Sarkozy's stupidity

Does Nicolas Sarkozy have a clue? He says the VAT cut had "absolutely not worked":

"Britain is cutting taxes. That will bring them nothing. Consumption continues to decrease."

However, official figures (pdf) flatly contradict this. They show that the volume of sales actually rose by 1.6 per cent in December, to stand 3.9 per cent higher than last December.
Of course, there are all sorts of ways to quibble with this data - ordinary noise is magnified by uncertainties about seasonal adjustment processes and the fact that the statisticians’ definition of “December” actually stretched to January 3.
And yes, the CBI and BRC data do show that sales are falling. But these are smaller samples of retailers than official data, and refer only to the value of sales, which would fall as prices fall.
What’s more, one retailer in particular seems to be thriving. John Lewis - one of the few major retailers not run by baboons - says its January trading was “hugely fruitful.“
Far from showing that the VAT cut hasn’t worked, the data has for me had the opposite effect. My immediate reaction was that the cut wouldn’t work, as consumer spending is not terribly price-elastic. But the data has caused me to have a little (only little) doubt about this.
But even if the cut hasn’t worked yet - and we’ll never know the counterfactual - it does not follow that it will bring us nothing. The move has an income effect. If shoppers don’t spend more in response to lower prices, they’ll have more cash left over. Which they could spend. They needn’t have done this already. It’s possible, therefore, that even if the VAT cut hasn’t worked yet, it might eventually do so.
Sarkozy’s dogmatism is, therefore, inconsistent with both data and theory. But I suppose his mind is on other things.

Comments

[kinglear]

Ah yes she really is both lovely and alluring.
And its not even gratuitous - there is a point to the picture. Perfect

[Shuggy]

You tell him, Chris.

On the other hand - the photograph and the title of the post don't go that well together, when you think about it.

[Chris]

Well, he's not wrong about EVERYTHING.

[dearieme]

Here's Gordon's problem.
http://www.youtube.com/watch?v=qkVkyeUbsKA

[ortega]

Shuggy is right.

What about SARKOZY'S FOLLY

[Bob B]

Well said, S&M.

I doubt that Anglo-Saxons regularly appreciate all nuances of French politics.

I belong to a U3A branch discussion group for current affairs of which a respected fellow member is a French lady, a graduate of the Sorbonne, one of the grandes écoles in France, with a better standing than mere universities there.

Her comment about Sarkozy in the run up to the French presidential election last year was that he wasn't a graduate of École Nationale d'Administration, unlike Ségolène Royal, his Socialist opponent -- or, by implication, François Hollande, her partner, or Jacques Chirac, the French president, or Giscard d'Estaing, author of the EU Constitution, or Jacques Delors, President of the EU Commission at the time of the Maastricht Treaty, Jean-Claude Trichet (head of the ECB), Dominique Villepin, Eduard Balladur, Michel Rocard, Alain Juppé, Lionel Jospin etc etc. Dominique Strauss-Kahn, now MD of the IMF, was at one time a professor at École Nationale d'Administration (ENARC).

Sarkozy had sought entry but couldn't pass the entry exams to this grande ecole for prospective entrants to France's political elite. The implication was clear: Sarkozy wasn't bright enough.

[passer by]

John Lewis might tick all the right boxes for you chris but

1, they are expensive, most stuff can be bought cheaper elsewhere.
2, they are crap to work for. I would rather work in a library.

As for Sarcs academic failings Bobb, Ecole Nat looks like somewhere to avoid, it seems to produce technocratic fools. I would say that was a plus for old stacked heels.

[Bob B]

"As for Sarcs academic failings Bobb, Ecole Nat looks like somewhere to avoid, it seems to produce technocratic fools."

Fools, they are certainly not but there are certainly suggestions in France that ENARCs tend to conform with particular stereotypical ways of thinking.

For one thing, the ENARCs generally subscribe to the deeply embedded dirigiste tradition of France, which has continued virtually unabated since Colbert, the finance minister of Louis XIV. Mercantilist notions still thrive there, despite the best efforts of Adam Smith in: The Wealth of Nations (1776) to debunct Mercantilism. Political argument is less likely to focus on the principle of state intervention than on the particular means of intervention or the intentions of "rightists" v. "leftists". Britain may have pioneered industrialisation through laissez-faire, but industrialisation in France was mostly achieved through highly interventionist means.

However, it would be wrong to assume all the French think this way. Bastiat, in the mid 19th century, famously wrote a satyrical petition to the National Assembly on behalf of the candlemakers urging protective measures against unfair competition from sunlight:
http://bastiat.org/en/petition.html

And France has produced a distinguished line of academic economists who have intellectually migrated to the Transatlantic mainstream. One such is Olivier Blanchard, now chief economist at the IMF, previously a prof for many years at the MIT.

Nor would it be correct to assume that we British have been unresponsive to the atractions of dirigisme.

Harold Macmillan, when PM in 1961, announced the creation of the National Economic Development Council and Office. So concerned was he about the admittedly lagging performance of Britain's economy at the time that he borrowed prevailing French notions about national planning institutions and the need for creating a tripartite census between government, business and the trade unions. That lasted through to the Thatcher government in the 1980s.

[passer by]

Bobb..I think you will find Einstein tried ETH Zurich, the Swiss Federal Institute of Technology in Zürich. Lacking a school certificate, he was required to take an entrance examination, which he did not pass, although he got exceptional marks in mathematics and physics, he obviously like Sarco did not fit the mold.

I tend to find technocrats dont do deductive reasoning too well, as an engineer its the place I start from.

[Bob B]

Passer by - I suggest you really need to watch this Google lecture by Prof Barry Schwartz on: The Paradox of Choice - Why more is less:
http://video.google.com/videoplay?docid=6127548813950043200

And this BBC2 TV doc by Adam Curtis on: The Century of the Self 1 of 4, about the work of Edward Bernays, who virtually founded the profession of public relations:
http://video.google.com/videoplay?docid=8953172273825999151

[Andrew]

Damn right about the income effect, Chris. The cut might have very little effect overall, but when the Conservatives say "expensive failure" it sounds oxymoronic to me. If it has truly been expensive, then that means the govt has foregone lots of tax which has been left mostly with us or the retailers, depending on elasticites. Either way, that's a tax cut.

[Glenn]

Hey - it provided a bounce to retail sales, which managed to lift the economy up a bit. Might be temporary, but these kinds of moves can make the difference in a recession.

It was a gamble, but one that seems to have paid off in my view - it ensured that the christmas period led to sustained sales volumes.

Sarkozy is taking his time finding solutions for France! the clear messages from previous recessions and the great depression was that doing nothing was often worse than doing something.

Sometimes any movement is positive.

John Lewis have their committment to match any price. They've maintained their customer service when its become so cr*p elsewhere. That's why they are doing so well.

Sarkozy - what a failure at his job. He's not done half of the stuff he said he'd do. Too mesmerized by Carla no doubt. Its a shame for France, such a wonderful country.

[Tag Heuer replica]

And a lot of it reflects a switch from bank deposits to securities; foreigners “other investments” in the UK, http://www.watchgy.com/ mostly bank deposits, fell by £143.2bn in Q1. And of course there’s no guarantee such buying will continue.
http://www.watchgy.com/tag-heuer-c-24.html
http://www.watchgy.com/rolex-submariner-c-8.html