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The Osborne audit: what have we learned?

Ahead of this week’s budget, the economic historian Robert Skidelsky examines how four years of austerity have affected Britain.

George Osborne by Ralph Steadman

On Wednesday, for the first time in four Budgets, George Osborne will be able to claim plausibly that Britain has come out of the Great Recession. Growth was 1.8 per cent in 2013 and is expected to be between 2.4 and 2.8 per cent in 2014. That’s the good news. The bad news is that the economy is still 1.4 per cent smaller than it was in 2008 and 14 per cent smaller than it would have been had the recession not struck.

That lost output, amounting to £210bn, is gone for ever. Every household is almost £2,000 poorer on average than it would have been; the government’s revenue is £70bn less – that is (say) 70 hospitals, 1,000 schools and 250,000 housing units not built. Or, to take another number: 650,000 people now unemployed would have been in employment.

This is not all. Every year of the recession has reduced our growth potential. Economists use the word “hysteresis” to describe the rusting away of economic resources through misuse or underuse. Hysteresis has to do not just with the output lost during the slump but with the potential output lost in the subsequent period of near-zero growth. Headline unemployment is an incomplete measure of such rusting, because it also occurs when people work less than they want to, or are in jobs below their skill level, or just leave the workforce. A physics graduate may be able to find employment as a taxi driver or waiter. But how much physics “potential” will he retain after years of doing such jobs?

These are heavy costs. Just as George Osborne did not cause the recession, he has not caused the recovery. Intertwined economies usually fall and rise together, and Britain has been lifted off the rocks by the global upturn. Yet policy does make a difference – to the speed of recovery, its strength and its durability. On all three counts, the Chancellor’s policy is open to severe criticism.

Fiscal austerity slowed and weakened the recovery; monetary looseness ensured that it would be highly unbalanced and therefore fragile. Significantly, the official independent watchdog, the Office for Budgetary Responsibility (OBR), in its December 2013 Economic and Fiscal Outlook, judged the “surprising” growth surge of the past year to be “cyclical . . . rather than indicating stronger underlying growth potential”. That the bank rate needs to be kept near zero shows that the economy is still on life support. 

Missed budget targets

Let’s start with the targets Osborne set himself in his first Budget of June 2010. He inherited a prospective deficit for 2010-2011 of £149bn, equivalent to 10.1 per cent of GDP. He promised to get this down to £20bn, or 1.1 per cent of GDP, in 2015-2016, mainly through spending cuts. By 2013-2014 the deficit should have been £60bn. In fact, it is projected to be £111bn, or 6.8 per cent of GDP this year. Now the Chancellor must cut spending by another £62bn over the next four years to meet his original target, two years later than promised.

There were no growth targets – those were abandoned years ago – but there were growth forecasts. Fulfilment of Osborne’s budgetary targets depended on the economy growing at 2.3 per cent in 2011, 2.8 per cent in 2012 and 2.9 per cent in 2013. In fact, the growth rates achieved were 0.9 per cent in 2011, 0.1 per cent in 2012 and 1.8 per cent in 2013. In other words, Osborne’s failure to meet his deficit targets was caused by the failure of the economy to grow to expectation.

The official explanation for this failure is “bad luck”. In familiar language, policy was “blown off course” by unexpected events. Chief of these was said to be the eurozone sovereign debt crisis, which started with fears of a Greek default in March 2010 and then spread, by contagion, to Ireland, Spain, Portugal and Italy. For the next three years the eurozone slumped almost as badly as Britain. The eurozone slump, it is argued, stymied the British recovery.

There are two things wrong with this. First, with its own currency and control of its exchange rate, Britain should have done better, not worse, than the members of the eurozone. Second, although the eurozone financial crisis undermined confidence, and hit British exports, the European slump arose in part because European finance ministers were pursuing exactly the same policy as was George Osborne. So it makes more sense to say that the coincident slumps of the eurozone and Britain between 2010 and 2013 were the effects of a single cause: the policy of cutting public spending. The “unexpected” element in the situation was the failure of so-called fiscal consolidation to deliver growth.

