The current budget impasse is based on a polarization regarding taxation. The New Popular Front wants to increase taxes on the wealthiest individuals and businesses. On the other hand, centrist and right-wing parties want to spare businesses and have the entire population contribute, to avoid an “excessive” taxation on capital in the name of attractiveness and competitiveness. The companies are thus annexed to the conservative liberal camp. It has not always been this way. In the past, the left has been able to put the development of businesses and wealth at the service of its project, and convince society that combining investment and redistribution was the best way to ensure economic and social progress.
Alberto Alesina, an Italian economist teaching at Harvard, had brilliantly analyzed one of these cases (“Why are stabilizations delayed” with Allan Drazen, Working Paper No. 3053, NBER, 1989). In the 1920s, the conservative government was desperately trying to restore the value of the gold franc from the Belle Epoque, which had been largely eroded by the Great War. Such a policy, led by the Tories in power in the UK, caused a depression that lasted the entire decade. Faced with powerful trade unions and the demands of war victims, another policy gradually emerged in France: to endorse the depreciation of the franc and therefore the payment of the war by rentiers – holders of fixed-income state bonds would be ruined by this choice. Alesina analyzes this policy as the alliance of companies and employees against rentiers, which reverses the alliance of companies and rentiers that, in the 19th century, had led by counterweight to the emergence of revolutionary socialism.
Establishing a more sustainable contract
In this new alliance, employees initially accept lower wages, but they quickly progress through growth and union mobilization, companies pay lower dividends and invest heavily. This model soon enriched with social protection that makes wage labor preferable to individual entrepreneurship and ensures both confidence in the future and the health of employees – and therefore reinforces their productivity. For several decades, this model, called Fordist, favored growth, even if it was at the expense of the environment. The temporary disqualification of the richest capitalists, by the 1929 crisis in the United States, by collaboration with the Nazi regime in continental Europe, contributed to its strengthening after 1945. You have 35.44% of this article left to read. The rest is reserved for subscribers.
