Back to the future-planning: France

Hello and welcome to The Intelligence on Economist Radio. I'm your host, Jason Palmer. Every weekday we provide a fresh perspective on the events shaping your world. Paul Rusesabagina, an activist who saved 1,200 lives during Rwanda's genocide, was charged with terrorism this week. How was it he was lured out of exile? What will happen to him now? Rwanda's leadership faces many hard questions. And you'd think that the European single market would cause consumer prices to converge across the bloc. You'd be wrong. Our correspondent bravely charts the costs of nappies to reveal the shortcomings of Europe's allegedly level playing field. Yesterday in Paris, French Prime Minister Jean Castex unveiled the country's coronavirus recovery plan, just as daily new infections neared an all-time high. The stimulus was the first to be announced by a big economy since the European Union agreed a €750 billion recovery fund in July.

The plan is focused primarily on boosting companies and is due to run over 2 years.

But it does little to directly support consumer demand, a traditional engine of French growth.

Between the first and the second quarter of this year, France's economy suffered its worst fall since the Second World War, shrinking by nearly 14%. The plan also includes reviving a post-war institution to ready the country for a post-Covid era. With the 2022 presidential race already in mind, the economic recovery will be central to President Emmanuel Macron's reelection hopes.

Yesterday, France launched its response to the shock and the economic recession caused by COVID-19.

Sophie Petter is our Paris bureau chief.

What it did was announce an economic stimulus plan worth €100 billion, which is one of the biggest in Europe so far. As well as a commissioner whose job is to oversee more of the long-term planning and thinking about preparing France for 2030.

So let's start with the stimulus plan. What exactly is in there?

Well, it's a package that's going to be spent over 2 years. Two-thirds of it comes from the new European Union Recovery Fund that France helped to set up. And part of the idea is short-term, so that's to try and keep businesses afloat, to try and keep people in jobs during this recession, and to try and kick-start the economy so that France can emerge healthier from it. On it over the next year or so. The French economy shrank by nearly 14% in the second quarter. That's better than Spain, but it's a lot worse than Germany. And the government has already said that it's going to extend its furlough schemes for another 2 years. And it's promising tax cuts for business and an absolute commitment not to raise taxes.

And so that's the view of kickstarting things in the short term. What are the longer-term aims here?

Well, I think what the President Emmanuel Macron is trying to do here is to turn what is a crisis into an opportunity and to try to both increase and also redirect French public spending and public investment. So on the one hand, there's a significant amount, nearly a third of the €100 billion, that's going to be devoted to greening the economy. So this goes from insulating buildings to creating bicycle lanes to investing in the hydrogen economy. But on the other, it's really looking at skills, competitiveness, how to train people in a way that will respond to the new sort of economy that France is hoping to build or is anticipating might emerge from COVID So this isn't particularly aimed at young people who are coming onto the labor market at such an incredibly difficult time. And I think one of the interesting things about this plan in a way is that if you look at the German stimulus plan, it was very much focused on tax cuts for individuals trying to kickstart consumer spending. In France, there's a feeling that that isn't the issue, that actually because of the furlough schemes that have been very generous in France, most incomes have been preserved. And in fact, consumers have been saving money so that there isn't an issue with the demand side. It's more about investing in skills, in companies, in industries.

And what about the new commissioner you mentioned who will oversee long-term economic planning?

Well, this one is almost a throwback to the post-war era. If you remember, in 1946, it was that the French first introduced this idea of the plan under Charles de Gaulle. And it was all about rebuilding the country that had been devastated by the Second World War. But I think what they're trying to do in France is think for the long term, think about how France France needs to prepare for 2030, and also how to strengthen local industries across the country. There's a particular feeling that France has become too dependent on global supply chains, particularly during COVID Think of the shortages of masks, for example, and that they want to strengthen the industrial base of France. And that's what this sort of new idea of planning is all about.

And what's your take on how the people of France are thinking about these moves and the moves until now? Do they seem satisfied with the way the government is handling the economy during the pandemic?

