A litmus test for the future of the euro and globalization, once again. And this time, it is in the land of liberty, equality and fraternity. On Monday, the world will know which way the French electorate would have voted with their feet. Will they plump for a more mainstream candidate to save the euro, the European Union, and sail with the rough winds of globalization? Or will they go for a Trump-like candidate such as Marine Le Pen, the leader of Front National Party (FNP), for unleashing the ugly forms of majoritarian cultural/economic nationalism? There is also a far left candidate—Jean-Luc Mélenchon—who is threatening to walk away from the World Trade Organization to pursue a radical left agenda. In addition, there are two centrist candidates—one from the traditional conservative party and the other a modern day globalist and a pro-Europe progressive.
Both candidates of far right and far left could spell a disaster for the euro. Le Pen has repeatedly blamed the single currency for hurting France’s economy. Mélenchon is a visceral critic of the European Union and wants to renegotiate with the EU and even hold a referendum on exiting the Union. The two candidates are also converging in their opposition to globalization while pursuing policies akin to “Buy American, Hire American."
It remains to be seen how effectively Le Pen will be stopped by another centrist-conservative candidate, Francois Fillon, who is currently mired in a corruption scandal. In the past, Le Pen’s party headed by her father failed to cross the crucial second round because of the solid block of conservative voters who wanted to keep the FNP out of the Elysee Palace, the White House of Paris.
But the odds seem to favour independent candidate Emmanuel Macron, who remains committed to the European project and globalization. In a volatile and extremely charged atmosphere in France, which experienced several major terrorist attacks over the past two years and which pursued insidious forms of social exclusion policies, anything could happen. The two candidates likely to cross the first round on Sunday are Macron and Le Pen. However, given the electoral surprises in the Atlantic West over the past two years, what would happen if Mélenchon makes it to the second round, along with either Macron or Le Pen, which will take place on 7 May. That would pose a major challenge to the French electorate.
Little wonder, Christine Lagarde, the head of the International Monetary Fund (IMF), has warned that the French presidential election is casting a “huge question mark" over the eurozone, in an interview with several European journalists, according to The Guardian on 17 April. The IMF chief expressed her concern over the rising wave of protectionism while acknowledging that criticism of Germany’s trade surplus is valid. “When there are excessive imbalances, when there is excessive inequality, or instability in the financial system, all those three are bad for stability, for the sustainability of growth…We do not shy away from saying that," she said candidly. Known for her forthright views, Lagarde also emphasized that Greece would need debt relief. “If the Greek debt is not sustainable in accordance with the IMF’s rules and on the basis of reasonable parameters, we will not participate in the program."
In his book And The Weak Suffer What They Must?: Europe, Austerity, and the Threat to Global Stability, former Greek finance minister Yanis Varoufakis argued succinctly as to how the recurring tensions between the surplus countries and the deficit nations—“one nation’s deficit is another’s surplus"—remain unaddressed despite the 2008 financial crisis.
Keynes’s blueprint of a surplus recycling mechanism that was required by the Bretton Woods system “would be to maintain monetary stability everywhere, to keep both surpluses and deficits in check throughout the Western world, and at the first sign of crisis in a troubled nation, speedily recycle surpluses into it so as to prevent the crisis spreading." But it was shot down by the then world’s sole surplus country, the US, which went into deficits in 1960s.
Finally, the Nixon Shock of 1971 paved the way for creating a dollarized global economy in which the US always retained an “exorbitant privilege." Simultaneously, Wall Street became the Global Minotaur, according to Varoufakis, for sucking the surpluses from China and Germany while servicing a debt-fuelled economy. Germany’s controversial role in the European coal and steel cartel that subsequently led to the creation of the European Union and the European Monetary System, which led to the single currency euro, have all along been challenged by successive French leaders starting with Charles de Gaulle. Germany’s export-based industry thrived because of the flawed European monetary system and “the export of German goods and German profits to the rest of the eurozone created debt-fuelled" annual growth in Greece and Ireland till the 2008 crisis wrecked the world economy.
Against this backdrop, the issue of a surplus-recycling mechanism is not going to go away. If anything, it has become an excuse for the US and other dominant powers to use outright protectionist measures such as the latest bout of restrictions. President Donald Trump finally unveiled the “Buy American/Hire American" executive order on 18 April ostensibly for cracking down on abuses in the H-1B visa program for skilled workers and for the federal government to strengthen its various “Buy American" provisions that give preference to domestically produced products and also for a 220-day study of US trade agreements that effectively give foreign companies the right to be treated as domestic companies under the so-called WTO plurilateral agreement on government procurement. Immediately, Australia and New Zealand joined the chorus for imposing restrictions on foreign skilled workers while declaring that they would only hire their nationals. The Trump virus will soon spread to the struggling economies in Europe such as France. Hence, the French elections could prove to be a tipping point for globalization.