Daniel Lacalle

LePen’s Economic Program. No Trump, Very Syriza

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The “super secret” economic program of Le Pen  for the French elections is now available. Yet there is nothing new about it, it is the same collection of unicorns that populates the economic proposals of the European populists, left or right. From Syriza to the National Front or Podemos, their economic proposals are always the most outdated and stale interventionism. All those economic programs can be summarized in one sentence: Two plus two does not equal four, it equals 22. Massive devaluations, believing in the unicorn of printing money to solve structural imbalances and nationalizing every sector possible. Venezuela without oil.

LePen demands full State control of companies in strategic sectors, printing currency without limit, eliminating the independence of the central bank to fund the State without control (the “people’s QE“, or Argentina without soya)  and interfering in all economic aspects with more bureaucracy and political control in every economic decisions. The assault on the citizen, on behalf of the ‘hyper state’, voted and approved by a relevant percentage who believe in magic as long as it’s more government.

Marine LePen says her program ia already being implemented by Trump and May. Really? There is nothing remotely similar. May wants companies to thrive and make the UK the next Singapore, cutting taxes and reducing bureaucracy. Trump is adopting the same measures. LePen wants companies surrendered to the State and aims to increase hyper regulation. LePen’s tax cuts are a mirage as revenues and earnings will be destroyed by devaluation and interventionism. Trump and May defend “America first” or “UK first” without destroying capitalism, closer to Roosevelt in protectionism and Reagan in liberalization. LePen defends “French State first”, completely obliterating free enterprise and capital investment, and closer in her view of protectionism to fascist and communist regimes.

The National Front’s program has no resemblance with the US and UK proposals. It has all to do with pre-war Germany or Soviet Russia. No reduction of bureaucracy. In fact, LePen promises a lot more, with many more public servants hired. No real cut in taxes, in fact LePen promises to penalize companies that use tax optimization schemes. No respect for shareholders, in fact a total war against capital investment and shareholders that they call “vulture funds”. LePen aims to deepen the imbalances of what is already a “sclerotic” economy, in the words of candidate Macron, a socialist system of inefficient directed economy, by adopting even more socialist anti-market measures.

There is nothing in this program that looks remotely similar to the proposals of Trump or May. And a lot that looks frighteningly similar to the magic ideas of Corbyn, Syriza and Podemos.

The “star” proposal is -of course- to leave the Euro. The National Front already voted in January 2016, a resolution to dissolve the euro “in an orderly way”. This vote was made along with the extreme right and left of Italy, the Northern League and Five Stars, and Spain, Podemos.

Orderly disolution of the Euro is an oxymoron. There is nothing orderly. Ignoring the massive impact on businesses and families of  leaving the Euro is dangerous. Capital controls would asfixiate the economy, devaluation and inflation would destroy savings and purchasing power of citizens, and the domino of bankrupcies of SMEs and families would be devastating. In an economy with high private debt, it would be -as we have seen in many cases- an absolute disaster.

LePen and the National Front know it. They love the idea of ​​confiscating the vast majority of the savings of families, which are in bank deposits, and surrendering the leftovers of the economic wreck to the omnipresent State. Capital controls, bank runs and confiscation of savings are not unforeseen collateral damages, they are part of the strategy of sinking and nationalizating the economy. It is not about improving, but absorbing 100% of the crumbs left from the debacle. The “orderly exit” of the Euro is an oxymoron, something like “democratic fascism.”

It is, at the very least, a joke that the National Front, in a program full of unequivocal proofs of the domino of bankruptcies it will create,  promises to “lower interest rates to companies and families.” First, bond yields would soar, the collapse of banks with capital controls and massive devaluations would destroy access to credit for those same companies and families, and the cost of borrowing -if available at all- would skyrocket … Yet they “promise” to lower it.

France, today, borrows at historically low rates and its companies and families at the lowest interest rates in history. To think that out of the Euro all this would remain is not being a nationalist, but being a fool.

Another oxymoron is “intelligent protectionism”, something like the “kind Leninism” that Podemos promised. The battery of measures aimed at closing access to capital and assets while demanding that the central bank finances “unlimitedly” the government is nothing more than to repeat the disaster of Kirchner in Argentina and Chavez in Venezuela, but in France. And, moreover, with the same result as what Varoufakis and Tsipras achieved in Greece. Deepening the recession.

It is endearing to read that the National Front thinks, like other populists, that putting capital controls and eliminating the open financial market will multiply access to credit and financing. It is the same as thinking that putting barriers to trade and eliminating bilateral treaties will help you export a lot… Nonsense.

Because LePen is not asking to renegotiate trade deals. The National Front is simply talking of eliminating every trade agreement existent in the past.

The whole program of the National Front starts, like all European populists, with the premises that the world is wrong and two plus two does not equal four. That the reason why the French interventionist economy does not work is because it is not interventionist enough. That the reason why it does not grow and delves deeper into debt is because they don’t print money. There is no measure about productivity, competitiveness. No. More public servants will solve all the problems.

The program permeates the view that private economic agents have no clue, but a group of bureaucrats is going to solve it all, and that everything is sorted devaluing, impoverishing and printing useless paper. It is repeating the same economic folly perpetrated in the French Revolution with the Assignats and, as it happened then, when the economy collapses, the government will blame shop owners for the lack of supply, merchants for not wanting to accept worthless pieces of paper, and the foreign enemy that attacks such beautiful plan. Blaming anyone except the ones that sink the economy, themselves.

No, the National Front program is nothing like Trump’s. It is Soviet-Fascist interventionism seen many times before, closer – in economic policy – to Mussolini, Kirchner, Allende or Maduro.

It will not work, and they know it. But the goal is not to make it work. The goal is that, when the economy collapses, all economic agents will be hostages of the omnipresent State.

Unlike the UK and US recent movements, this is not a program that promotes freedom from the system to incentivize private iniciative outside of bureaucracy, it is the glorification of slavery to the bureaucrat system.

Daniel Lacalle is PhD in Economics and author of “Life In The Financial Markets”, “The Energy World Is Flat” (Wiley) and forthcoming “Escape from the Central Bank Trap”.

Graph courtesy Bloomberg, cartoon courtesy Dave Simonds.

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