Well, I think the French as a general rule tend to be dissatisfied with the way their governments run, whoever is in government. And during the pandemic, there's just been a lot of uncertainty and fear, as there has been anywhere else, and that has been reflected in poor opinion poll ratings for the government. But I think that the numbers of this plan, the size of it, the scale, has really focused minds. Some of the opposition politicians who generally criticize everything the minute it's been announced have had to acknowledge at least that this is serious and significant. And if put in place properly, it could really make a difference in France, especially in the short term.

Do you think the whole set of measures will help Mr. Macron politically?

It's a difficult one. You know, we are about 18 months away from the next presidential election in 2022, and minds are beginning to turn to that, obviously. One of the interesting things about Macron's popularity ratings, or lack of popularity, is that if you look around in France at the moment, actually there is really no alternative credible mainstream political leader that has managed to emerge to take him on. If you look at the left and the Socialist Party, if you look on the right, the Republican Party, even in the Green Party, although they did well at recent elections in cities, they haven't yet managed to find a single leader who can push them forward on a national level. And it's that which, in a way, you have to set against Macron's low poll ratings. The French may be unhappy with him, but they don't seem to be happy with anyone else. And the only character that has resisted during this whole period, of course, is on the far right, and that's Marine Le Pen, who manages to somehow retain her support, even though she hasn't really played any role at all during this whole COVID crisis in France.

And what do you make of this evident return to something more like state planning then, in terms of a president who came in as a reformist?

Well, in some ways it does look like a sort of U-turn almost. It's a throwback to the past, the idea of a commissioner in charge of the plan. It very much sounds like France of the old days. And Macron was elected precisely not to do that, but to sort of disrupt France and reform France and modernize it. But I think in a sense, what he would argue is that he is trying to use perhaps the tools of the past. So that is sort of long-term planning. A strong role for the state, high public spending and investment in order to bring about the modernisation that he thought was necessary for France when he was first elected and indeed during his term in office as president. So, you know, that's the way he's trying to spin this. But I think one of the problems is that he has put on hold some of the reforms that he did promise to bring about. I'm thinking notably of reform to the pension system and another to the unemployment benefit system. Those have gone on hold because of COVID Which is understandable. But if he's going to bring them back in, that means doing it either in the middle of the recession this year or next year, which will be a pre-election year in France. And as usually happens in a pre-election year, a lot of fine words end up being ignored. So the longer he waits, the more difficult it's going to be to return to that reform program.

Sophie, thank you very much for your time.

Thanks, Jason. Good to talk to you.

On Monday, Rwandan officials said they had arrested Paul Rusesabagina for terrorism offenses. Mr. Rusesabagina first came to prominence during the country's 1994 genocide, in which hundreds of thousands of members of the Tutsi ethnic group were slaughtered by the Hutus. He harbored more than 1,000 Tutsis at the hotel he managed.

And these people were killed. I will never be a free man. I will never go to bed and sleep.

Fame followed, and a Hollywood movie. In 2005, he was awarded the Presidential Medal of Freedom by George W. Bush. The United States honors Paul Rusesabagina for his spirit and bravery in defending and caring for his fellow man. But he's become a strong critic of Rwanda's president. Paul Kagame and lives in exile in America.

All of those people who advocate for human rights, for our rights, are put in prison.

Now the head of the Rwanda Investigation Bureau has accused him of being the leader and sponsor of extremist terror outfits.

So this was a big shock, not least to his family, because they were all under the impression that he was safely at home in San Antonio in Texas, where he is usually based.

Michaela Wrong writes about Rwanda for The Economist.

They hadn't realized until very late in the day. He had let them know that he was flying to Dubai for a meeting. They say they don't know who he was meeting in Dubai, and it's unclear how he got from Dubai to Kigali in handcuffs and being charged with some very serious offenses.

Quite a dramatic story then for so well-known a figure from Rwanda.

I think it would be fair to say that Paul Rusesabagina is probably after Paul Kagame, the president of Rwanda. He's probably the most famous Rwandan outside the country, the best-known Rwandan in the West.

We have been abandoned. There will be no rescue.

We can only save ourselves.

