by Rachel Marsden
Being a geopolitical analyst and forecaster often means having to explain to people in America how and why a single event in Africa, Russia or China will directly impact them. One such event is the French presidential election set for May 2012, for which the opposition Socialists have just selected their candidate, Francois Hollande, in a final round of open primary voting.
For most people, the knee-jerk reaction to an event on the other side of the world is, "Why should I give a toss what happens in France? Also, they are Socialists and promiscuous, so there's that." While such foreign-policy prowess might be a hit at the local pub, would it really be smart to ignore an election that will impact everything in your life for which you pay or require borrowed money? Bear with me as I explain why this is the case.
No one really knows who will be the French president by this time next year. The French haven't been keen to elect a Socialist to the highest office since Francois Mitterrand in 1988, and polls strongly suggest that they aren't now. If anything, they'd be voting against
In all cases, the future of Europe depends on this French election.
Socialist Hollande claims to defend the middle class while taxing high-earners who create jobs. He vows to significantly reduce the debt while bailing out other countries along with Germany, all while undoing Sarkozy's retirement reforms so people can again cash in on benefits earlier. It's the usual Socialist fiscal math of "1 + 1 = you're paying, so who cares?"
Whoever gets elected in France, the euro zone risks breaking apart -- if not from
The solution to this predicament is decreased spending and/or increased production. Because less spending seems unlikely, it would make sense to produce more. This would mean slapping import taxes on products from China to make them competitive with domestically produced goods, reducing union costs that drive up prices, and lowering taxes on French producers to keep them from outsourcing. Think that sounds easy? Think again: What's China's largest export market? Europe. Who's buying up Europe's debt bonds to ensure European consumers can keep getting their "Made in China" fix? That's right -- China.
Because wages are so low, China certainly doesn't have anywhere near the kind of domestic consumer economy that Europe has. So China is outsourcing its consumers to Europe, and Europe is outsourcing its production to China. It's a symbiotic survival relationship. Does Europe still exist as Europe, with China as a major stakeholder calling the shots? And where does this leave America? Relegated to mistress status, with China buying fewer debt bonds in favor of leveraging Europe. This means less money floating around in America to buy that Chinese-made swing set for your kid from
"Why Care About the French Presidential Race"