France may be the birthplace of Cartesian logic; however, these rationalist roots are nowhere to be seen in President Hollande's proposed economic and tax policies. I have written before in this blog to criticize then candidate Hollande's plan to reduce the retirement age in France from 62 to 60, enforce the 35 hour cap on working hours, and raise the top tax rate to 75% (actually far higher when social charges are included). These are not only fiscally reckless for a nation with a stagnant economy, a huge public debt and generous social benefits promised to an aging population, but they reinforce a view, already all too prevalent in France, that work is some horrible affliction designed by evil plutocrats to interfere with "real life," and which should be restricted to the smallest corner of that life as possible.
I did not expect Francois Hollande, once at home in the Elysee Palace, to suddenly succumb to free market fever, but I did expect him to be consistently socialist. A candidate who declares that he hates "rich people" should stick to his guns. Thus, it came as quite a surprise when I learned this summer that Hollande was proposing to create an exception to the confiscatory 75% tax bracket for professional athletes and creative talents. Now those who know me well can attest to my love of Euro Cup calibre football and French art and film, but I cannot see why Zlatan Ibrahimovic deserves millions at PSG but a self-made man like Maurice Levy who built the advertising agency Publicis into a global power does not.
I do, of course, see the awkward policy position President Hollande backed himself into because it would certainly be embarrassing if French club teams consistently lost against international competition when the talent (including French players) chose to sell their skills elsewhere. But what if it didn't matter? What if the Messis, van Persies and Ballotellis are no more talented than the sub-one million Euro players? Why not tax all workers who earn more than one million Euros at the top rate? This at least would be a consistent policy and would be an interesting experiment to run, with the downside limited to disappointed football fans. If this is not an appealing prospect, then why run the same experiment in the business world when the risk is fielding a second-string team to help grow the economy?
The answer can only be that French society believes that talent matters in sports and the arts (and I agree), but that it does not matter or at least not that much when it comes to running companies and other institutions. Putting aside my reservations about who is competent to deicide which occupations require talent and which do not (what about brain surgeons?), as an investor I do not want to put my money into a company that is at a significant government-imposed disadvantage when hiring and retaining talented staff.
So what I learned on my summer holiday in France is that the country remains a great place to take a vacation.