Which is largely thanks to the film Hotel Rwanda, in which Don Cheadle stars, which focuses on the remarkable role he played during the genocide of 1994, in which he, as the acting manager of the Hotel Mille Collines, which is a landmark in Kigali, gave refuge to 1,200 Rwandan Tutsis who knew that they were quite likely to be massacred on the streets by the Hutu extremist militiamen who were rampaging through the city. And they gathered at the hotel and he kept them in the hotel and sort of made sure that, you know, when the militiamen and the army generals who were responsible for the 1994 genocide came knocking at the hotel doors, he would cajole them, he would sort of buy them off with the best cigars and the best scotch, and he had crates of beer in his office. And he was someone who was on good terms, partly because he was a Hutu, he was from the majority Hutu ethnic community, and so they thought of him as one of their own.

So he would ostensibly have been on the, pretty much in the same camp as the people who ended up ruling Rwanda. How has he seemingly now ended up on the wrong side of them?

I think this happened quite soon after the genocide. He was this Hutu manager who'd acquired a very high profile abroad, but he was never quite as popular at home. And he became an advocate for human rights. He also became a critic of the government. He felt that a lot of the work that the government was doing, the new Tutsi-dominated government, even though it did have Hutu ministers in key positions, he felt that it was cosmetic. When there were multi-party elections, He sort of pointed at the sort of rather unbelievable results showing that Paul Kagame had won, you know, election figures that went into 90% and higher and sort of said, these are ludicrous results. They just can't possibly be credible. He was sort of poking holes in this success story that the Rwandan Patriotic Front and Paul Kagame's regime was presenting to the world of, look, look how we've rebuilt our country. And let's not forget that Paul Kagame got a lot of aid from the West because of that very successful image that he'd created of a progressive country that had put an appalling trauma behind it.

But what exactly is it that he's charged with now?

It was interesting, very soon after he was arrested, on social media you were seeing supporters of the government in Rwanda circulating a clip.

I plead that our youth the National Liberation Forces, NLF, launches against the Kagame army in order to free the Rwandan people.

Of him apparently giving an interview in which he's talking about the armed struggle and saying that all political means have failed, and he calls in this clip for the Rwandan people to rise up and to support the National Liberation Front, which is the armed wing of a coalition of opposition groups, all of them based in exile outside Rwanda. And so that's clearly going to be a key plank of their prosecution case against him.

Well, what do you make of those accusations then?

It does seem that he had gone on a trajectory. I've spoken to his family, I've spoken to his son, and the son is adamant. He said, look, the guy is not a terrorist. He didn't know how to handle a gun. He would never call on someone to take up a gun and kill someone else. He's just a human rights campaigner and someone who had a voice and expressed himself, and that's just not tolerated in Rwanda today.

And what about the nature of the arrest itself, though? The fact that he was arrested overseas, brought to Rwanda under these mysterious circumstances?

The reason he lived in fear of this kind of kidnapping or rendition or however we term what has happened is because the Rwandan government has got a track record of mounting these very daring Mossad-style operations. It's done this before. It doesn't seem to regard national sovereignty as an issue when it's trying to reach out to intimidate, bully, kidnap, and the accusation is assassinate critics or members of the opposition or troublesome journalists abroad. And in one of the most egregious attacks, the former head of intelligence Patrick Karagaya, was strangled to death in a hotel room in Johannesburg. The evidence is there and has all come up in court pointing to the fact that Kigali feels it has the right to reach out across the world and chase down its enemies in a really terrifying way.

And now they've reached out for Paul Rusesabagina.

One of the questions has to be, what does Kigali get out of this? You know, what's the point? Because the armed group that he is said to have been supporting, the coalition that he was a part of, doesn't seem to have amounted to very much. Regional analysts will tell you that it sort of fell apart in 2019, hasn't really been a united movement capable of doing much on the ground. It seems to me that it's more about maintaining this image that we will hunt you down. I mean, Kagame has said this in various speeches he's given, he said, you know, you can run, but you cannot hide. We will find you. And that often the sort of level of retribution meted out seems to be out of proportion to the misdemeanors or crimes that these critics, these people challenging the regime, are actually guilty of.

So what's been the international response to this act anyway?

