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President Macron's policy agenda

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When we seek to analyse President Macron’s policy agenda, and its implications for France’s investment environment, the way in which we define “success” is pivotal and dependent not only on financial considerations, but political and temporal ones as well. In answering this question we will first revisit Macron’s policy priorities, before discussing the alternatives perceptions of “success”.

Following the rise of La Republique En Marche and their growing legislative weight, key pieces of President Macron’s policy have been enacted challenging France’s trade union establishment and labour laws, with the ultimate objectives of reducing the cost of labour, and in so doing, raising France’s employment rate. Whilst the fundamental indicators of these outcomes have been moving only gradually, the implications for investors is clear. Efforts to reduce minimum wages would entice investors because the profit margins of taking on risk in France’s industries would be offset by the reduction in the costs of labour.

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This is the financial case for defining success; where the data indicates growing foreign investment in France, asides from whether or not this is linked to President Macron’s agenda, this would be considered a successful outcome as indicated by fundamental measures of the French economy over the fiscal time frame corresponding with Macron’s first year in office. This measure would, however be short sighted, and our understanding can be supplemented by the political opportunity cost, as well as temporal considerations.

With regards to political costs, taking on France’s trade union establishment puts Macron’s movement in risky territory politically, since the progressive cleavage which La Republique En Marche occupies could conceivably be swept away by an upswell in support for the Socialists which might come about if Macron’s party sheds left-wing support. In this case, the fragile legislative position which the young party holds could be irreversibly damaged, and Macron’s presidency would be muzzled by the consignment of his signature party to the dustbin of history. In this case, any tentative improvement in economic fundamentals would, from Macron’s perspective, matter less if it came at the cost of political salience.

In conclusion, we must also exercise caution in the timeframe over which we form our judgement. The temporal measure of success matters, since any reduction in the cost of labour, subsequent rise in direct foreign investment, and hence employment, could feasibly be offset by a long term reduction in productivity, as elsewhere in Europe (particularly the UK). In this sense, although low labour costs would be financially advantageous for investors, and politically advantageous for President Macron, any reduction in productivity as a result of an oversupply of cheap labour and low paying jobs would necessitate tax rate rises within a period of around a decade. This suggests that even financially and politically expedient actions would turn out to be less advantageous when viewed from a long term perspective. This suggests sustainability in long term fiscal policy is necessary and more advantageous than short term expediency, and is (normatively speaking), a better- albeit less salient- measure of success in this field.

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