The free market bites both ways

There have been contrasting reactions of both governments and public in China and Europe to the problems posed by the global market. While China has been on a relentless march towards commercial engagement for over 20 years, it often seems that some European countries would rather opt out of the international economy.

In the past month, the French government has once again failed to push through economic reform in the face popular strikes and demonstrations. The focus of the recent protests, which united students and trade unionists, was a relatively minor alteration of the employment law. A new contract was proposed for employees under the age of 26 that would make it easier for companies to hire and fire them. This would hopefully encourage the companies to employ more young people, for whom the unemployment rate is well over 20%.

Wider significance

Mass protest against reform is by no means unusual for France. This time, however, the battle has become entwined with a wider conflict over the future of Europe, and how it should interact with the rest of the world, including China.

France is in the forefront of the conflict because it has come to symbolize a particular view of the world, one that seeks to challenge free markets as the determining forces in economic policy. Not only were the activists and left-of-center politicians opposed to the new employment law, but opinion polls showed that the general public was overwhelmingly against it, too. Even many members of the right-wing ruling UMP party who had passed the law withdrew their support in the face of the protests. French politicians of all colors, almost without exception, view the hand of the state as superior to that of the market.

This is not just a French problem, but it is also one for the whole of Europe, and by extension its economic partners in the rest of the world. There is a battle for the future of Europe underway, and the role of markets and protectionism are its focus. The global aspect of this involves issues like anti-dumping duty on Chinese and Vietnamese shoes, or the various other industries that are lining up to follow suit in a bid to save themselves from competition.

Yet the battle over protectionism is increasingly being fought within Europe itself. The protectionist sentiment is being countered by those who believe trade, even if it’s unfair, is more important than protecting declining domestic industries. Once again, France, with its new policy of "economic patriotism" has come to symbolize this rejection of markets. Opponents include the UK, some of the northern Europeans and many of the EU’s new eastern European members. Even Germany, under its new chancellor Angela Merkel, has parted company with France on this issue.

Interestingly enough, the European Commission tends to see itself as the guardian of Europe’s markets, and officials have attacked the rush to protectionism.

Living in denial

The difficulty of some governments in Europe in facing up to economic reform contrasts the situation in China, which for over 20 years has pursued policies that have entailed considerable risks and sacrifices, not least among the many workers who have lost their jobs. European leaders of today are unwilling to take the risks that China has taken in the past. This is not just a question for governments. A recent survey found that in France only 36% people agreed with the statement that free enterprise and markets were the best system on which to base the future of the world.

This contrasted with 74% in agreement in China (although the survey only included the country’s cities). In fact, France had the lowest, and China the highest, percentage in agreement of the 20 countries surveyed. The survey also showed that Chinese had among the highest levels of trust in large companies, and even foreign companies, operating in their country.

The attitudes of French people are by no means typical across Europe, but recent events certainly demonstrate that they can have consequences. China’s urban dwellers appear better adjusted to the realities of the modern world than their French counterparts. Still, there are some signs that even many Chinese are reaching the limits of their tolerance of reform, or least some of its negative consequences.

For China to persevere with its changes, the Communist Party must carry its people with it, just as the French government needs to do if it is even to start reform. At the moment, it seems this will be achieved more easily from Beijing than from Paris.