I think the response has been extremely muted so far. We see various human rights groups who regarded Rusesabagina as a hero They have been squawking and saying, "What on earth is going on?" From the Rwandan perspective, I suspect this is in danger of backfiring on them. Are they going to put him on trial? Are they going to have a trial in which members of the press and international journalists and ambassadors will be allowed to sit in and listen to the evidence? Because they don't tend to do that very much. And it's definitely going to put an awkward spotlight on the relationship between Western aid donors who support that government and will now be asked, well, you know, what do you have to say about this government's human rights record?

Michaela, thank you very much for joining us.

It's a pleasure.

For more analysis like this from our international network of correspondents, subscribe to The Economist. To find the best introductory offer wherever you are, just go to economist.com/intelligenceoffer. The European single market is meant to stimulate economic growth, spread jobs, and propel European businesses big and small to prosperity. But if you take a look at how consumer prices vary across the Union, it seems that the boast of a unified, level market is, well, full of it.

In Europe, the cost of nappies, or diapers as some listeners prefer, varies hugely depending on which country you're in.

Duncan Robinson writes Charlemagne, The Economist's column on European affairs.

They can be very expensive in some countries and very cheap in others, which in the European Union, which is meant to have a single market, is a bit of a problem.

So how much does the cost of nappies, of diapers, vary across the EU?

So it can be huge. The way of checking this, I logged on to Amazon and just fired up the different countries' websites. In the US, you basically get one price for Amazon products, but in the EU you get very, very different prices. So if you're in Spain, you're looking at paying about sort of €50 for an enormous box of nappies or diapers. But in the UK, which is still part of the single market, you're looking at sort of €20, in France €30. And so the prices can vary hugely, which you wouldn't necessarily expect, given that anyone can log on to these websites and order it to anywhere.

But I mean, presumably this disparity is not limited just to nappies.

No, everything costs differently. So if you try and buy a sort of Nespresso machine, you can pay up to €100 more if you log on to the French website rather than the German one. And the same even with mobile phones, which you'd expect to be relatively standardly priced across the whole bloc. But you often get huge, huge savings by just logging on to a different website, or savings up to sort of €200, €300 quite often.

But the assumption is with the European single market that over time, these prices, all prices would, to a greater or lesser degree, converge. Why isn't that happening?

So prices were converging for quite a bit, but they sort of stopped around 2008. So since then, there hasn't really been much price convergence. And there a few reasons for that. The first one was that there's few sort of big integration steps. So like there was the euro over the turn of the millennium, and then you also had the economic catch-up in Eastern Europe where Eastern Europeans just started to get much richer and become not as rich as Western Europeans, but much closer. And that sort of closed the gap a little bit. But sort of since then, that catch-up's much less pronounced.

But you'd expect some divergence anyway, because prices being made to match what the market can bear, surely if there are still poorer countries and richer countries, there will be lower prices and higher prices.

Yeah, and sometimes price divergence is good. So Bulgarian GDP is about sort of €8,000 or €9,000 per capita, and German GDP is close to €40,000. Like, obviously those consumers can't afford the same prices for similar products. But at the same time, it demonstrates that the single market isn't really one market. It's effectively sort of 27 national markets. And it means that there are still barriers when it comes to borders for trade.

And opportunities for arbitrage, right? Why don't we run down to Bulgaria, get a couple of big trucks full of nappies and sell them in Germany?

That's the interesting thing with the rise of online shopping is that people can now sort of log on to any website they want and buy whatever products, but there's still a few obstacles. The main one is delivery costs. You know, nappies are quite bulky and heavy and they're relatively expensive to post within a country. But the moment you sort of try and post it to a different country, even one just next door, it becomes inordinately more expensive. And that's not necessarily because the distance is any more, but just that the market isn't built that way. It's still very much a national market.

And so is there a push to, a desire to make the prices converge, or is this the sort of the steady state of the market?

There's some push. The main efforts the EU is making is to sort of try and make delivery prices in the EU a little fairer to consumers. But the other thing is that I think most European consumers aren't quite aware that particularly if you're in countries like Spain or Italy, then you're often being ripped off quite badly. There's always this criticism of the EU that this is a very sort of top-down project. And so it is sort of like integration from the bottom up in that consumers do need to do it themselves.

Duncan, thanks very much for your time.

Thank you.

That's all for this episode of The Intelligence. If you like us, give us a rating on Apple Podcasts and see you back here on Monday.