Corporate Decisions in France to Be Made by Francois Hollande?

French presidential candidate François Hollande, the likely winner of the upcoming election, says he will block planned job cuts at private companies as a way to keep unemployment from growing. According to Bloomberg, Hollande said:

“I won’t allow a parade of firings that have been postponed. There needs to be a sense of responsibility in executive suites at companies. The day after the election, before irrevocable decisions are taken, I will have to intervene.”

It is an extraordinary statement, and a signal of just how much France could change if a new government comes in. Corporations, it would seem, will lose some of their autonomy — a dangerous precedent.

There is no arguing that unemployment is among the greatest threats to the financial recovery of the European Union. It may, in fact, be the greatest one. The jobs problem is at the heart of the austerity debate. Many economists believe government spending cuts will increase unemployment. This is accurate because most of these governments will have to eliminate public jobs to reach their financial goals. This means private sectors, hampered by recession, would have to add substantial numbers of jobs.

The best way to improve unemployment is through stimulus, experts claim. Governments must spend money today to give the private sector reasons to add new workers. That may increase deficits now, but the net effect on gross domestic product will narrow deficits later, this theory says.

It is one thing to plan to increase government spending and hamstring austerity plans. Hollande already has said he will do this in France and will fight for EU officials to do the same to reverse economic slides in places like Spain. It is quite another thing to block layoffs at individual private enterprises that have shareholders or owners. To force employment levels will crush profits in many cases. Money will have to be saved through other means. When workers cannot be cut, capital spending can be. And, that reverberates around a nation’s economy and threatens jobs anyway.

Francois Hollande may want to control French employment to the extent he can. Meddling in private enterprise as a way to do it will backfire.

Douglas A. McIntyre