France’s “less-ez faire” might be the solution to soaring living costs

French Government Urges Insurers to Assist in Cost-of-Living-Crisis

Centuries after laissez-faire philosophy changed capitalist society forever, France’s Ministry of Economy and Finance Bruno Le Maire is keen to change it. Far from saying it has come to an end, it has simply become the latest attempt to help contain the ever-increasing living costs that is impacting Western economies, as a result of higher energy prices sparked by Russia’s invasion of Ukraine. 

Coined in 1681, the French term likely originated in a meeting between French Controller-General of Finances, Jean-Baptiste Colbert and a group of local businessman, headed by M. Le Gendre. When the mercantilist minister asked how the French state could better promote their commerce, Le Gendre simply said: “Laissez-nous faire” (or “Leave it to us”, in English). 

Bruno Le Maire, the current Economy and Finance Minister, thinks differently. Well, at least at the present time. Poised to fairly distribute the burden of inflation, according to his own words, the Minister of Economy indicated that he was going to ask insurers and even banks to “make a serious effort” to support consumers. In front of a big audience, he called on these companies to help households in the face of soaring prices. 

“I call on all companies that have necessary leeway to reduce the inflation bill for our compatriots”, he said. 

The Minister went on to underline that certain companies had already made efforts, namely Total Energies, CMA CGM or distributors. However, he assured that he was going to send the exact same message to insurers and, finally, banks. 

“I will receive the insurers soon and will ask them to make an effort on the insurance premiums of our compatriots. I will (also) receive the banks and ask them again to make an effort on bank charges”, he said. “Companies that can must also raise wages – and many are already doing so”. 

By doing so, the Minister aims to widen services, such as the sector-run coverage mediation service. And while it is understood the request to the insurance sector is voluntary, insiders have shared that Le Maire has left the threat of a windfall tax on the table. The move resembles a scheme introduced by the same Le Maire during the coronavirus outbreak, which saw French insurers pledge to keep premiums steady for a 12-month period, part of a trio of measures designed to support struggling policyholders. 

At the time, the pandemic support measurers saw insurers agree to not increase the prices of their commercial multi-risk insurance contracts in 2021, also offering free coverage for executives and employees in the leisure sector. The move was followed by several days of talks between policymakers, insurance executives and trade bodies, in which the sector was threatened with an additional €1.2 billion ($1.45 billion) tax in case they failed to keep premiums steady. 

Despite inflation, to which is added the ongoing energy crisis in Europe, Bruno Le Maire shared his optimism about the economic situation in France: “Our economy is resisting. The figures are solid and I approach this return to school with determination and confidence”, he confided, confirming the growth forecast of 2.5% for 2022. “The best rate of growth of all euro area countries”. 

All this comes after French President Emmanuel Macron said last week that there were “tough months ahead”, while his government warned that French industry would be required to step in and tackle the devastating impact of energy price rises – which have also threatened Europe. 

In face of the present circumstances, even mercantilists such as the legendary Le Gendre would agree that the economy does need to be assisted. Although this clearly hurts the principle of the economic freedom, which has survived many crises throughout history, one may also argue that the risk of not doing so has never been so big. After all, if the pandemic taught us anything, it is that the world is even more inter-connected than we first believed. 



Post Date: 12/09/2022

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