Economic Policy Review ISSN 1313 - 0544

From Administration to Stagnation (Monsieur Sarkozy's speech in Davos and the contribution of ILO)

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Recently the French President Nikolas Sarkozy gave his introductory speech at the forum in the Swiss town of Davos. The speech was assessed with different epithets such as „a key one", „revolutionary" and „the most socialist speech by a center-right president". There were several distinguished aspects in his speech: new regulations for the financial sector plus transaction tax known as the Tobin Tax (which was not surprising as Sarkozy withstands his position on bank bonuses from a long time), the creation of a new world monetary order and the formation of some kind of a world government that should be capable of imposing internetional organizations' decisions to all countries. This includes putting the fight against climate change, labor legislation and health legislation on the same footing as trade law. This will be acomplished by building special institutions set up at government level in G-20 format to implement and monitor the measures taken.

The idea of New World Order and „World Government" is highly praised by the leaders of "the free world". It should be mentioned that the term „government" was first mentioned in the draft of the rejected "Treaty of Copenhagen". In his speech president Sarkozy mentioned that the main reason for the global crisis was "the idea that the market was always right and that no other opposing factors needs be taken into account". Actually this is an internally controversial statement as the market takes into account all factors influencing social relations and the formation of price and income distribution. The argument of market failure is not a new one. The root of this statement is in the positive view of the market and the idea that it should bring specific forseeable results that could be mesured. When these expectations are not justified for certain people, they require state intervention to correct the "failed market", which leads to an imbalance, which of course will be attributed to the market again.

The measures accepted by the internetional organizations are the governments' specific aims, but the market has no common objectives, it only respects the objectives of every individual. To implement those objectives Sarkozy proposes putting environmental law, health law and labour law on the same footing as the law of free trade. What is omitted is that while the latter is a right in negative aspect, that is non-interference in freedom of contract and the movement of goods, people and capital, the other two are positive rights, i.e. right to have that necessarily binds its compliance with specific material result. Therefore, negative rights are called general and abstract rules of behavior, while the rights associated with material benefits and specific targets can not be defined as law, but rather administration as are the goals set by most international organizations.

One of the big concrete objectives that this "government" should win is the battle of climate change (the carbon emission reduction). Ecology as a science is founded in the late 20th century. It is believed that the ecological problems are market failures. Back then the ecological treath was real and measurable (example: an oil spill), now it becomes an abstract ecology and the result of non-scientific assertions and unsupported assumptions (global warming). As if the people should feel guilty for their existance because they change the world around them. Sarkozy proposes imposing carbon duties for the countries carrying out "environmental dumping", a concept embodying not paying "climate fees".

The Internetional Labour Organization took part in the Davos forum. On the 19th of June 2009 it passed a Global Jobs Pact whose goal was to promote employment through:

  • Imposing a minimum wage. Minimum wage limits less productive groups such as young and unskilled people to enter the labor market as employers seek more productive and skilled workers for the higher costs they pay. On the other hand, skilled and productive workers always earn more money, and the more expensive labor of others does not increase their income but deprives them of access to the labor market and to any earnings whatsoever;
  • Macroeconomic package of incentives for small and medium enterprises to promote entrepreneurship. This means the taxes collected from those who have succeded to be given to those who have failed by a wrong sense of "social justice";
  • Increasing the duration and size of unemployment benefits. As humane as it seems to maintain welfare of those who have fallen in temporary difficulty, until they once again find their place into the labor market, this practice in some developed European countries (France, Germany, UK) provides a decent living and housing, which creates a disincentive for people to make effort to come back into the labor market because they receive better conditions for no effort.

President Sarkozy's global "government" will allow all the positive results of specific measures to be imposed by the power of coercion. Imposed regulations will limit the area of freedom of contract and will replace it with administrative measures. The result will be stagnating economy (people want to maintain their previous positions, despite the changed conditions) and even deeper crisis.

* An intern at IME