality under law. It is worth looking at the consequences of these different principles, because the renewed focus on inequality in the United States is fundamentally an attempt to make our core political concern be equality rather than liberty.

Events in France demonstrate how dramatically the call for equality can curb liberty, creating a society where it is difficult for employers and those who want employment to choose the terms on which they will cooperate to produce.  The result has been persistently high unemployment. An oped published in the New York Times this week expresses puzzlement about why French labor market regulations create high unemployment, but the answer is obvious. If it is almost impossible to fire a worker, employers will be very cautious about hiring. Indeed, the burden of such regulations will fall most heavily on those without credentials and connections, making it difficult to integrate immigrants.   And there is a great deal of social science suggesting that unemployment is a greater source of misery than mere poverty.

But beyond the specific costs of high unemployment, the social norms favoring equality have made France much less prosperous than it otherwise could be. It is not widely discussed, but France’s median income is only slightly higher than that of our poorest state—Mississippi, despite France’s having a highly educated work force. Because of a climate hostile to business, it has a large net emigration of workers to the more market oriented UK.  The French equality norm also encourages social unrest, like the national strikes that will greet me. A norm of liberty creates social cooperation among individuals through markets. A norm of substantive equality can generate social division as citizens try to become more equal through through government.