Why should anyone expect a policy of cutting public spending in a recession to produce growth? It is counterintuitive. A recession is caused by businesses and households spending less. If the government also spends less, one would expect this to worsen, not reverse, the recession. This, I think, is exactly what happened.

Making the case: George Osborne on his first Budget Day, 2010

Primitive economics

Over the past four years, I kept asking myself: what did Osborne have to believe to convince himself that cutting government spending was necessary to “get the economy moving again”? His core belief, I concluded, is ideological. This is that state spending is heavily wasteful. From this, it follows that the smaller the share of GDP spent by the state, the larger GDP will be, because the private sector allocates resources more efficiently. It’s as simple as that.

This ideological fundament generates three seemingly common-sense, short-run propositions, which I call “primitive economics”. The first, known by the cognoscenti as “real crowding-out”, states that if the government commandeers an extra quantum of “real” resources such as workers and factories this will deprive the private sector of their use.

Second, there is the idea of “financial crowding-out”. If the government borrows additional financial resources (money) to fund its spending, this will force up interest rates and oblige businesses to pay more for their money.

Finally, there is “Ricardian equivalence”. This says that government borrowing is just deferred taxation. Expecting to pay more taxes tomorrow, people increase their savings today. So increased government consumption “crowds out” an equivalent volume of private consumption.

Eighty years ago, John Maynard Keynes pointed out that this trade-off view of the relationship between public and private spending may be valid at full employment, but is quite wrong in a severe recession.

In such a situation, extra government spending does not necessarily “crowd out” real resources. Where there is slack in the economy – the labour supply exceeding labour demand as today – extra government spending can bring into use the idle resources by creating more employment. There is no displacement; the public spending is not done at the expense of private spending. Rather, the public spending compensates for a lack of private spending.

Second, it is not true that whatever the government borrows is a subtraction from a fixed pool of savings that would otherwise be invested by the private sector. Many savings are just lying idle in bank accounts, because the private sector lacks the confidence to invest them. By offering investors a risk-free rate of return, the government can put these savings to active use. And by generating employment, this “crowds in” additional savings.

Finally, “Ricardian equivalence” ignores how government spending can pay for itself, not just by increasing national income (and therefore government revenue) but by investing in projects that create value for the economy, such as schools, houses, transport infrastructure, green energy, and so on.

Probably few policymakers today believe these “crowding-out” stories literally. I doubt whether even George Osborne does. But they believe that governments need to behave as though they believe these ideas in order to retain the “confidence” of the markets.

So, the question is: why do the markets believe them? Why do they scream “Default” whenever government borrowing goes up? Why did Osborne feel that unless he got the deficit under firm control, he would be spooked by the markets?

The reason is that, for the past 30 years, all economically literate or market-savvy persons (who do not generally include politicians) have been slaves to “models” of the economy which ruled out severe recessions by assumption. Even social democrats, who wanted to use the tax system to redistribute the wealth created by the private sector, bought in to the dominant view that, on average, markets do not make mistakes. This was the tragedy of Gordon Brown; it is also why Labour under Ed Miliband has been unable to deploy a convincing case against Osbornite economics.

Consequently, it is not surprising that governments and central banks failed to take precautions against a slump happening; more surprising that they did not thoroughly revise their beliefs when it did happen. To some extent, they did. When the world economy crashed in the winter of 2008 all the main governments came in with bank bailouts and stimulus packages. But as soon as the danger of another Great Depression was removed, the old orthodoxies reasserted themselves. In particular, as it was bound to do, the slump left a legacy of rising deficits and taxpayer liabilities. In this kind of climate, fears about the solvency of governments seemed reasonable.

