Employees at all levels are worried about the cost of food; low-paid workers and the old are reduced to sifting through supermarket rejects: the problem of purchasing power is destroying the credibility of governments everywhere. In France, Italy and Britain, the parties in power have been soundly defeated in local elections. In the United States, the Republican Party has lost three of its traditional strongholds since March, in elections for seats in Congress. It had held one for 33 years, another for 22 years, while the outgoing candidate in the third polled 66% of the vote in the previous election.

 

Life is getting harder for most people. In Italy and Spain, they blame the euro. But the cost of food in Britain is 15% higher than a year ago. In the US, the price of eggs has risen by 30% in the past year, milk and tomatoes by 15%, rice, pasta and bread by 12%. Rising accommodation costs and energy bills make matters worse.

 

Renewed growth, if and when it happens, will not solve the problem. Former US treasury secretary, Lawrence Summers, recently reversed the famous 1953 dictum, "what’s good for General Motors is good for the country", admitting that there was "a growing recognition by workers that what was good for the global economy and its business champions was not necessarily good for them". The reason for this volte-face? "A decoupling of the interests of business and nations may be inevitable" (1).

 

Inevitable, but not unexpected. Stagnation or a decline in purchasing power was the natural result of political choices taken after a war on workers, in the good cause of increasing competitiveness and reducing the cost of labour. Economist Alain Cotta recalls that, with the end of index-linked wages in France in 1982, "the Socialists did private enterprise the biggest favour it had ever had from the public authorities". Jacques Delors, minister of finance at the time, was delighted: "We have got rid of index-linking without a strike" (2). Has Europe learned a lesson? German workers went on strike in March, British teachers in April, Greek lorry-drivers and French fishermen in May.

 

For those who can’t or won’t see that the source of the current problems over living standards (3) is a decline in earned income as a proportion of national wealth, there are plenty of alternative solutions available. More supermarkets, as Sarkozy suggests, to "increase competition between distributors". More "sacrifices", so that increases in the price of food and energy will be absorbed by wage-earners. This would help the European Central Bank to achieve its great objective (2% inflation) and improve the purchasing power of its wealthy customers.

 

As for the rest, they can make a little go a long way and "eat well without spending too much", like the miser in Molière’s play. That is what Robert Rochefort, director of the centre for research on living conditions (Crédoc), suggests: "Consumers must learn to optimise their budgets. They are already quite good at doing this. But they must learn not to complain, to accept the fact that purchasing power is gradually becoming a more qualitative concept, a power to decide between different items of expenditure, a power to choose one’s purchases" (4). A sociologist agrees: "There is a range of tariffs for telephone calls. This also applies to rent: one can always find somewhere cheaper to live" (5).

 

Work longer, live less well. It is clear where we are going, unless we follow a 40-year-old precedent and decide to call a halt.   

 

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(1) Lawrence Summers, "A strategy to promote healthy globalisation", Financial Times, London, 5 May 2008.

 

(2) See Jean Lacouture and Patrick Rotman, Mitterrand, le roman du pouvoir, Seuil, Paris, 2000.

 

(3) When the 2000-2007 period of growth came to an end, the income of 50% of US families was less than it had been seven years before, a situation without precedent.

 

(4) Challenges, Paris, 6 December 2007.

 

(5) Gérard Mermet, Les Echos, Paris, 21 April 2008.

 

 

 

Translated by Barbara Wilson 

 

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