Research editorial: To govern is to choose

When Pierre Mendès France spoke these words before the French National Assembly in 1953, he surely had a notion of the import of what he was saying, well beyond the borders of France.

By Ludovic Subran, Economic Studies Group Chief Economist

After the crisis of 2008-2009, and the recovery begun in 2010, the Arab Spring, the earthquake in Japan, and the European sovereign debt crisis were the big events in the world economy in 2011. The Arab Spring showed us how the young, the voiceless, the outraged and often unemployed are demanding to be taken into account in the economic choices made in their countries. The Fukushima catastrophe, for its part, demonstrated the considerable economic consequences of new risks, such as natural catastrophes, in world that has become super dependent.
Lastly, there is the sovereign debt crisis: the vanishing AAA ratings, and the financial markets seeming to dictate the composition of governments and their austerity policies – reminding us just how much formulating economic policy is a long-term undertaking, and a question of taking responsibility for your choices.
So the year 2011 has ended on a sour note. The slowdown in emerging economies is confirmed, the risk of another credit crunch is palpable in countries that are ‘underwater’ – due to their public deficits and sovereign debt – and, lastly, the lack of visibility and lack of solutions for a strong European economic union continues to frighten the markets, businesses and households.
​The start of 2012 will be just as difficult. Indeed, all eyes will be focused on European sovereign debt and how it is managed and absorbed by the market. The implementation of the rescue mechanisms, still hesitantly under design, will be critical. How long will this thick fog hang over Europe? Only until spring, we hope. However, the consequences of the
indecision manifest in 2011 are already being felt, notably in the gloomy growth outlook and in business insolvencies in the first part of the year. This fog should lift, giving way to a difficult but bearable convalescence in the second half of the year.
"To govern is to choose, however difficult the choices" were the exact words spoken by Mendès France. Austerity cures, recovery plans focusing on productive and competitive sectors, systemic reforms (in banking, in social security) are all necessary but complex trade-offs. The key is to choose, and to chose what is key.