Late last year, the French government imposed a much-advocated fuel tax. In the wake of global warming, economists and policymakers have been advocating ‘carbon taxes’ to reduce emissions. Since vehicular emissions are a huge source of these and also of congestion, fuel taxes are thought off as a convenient policy to discourage dangerous emissions plus decrease congestion.
Evidence suggests that, overall, carbon taxation has worked well. California, for example, met success with such policies under Governor Arnold Schwarzenegger. Therefore, in order to address the dual problem of congestion in large cities like Paris in addition to curbing carbon emissions, the government led by President Emmanuel Macron imposed a fuel tax.
But what happened in the wake of the imposition of the tax was spectacular and unfathomable at the same time. France erupted into ‘yellow vest’ protests (‘gilets jaune’ in French. Protestors wear yellow vests, hence the name) that have turned violent on various occasions. In a moment reminiscent of the summer 1968 protests, the uprisings during the French Revolution and the 1843 uprisings, France was brought to a standstill as society rose in revolt against its government. Taken aback, the French president announced some measures (like increasing wages) to dissipate the tumultuous effects of the uprisings. Yet these continue.
We begin with the observation that French gasoline prices were already high even before the protests began. It was $6.48 per gallon at the time that protests began, and now it stands at $6.13 after drop in world oil prices. More importantly, it is lower than prices per gallon in some Scandinavian welfare states, and almost equivalent to what prices are in Germany.
But the similarities end here. France has been going through a decade or more of sluggish economic growth. Its unemployment rate refuses to budge from a high of 10 percent, and the number has stubbornly clung on despite the changes in policies and governments. The real growth in wages (real meaning disposable income after accounting for cost of living) has, like economic growth, been nearly non-existent. When Emmanuel Macron took over, the French people saw much hope in the charismatic new man anointed to the highest seat in the country. And he promised reform and change.
Last year, before the uprisings began, Macron enacted exemptions in taxation on the higher income earners. Put another way, he lowered taxes on the wealthy. Moreover, changes were proposed to labour laws to make it easier for employers to hire and fire workers at their pleasure (under existing French labour laws, once an employee is hired, it is almost impossible to fire them). The aim was to kick start the anemic process of economic growth through more investment and a dynamic labour market (savings through lower taxes would, so goes the logic, find their way to the economy as investment). As growth picks up, more opportunities will be created and more investment will come in, which will push GDP growth even higher.
But this fancy vision didn’t stand up to scrutiny. What then, we may ask, unnerved the people so much that they turned against a fellow whose promise of reforms had gone down well initially across France? Readers should note a few things lest they mistake these as the driving forces behind the uprising: inequality in France is one of the lowest in the world, and its taxation and economic policies are strictly welfare oriented (free education, free health, unemployment benefits, etc.). So neither were inequality nor any changes in welfare policies responsible for the disturbances.
To understand what happened, we would need to be aware of the nature of welfare policies, the prohibitive cost of living in major European cities like Paris and the policies governing cities. I remember that back in 2005, when I was working at a grocery store during my studies in US, a customer came and bought some goods. His total bill came to $7 or $8, which astonished the customer to no extent. He turned out to be a French citizen, explaining that his astonishment owed to the fact that he could buy hardly half of the amount of goods with that much money in cities likes Paris.
This exorbitant cost of goods is complemented by the high amount of taxes that government takes from earnings of workers, which considerably slashes their disposable income. Then there are other mandatory obligations (like buying a car insurance) that further tighten the screws upon spending possibilities of citizens. Over time, as the cost of living in cities like Paris became unbearable, citizens either moved out to suburbs or to even farther places. Their main connection to the major cities, which also tend to be centres of commercial and economic activity, is now the vehicles that they own, and they have to spend a hefty amount on oil in order to realize their commute.
In the end, a growing percentage of the population is left with little disposable income to attend to other aspects of life. Combine this with the above narrated facts of stagnant incomes and high unemployment, and we have a tinderbox of frustrations and unmet expectations. The match to this tinderbox was ignited by the policies of higher fuel taxes (making fuel more expensive), exemptions to the rich and the labour reforms (which would have made decisions to fire or terminate employment much easier).
The movement against these reforms was kick started on October 10, 2018 through Facebook posts by two truck drivers, who called for a national blockade. Within days, their appeal to rebel aroused the people to the extent that within a short span of time, thousands of people all over France rose up. The protestors included people of almost all backgrounds, from students to the employed as well as the unemployed. They were on the streets because their already challenging existence was set to be squeezed further by the Macron government. At the one end, their disposable income did not leave them with any worthwhile savings, and their lives (especially that of working class) were set for further misery through more expensive fuel, which could severely affect their economic mobility. Adding insult to injury, exemptions were planned to be given to the richest, who needed it the least. To further exacerbate the uncertainty, employers were to be given the right to fire employees at will. Thus began an aggregate commotion that would put whole of France in a twirl.
I will conclude by suggesting that the uprisings were not about fuel taxes. It was a rebellion against the creeping hopelessness that has come to gradually pervade the lives of the ordinary French. This episode also showcased that being a welfare state is no guarantee that no experience socio-political turmoil would be experienced. Welfare transfers do guard against many uncertainties in life, but what matters even more is the standard of living and the perception of fairness. Successive French governments have failed to take care of these aspects. Citizens can only bear a burden to an extent. But as their aspirations keep crashing one after the other, their frustrations ultimately boil over. That’s what we saw in France, that’s what history tells us, and that’s what can happen in the future too anywhere in the world. As we discuss, the movement has already spread to other European nations and middle-east.
