Sarkozy’s Delusions

The French president declares that capitalism can be made kinder and more humane. Good luck with that!

Check out the washingtonpost.com’s Insider’s Guide to Davos.

Nicolas Sarkozy. Click image to expand.
Nicolas Sarkozy

The other economic commonplace disproved by Davos: There’s no free lunch. There is a free lunch everywhere you go here, mostly involving undersized Emmenthal-on-pumpernickel sandwiches.

The larger challenge to the economist’s worldview came last night from French President Nicolas Sarkozy, the biggest big shot to make it to the World Economic Forum this year. Sarkozy delivered a passionate keynote address, which, in another era, would have been framed as an avowal of “third way” economics, threading the needle between inhumane capitalism and impractical socialism. But because the term “socialism” remains politically unpalatable even in France, even after the financial crisis, Sarkozy framed his alternative as a “kind of capitalism.” His argument is that untrammeled market economics threaten human values. Or, in words of the official translation: “We will not reconcile our citizens to globalization and to capitalism, if we are not capable of offsetting market forces with counterbalances and corrective measures.”

The question is whether Sarkozy’s kinder, gentler form of capitalism exists. He thinks it is possible to get capitalists to behave better by reminding them of their responsibilities to society. He also thinks that it’s possible to distinguish between healthy capitalism that creates jobs and wealth, on the one hand, and unhealthy “financial capitalism” on the other. Sarkozy described the economic situation that precipitated the crisis as one “in which those who lived on unearned income left the workers far behind, in which the use of leverage, to an unreasonably disproportionate extent, created a form of capitalism in which taking risks with other people’s money was the norm, allowing quick and easy profits but all too often without creating either prosperity or jobs.”

As accurate as parts of that description are, I don’t think capitalists are likely to become nicer, more generous, or less rapacious because of the crisis. And I don’t think Sarkozy’s distinction between good “entrepreneurship” and bad “speculation” will hold up for long. It brings to mind the line, apocryphally attributed to George W. Bush, that the French don’t even have a word for entrepreneur. In real life, all entrepreneurs are speculators (even if not all speculators are entrepreneurs.) In real life, entrepreneurs are as motivated by greed as hedge-fund managers, if not more so. Financiers, who fund entrepreneurs, play an equally vital part in job creation. And speculation is just a word for investment someone doesn’t like. The notion of capitalism without it is, well, very French.