The upcoming French elections are the new bellwether of populist politics. In the two-round presidential contest, polls point to Marine Le Pen making it into, but then losing, the second round run-off. Nonetheless, reflecting the growing appeal of the National Front (FN), Ms Le Pen is poised to do considerably better than her father – Jean Marie Le Pen – did in 2002, when he got through to the second round against the then incumbent, Jacques Chirac. In her latest article for the OMFIF bulletin, “Unemployment spurs Le Pen Phenomenon”, Professor Brigitte Granville – CGR Director – argues that to explain the strength of the FN, the poor performance of the French economy matters even more than immigration and other issues touching on identity politics.

The OMFIF, founded in January 2010, is an independent platform for dialogue and research on world finance that serves as a non-lobbying network for promoting public and private sector interaction across law and economics, with the aim of fostering exchange of information and best practices. “The Bulletin” is OMFIF’s monthly publication, featuring in-depth news and expert commentary on the financial industry and capital markets. Prof Brigitte Granville latest contribution can be found in the April 2017 Bulletin.

In support of her contention that economics is the key to the FN’s popularity, Prof Granville notes the contrast between Ms Le Pen and her political counterpart in the Netherlands, Geert Wilders. With a similar anti-immigration platform but comparatively little emphasis on the economy, Wilders only obtained 15% of the vote in last month’s Dutch Elections, while Le Pen is poised to win around 25% of the vote in the first round of the French presidential election on 23 April. Prof Granville also points to the growing popularity of the hard leftist Jean-Luc Mélenchon – currently out-polling Benoît Hamon, the candidate of the centre-left Socialist Party (PS) – as a reflection of economic problems, since Mélenchon has no truck with identity politics. At the same time, she highlights the linkages between these two drivers of protest votes – i.e. economic problems, above all unemployment, and tensions related to immigration. She highlights how strongly the dysfunctional labour market has contributed to the failed integration of immigrant communities.

A parallel theme of Prof Granvillle’s article is the extent to which voters are repelled by the oligarchic features of France’s elite and policy-making processes that blocks change, entrenches high unemployment, and propagates mistrusts towards free markets. This lack of trust is a root cause of excessive regulation and corruption. The overall outcome is France’s poor economic performance.

The above exhibit captures the career trajectories of the 77 directors that sit on at least two of the CAC-40 supervisory boards. Their careers paths are divided between business and state service (a sub-group of the latter being “Enarques”, graduates of the elite civil service school, ENA). Graduates of ENA and other such Grand Écoles start their careers in the upper echelons of the civil service before in many cases moving on to senior management positions in the country’s top companies, many of which have important state shareholdings. Figure 1 shows the extent to which this Elite Thicket is present on the boards of corporate France, with 35 of the 77 directors holding more than one directorship having started their careers in the civil service.  As Professor Granville points in her OMFIF article:“This group – formed from a web of connections and vested interests among no more than a few thousand individuals– is resistant to external input. Instead, policy initiatives emanate from the rigid world view of this hermetic core”We can find a perfect example of an Elite Enarque in the current presidential election front-runner Emmanuel Macron. Macron is a perfect product of France’s elite selection processes: An ENA graduate who started his professional career as an inspecteur des finances, and then transitioned to the private sector as an investment banker at Banque Rothschild. There he gained the nickname of the “Mozart of Finance” after successfully advising Nestlé on acquiring a unit of Pfizer. Nonetheless his main asset was not deep technical knowledge but a well-maintained rolodex. Their contacts as an ENA graduate where key in getting the job at Rothschilds, with Alain Minc – a fellow former inspecteur des finances (the inner core of the elite, reserved for top ENA graduates) – helping to secure his interview, at the banks and his subsequent successes as an investment banker. The Financial Times notes the sharp contrast between his promises to eliminate the privileges of “insiders” and his professional trajectory.

Thus, if Macron defeats Le Pen, the relevant question is whether he will be successful in reforming France’s economy and institutions. The FT points out that while he has vowed to crack down on insider privileges and break up the bipartisan political system, he does not question how French elites are selected and recruited. Prof Granville stresses the importance of reforming these mechanisms, warning about the risk of complacency, as she concludes:

“. . . in the event of Ms Le Pen’s defeat in the second round-off on 7 May, the sense of relief felt by the establishment and media will prove hollow. The underlying realities in France will make it impossible that the probable victor Emmanuel Macron, who is in practice the continuity-candidate from François Hollande presidency, could govern any more effectively than his dismal predecessor”

Further ReadingCGR Blog Posts:

• “Versailles in Athens: the implications of German government policy for Greece”
• “Prof Granville on the links between the Euro and France’s competitiveness in The Telegraph”
• “The IMF and the Eurozone, fireman or arsonist?”
•  “Can France Reform itself within the Euro?”
• “The Economic Consequences of Greece”

 CGR Working Papers:

• Elites, Thickets and Institutions: French Resistance versus German Adaptation to Economic Change, 1945-2015 by Brigitte Granville & Jaume Martorell Cruz & Martha Prevezer
• Eurozone cycles: an analysis of phase synchronization by Brigitte Granville & Sana Hussain
• Conflicting incentives for the public to support the EMU by Brigitte Granville & Dominik Nagly
• The Current Eurozone – an impediment to critical French reform by Brigitte Granville