America and France, Marching in Different Battles

In Paris, students march to demand 35-hour workweeks and five weeks' vacation. (By Anja Niedringhaus -- Associated Press)

In one country, millions of hard-working people who earn modest wages and have no job security march to demand the right to continue participating in the global economy.

In another, millions of people without jobs and fearful of the global economy march to demand that, if and when they get a job, it comes with a 35-hour workweek, five weeks of vacation, mandatory profit-sharing, retirement at age 60 and the right never to be relocated, fired or demoted.

There, in a nutshell, is the difference between the political economy of the United States and France.

It's the reason one country's economy is growing at the annual rate of 4.5 percent and the other will be lucky to reach 2 percent.

Why one creates a million net new jobs in a year without breaking a sweat and why the other has trouble creating a million in a decade.

Why one has an unemployment rate of less than 5 percent and the other more than 10 percent.

Why one is a magnet for ambitious talent from all over the world and the other is slowly losing its best and brightest.

And the gap -- in terms of perception, in terms of economic performance -- is only going to get worse.

The decision by President Jacques Chirac to cave in to the demands of street protesters will set back market reform for a decade, not just in France, but in Europe generally.

Never mind that the law that sparked it -- a new labor contract that would have allowed companies to fire young workers during their first two years on the job -- failed to address the larger question of how any company can be expected to compete in a global economy while offering lifetime job security to its workers.

That Chirac and Prime Minister Dominique de Villepin drew a public line in the sand over such a modest reform and then failed to muster any serious support from business leaders, the media and the professional middle class will only embolden those who cling to the fantasy that the old socialist model can survive.

Not surprisingly, union and student leaders have already declared that they aren't done yet with rolling back earlier reforms that allow for temporary jobs and give small businesses more freedom to hire and fire.

And, as if to punctuate the full measure of their retreat from the cause of market-based reform, the alternative program for reducing youth unemployment involves yet another round of government subsidies supported by another tax increase. Can a fresh crop of new lifetime government jobs be far behind?

The news from Italy isn't much better. The virtual tie in the political rematch between Silvio Berlusconi and Romano Prodi will ensure that the government remains powerless to reverse the decades-long slide in the most dysfunctional economy of "old" Europe.

Although Germany's new chancellor, Angela Merkel, is enjoying a political honeymoon, it is largely because the deal she struck with her coalition partners precludes further steps toward liberalizing the country's labor markets and reducing its sky-high tax burden. In fact, taxes are headed up.

And in Brussels, Eurocrats are still trying to figure out how to rescue their big, new initiative to allow cross-border competition in service industries that have remained stubbornly localized and inefficient. A watered-down version, grudgingly approved at a European Union summit last month, excludes banking, telecommunications, health, audiovisual services, legal services, gambling, private security, temporary employment and utilities such as water, gas and electricity. More significantly, each country will be allowed to maintain its own rules for any firms operating within its borders -- a concession that will surely undermine the efficiencies that might come from cross-border integration while allowing countries to insulate any of their service industries from cross-border competition.

With all due respect to Tom Friedman, it is becoming clear now that the world is still a lot less "flat" than he imagines. Even Americans must acknowledge, from our own divisions here over immigration and trade, that there is nothing inevitable about the next increment of globalization or irreversible about the globalization that has already occurred, even in a "wired" world.

It is easy (and fun!) to blame recent stalemates and reversals on the pig-headedness of the French, the grandstanding of Lou Dobbs or the failure of politicians to adequately explain the benefits of a borderless economy. But just as important has been the utter failure of global elites to come up with effective mechanisms to redistribute the economic benefits of globalization from the winners to the losers. The political reality is that simply leaving it all up to the markets is no longer an option. It's time for a Plan B.