The writer is an economist
Evidence suggests that, overall, carbon taxation has worked well. California, for example, met success with such policies under Governor Arnold Schwarzenegger. Therefore, in order to address the dual problem of congestion in large cities like Paris in addition to curbing carbon emissions, the government led by President Emmanuel Macron imposed a fuel tax.
But what happened in the wake of the imposition of the tax was spectacular and unfathomable at the same time. France erupted into ‘yellow vest’ protests (‘gilets jaune’ in French. Protestors wear yellow vests, hence the name) that have turned violent on various occasions. In a moment reminiscent of the summer 1968 protests, the uprisings during the French Revolution and the 1843 uprisings, France was brought to a standstill as society rose in revolt against its government. Taken aback, the French president announced some measures (like increasing wages) to dissipate the tumultuous effects of the uprisings. Yet these continue.
We begin with the observation that French gasoline prices were already high even before the protests began. It was $6.48 per gallon at the time that protests began, and now it stands at $6.13 after drop in world oil prices. More importantly, it is lower than prices per gallon in some Scandinavian welfare states, and almost equivalent to what prices are in Germany.
Welfare transfers do guard against many uncertainties in life, but what matters more is the standard of living and the perception of fairness. Successive French governments have failed to take care of these aspects
But the similarities end here. France has been going through a decade or more of sluggish economic growth. Its unemployment rate refuses to budge from a high of 10 percent, and the number has stubbornly clung on despite the changes in policies and governments. The real growth in wages (real meaning disposable income after accounting for cost of living) has, like economic growth, been nearly non-existent. When Emmanuel Macron took over, the French people saw much hope in the charismatic new man anointed to the highest seat in the country. And he promised reform and change.
Last year, before the uprisings began, Macron enacted exemptions in taxation on the higher income earners. Put another way, he lowered taxes on the wealthy. Moreover, changes were proposed to labour laws to make it easier for employers to hire and fire workers at their pleasure (under existing French labour laws, once an employee is hired, it is almost impossible to fire them). The aim was to kick start the anemic process of economic growth through more investment and a dynamic labour market (savings through lower taxes would, so goes the logic, find their way to the economy as investment). As growth picks up, more opportunities will be created and more investment will come in, which will push GDP growth even higher.
But this fancy vision didn’t stand up to scrutiny. What then, we may ask, unnerved the people so much that they turned against a fellow whose promise of reforms had gone down well initially across France? Readers should note a few things lest they mistake these as the driving forces behind the uprising: inequality in France is one of the lowest in the world, and its taxation and economic policies are strictly welfare oriented (free education, free health, unemployment benefits, etc.). So neither were inequality nor any changes in welfare policies responsible for the disturbances.
To understand what happened, we would need to be aware of the nature of welfare policies, the prohibitive cost of living in major European cities like Paris and the policies governing cities. I remember that back in 2005, when I was working at a grocery store during my studies in US, a customer came and bought some goods. His total bill came to $7 or $8, which astonished the customer to no extent. He turned out to be a French citizen, explaining that his astonishment owed to the fact that he could buy hardly half of the amount of goods with that much money in cities likes Paris.
This exorbitant cost of goods is complemented by the high amount of taxes that government takes from earnings of workers, which considerably slashes their disposable income. Then there are other mandatory obligations (like buying a car insurance) that further tighten the screws upon spending possibilities of citizens. Over time, as the cost of living in cities like Paris became unbearable, citizens either moved out to suburbs or to even farther places. Their main connection to the major cities, which also tend to be centres of commercial and economic activity, is now the vehicles that they own, and they have to spend a hefty amount on oil in order to realize their commute.
In the end, a growing percentage of the population is left with little disposable income to attend to other aspects of life. Combine this with the above narrated facts of stagnant incomes and high unemployment, and we have a tinderbox of frustrations and unmet expectations. The match to this tinderbox was ignited by the policies of higher fuel taxes (making fuel more expensive), exemptions to the rich and the labour reforms (which would have made decisions to fire or terminate employment much easier).
The movement against these reforms was kick started on October 10, 2018 through Facebook posts by two truck drivers, who called for a national blockade. Within days, their appeal to rebel aroused the people to the extent that within a short span of time, thousands of people all over France rose up. The protestors included people of almost all backgrounds, from students to the employed as well as the unemployed. They were on the streets because their already challenging existence was set to be squeezed further by the Macron government. At the one end, their disposable income did not leave them with any worthwhile savings, and their lives (especially that of working class) were set for further misery through more expensive fuel, which could severely affect their economic mobility. Adding insult to injury, exemptions were planned to be given to the richest, who needed it the least. To further exacerbate the uncertainty, employers were to be given the right to fire employees at will. Thus began an aggregate commotion that would put whole of France in a twirl.
I will conclude by suggesting that the uprisings were not about fuel taxes. It was a rebellion against the creeping hopelessness that has come to gradually pervade the lives of the ordinary French. This episode also showcased that being a welfare state is no guarantee that no experience socio-political turmoil would be experienced. Welfare transfers do guard against many uncertainties in life, but what matters even more is the standard of living and the perception of fairness. Successive French governments have failed to take care of these aspects. Citizens can only bear a burden to an extent. But as their aspirations keep crashing one after the other, their frustrations ultimately boil over. That’s what we saw in France, that’s what history tells us, and that’s what can happen in the future too anywhere in the world. As we discuss, the movement has already spread to other European nations and middle-east.
The writer is an economist