Diary

The Cheap Path Towards Political Popularity

The most dangerous politician around is the kind whose bad policies are enabled by an adoring public.

Nicolas Sarkozy has become a very dangerous politician:

At 4 a.m. on Sept. 30, as the collapse of Lehman Brothers Holdings Inc. was shaking up investors on six continents, President Nicolas Sarkozy convened an emergency meeting at the Elysee Palace in Paris to broker the bailout of French-Belgian bank Dexia SA. For an hour, he grilled Finance Minister Christine Lagarde and Bank of France Governor Christian Noyer on the terms of the 6.4 billion euro rescue plan, says François Perol, Sarkozy’s economic adviser.One of his top requirements: Dexia Chief Executive Officer Axel Miller must leave and forfeit his 3.7 million euro severance paycheck.

With that gesture, Sarkozy, who took office pledging to instill a work-hard, get-rich ethos in a country known for its disdain for money, turned into something more familiar to the French: a politician who intervenes in private companies, subsidizes jobs and bashes the bosses.

“By conveying the message that the state can do better than free markets, Nicolas Sarkozy is appealing to the French’s old instinct for protection,” says Philippe Waechter, chief economist at Natixis Asset Management in Paris. “He seems to be turning his back on his reformist agenda meant to give the French economy more inner resilience.”

While the French may love this, people who have a good grasp of what dirigisme means for the French economy do not:

What’s good for the president’s approval rating — it rose 8 percentage points from October to a 10-month high of 49 percent in November — may not be so good for the economy. Sarkozy’s moves to bolster struggling companies will only delay a recovery, says Natacha Valla, an economist at Goldman Sachs Group Inc. in Paris.The economy, which has lagged behind the average of the 15 nations sharing the euro since 2006, will contract 0.5 percent in 2009, the International Monetary Fund predicts.

“I hope we’re not going back to basic protectionism,” Valla says. “I’m not sure that Sarkozy’s latest measures are efficient. And the subsidized jobs are just a teardrop compared to what’s needed while we wait for structural labor market reforms.”

I hate to say “I told you so.” But, did.