08 May 2017 13:34:32 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

The EU’s sigh of relief is heard around the world

A toast should be raised to the French voter for injecting much-needed life back into globalisation

When the history of the early 21st century is written, France can claim to write its most important chapters, as it did once before during World War II. Just as Abraham Lincoln saved the United States from what appeared to be a certain fracture in the 1860s, Emmanuel Macron, by winning in a 64-36 landslide against Marine Le Pen in this week’s French presidential elections , may have saved the European Union. And probably also the world as we have come to know it.

Even as recently as a week ago, Macron’s victory was not a foregone conclusion at all. He did not even belong to one of France’s established political parties while running for president. Macron started his own centrist party, En Marche! (meaning, move forward), only a year ago. As Economics Minister in Francois Hollande’s government, he carried all of that unpopular administration’s baggage — and blame for the perpetually stubborn 10.5 per cent unemployment rate (the youth unemployment rate is above 20 per cent). President Hollande’s approval ratings continue to be in the low single digits.

His experience as an investment banker at Rothschild was not necessarily a glowing endorsement of his qualifications either. In the last 20 years, big finance industry powerhouses, such as banks and insurance companies, have been accused of engaging in crony capitalism wherein they grease the wheels of political parties in return for favourable regulatory treatment once governments are sworn in.

The how and why

So why did 39-year old Macron win?

He won simply because the alternative, Marine Le Pen, was considered a far worse choice. Le Pen was everything Macron was not. She stoked nationalist fears by suggesting that immigrants were taking away French jobs (there’s some truth to this) and repeatedly said that Muslim immigrants were the reason for France’s regular drumbeat of terror attacks. She actively advocated for a return to the French Franc and threatened a ‘Frexit’ referendum to have France leave the EU.

Even the nationalist French, brimming with pride, did not want to risk so many changes all at once. They figured that Macron was a safer alternative because no one yet knows how Brexit will pan out. Trump’s performance during his first 100 days in office are mixed, at best, given how often he has changed positions and yielded to the reality of governing.

With such an astounding mandate for Macron, will it be easy for him to lead France now? Not really.

Macron has first to contend with the fact that 34 per cent of the electorate did not vote for him and chose the policies championed by Le Pen. This means that in large pockets of rural France, Macron’s centrist and globalist ideas are despised. France is an extreme example of the socialistic nanny state with cradle-to-grave benefits which suck out over 50 per cent of its GDP in government spending. Very few countries have such generous welfare policies.

The French way

In France, people only work for 35 hours a week. Companies face civil penalties if they send emails to employees over the weekend with the expectation of a response. French employees get six weeks of vacation. Pregnant, employed or self-employed women are allowed 16 weeks of paid maternity leave in France. For the third child, in a growing recognition that birth rates are not high enough, maternity leave is 26 weeks long. For companies, all of these rules and regulations tremendously raise the cost of doing business in the country.

And then there are the labour unions, which are so powerful that they can strike work and bring the entire country to its knees. In recent years, we have witnessed strikes by truck drivers protesting one rule or the other; and sympathy walkouts by airline staff. Firing an employee is said to be so incredibly hard that companies prefer not to hire at all.

If France has to truly compete with the global economy, which it helped restore this weekend, the country has to change. But privileges once granted are extremely difficult to withdraw, and any attempts by Macron to make changes will be met with stiff opposition — even from his supporters. That his party is only a year old will make it harder because, like Trump, he has no real political support in parliament. On the other hand, Macron cannot afford not to make changes. The status quo in France is just too harsh to bear.

Macron’s victory poses other risks around the world. For one, there’s a big risk in thinking that the world has had enough of nationalistic campaigns — like those of Nigel Farage in the UK, Trump in the US and Le Pen at home — and is ready to go back to the tried and tested globalisation model. This would be a dangerous assumption because the problems of globalisation are real.

Unanswered questions

Forty years after the birth of the EU, the world has not yet found a solution to chronic unemployment in the face of rising threats from immigration and technological advancement; problems with security and terrorism; issues with non-state actors making trade rules for distant nations; and the underlying idea of globalisation — that a country’s sovereign interests are second to those of a common block of nations.

For now, though, the EU’s sigh of relief is profound and loudly heard everywhere around the world. Macron has, at the very least, helped put a dent in the momentum of nationalist movements. This should make the elite at next year’s World Economic Forum in Davos raise an exclusive toast of a Cabernet Sauvignon or a Chardonnay, to the average French voter: for injecting much-needed life back into globalisation.