And mainstream economics offered no help at all. What was going on, the economists said, was just a readjustment of economic life from one optimum equilibrium to another. Thus there was no “output gap” that needed to be filled by extra government spending. Rather, what needed to be done was to cut down state spending in order to make the existing output more productive. The Chancellor is no economist: but this presentation played to his ideological preconceptions. In a world-view of this type, there is no distinction between the short run and the long run. We always live in the long run, and if we leave the long run to the markets, all will be for the best. 

Delusions

A world in which beliefs and facts have come so far apart will be particularly prone to delusionary thinking. The delusion was that policies that made the recession worse would produce recovery. This delusion was abetted by reputable economists. Three years ago, the doctrine of “expansionary fiscal contraction” was all the rage and a huge research effort went into trying to prove its core proposition: that the less the government spends, the faster the economy will grow. The econometricians produced some striking correlations. One claim was that “an increase in government size by 10 percentage points is associated with a 0.5 to 1 per cent lower annual growth”. In April 2010, Alberto Alesina of Harvard University assured European finance ministers that “many even sharp reductions of budget deficits have been accompanied and immediately followed by sustained growth rather than recessions even in the very short run”.

An International Monetary Fund paper in 2012 brought Alesina’s hour of glory to an end. Going through the same data as he had examined, the IMF authors pointed out: “While it is plausible to conjecture that confidence effects have been at play in our sample of consolidations, during downturns they do not seem to have ever been strong enough to make the consolidations expansionary at least in the short run.” Fiscal contraction is contractionary, full stop.

George Osborne has said publicly that he was influenced by Carmen Reinhart and Kenneth Rogoff. These two Harvard economists claimed that their data showed that countries’ growth slows sharply if their debt-to-GDP ratio exceeds 90 per cent. It turned out that their findings were skewed by the vast overweighting of one country in their sample. But a much more important error was their confusion between correlation and causation, also seen in the work of Alesina. High debt levels may cause lack of growth but a lack of growth may cause high debt levels; or both may be due to some other factor(s). How, one asks, can good statisticians make these kinds of mistakes? Only, I think, because their theory or model already tells them that this is the way the causation has to run, so that their only task is to establish a correlation.

Quantitative easing to the rescue?

With the failure of fiscal “consolidation” to revive the economy, the Chancellor increasingly turned to monetary policy. This fitted his ideology. Orthodox monetary policy works by the central bank targeting short-term market interest rates, providing banks with the reserves needed to keep the rates on target and, by varying the rates (or expectations of future rates), influencing the volume of private-sector lending and borrowing. It bypasses fiscal policy, which is why it is attractive to those who dislike state intervention. Since 2008, monetary policy has been ultra-loose or “unorthodox”. Not only has the bank rate been kept at 0.5 per cent for a record length of time, but the Bank of England has injected £375bn of “new money” into the economy, £225bn of it before Osborne became Chancellor. This is known as “quantitative easing” (QE).

How big a part has QE played in producing a recovery? The quick answer is that no one knows for sure. Unlike government spending, which has a direct effect on the economy, monetary policy works indirectly by inducing private households and businesses to change their behaviour – to save more or spend more. QE is supposed to work through two “transmission channels”: the bank lending channel and the portfolio rebalancing channel.

The central bank activates both channels by buying government bonds (gilts), mainly from non-banks. The sellers of the bonds receive cash; they deposit their extra cash with the commercial banks. In the first transmission channel, this is supposed to increase bank lending. The banks have more cash to lend out, causing them to lower their interest rates. As a result, more money is borrowed by businesses and households; the spending of the loans raises total spending, and therefore output, in the economy.

Early experience of QE showed that this was not happening: the banks were hoarding their cash, not lending it out. The architects of QE had underestimated the damage that banks had suffered as a result of the collapse of their assets in the crash, and therefore their desire to rebuild their reserves. What Osborne then did was to start subsidising bank lending. The Funding for Lending scheme, introduced in July 2012, was supposed to stimulate bank loans to businesses. It failed to do this – business lending is still well down from its pre-crash levels.

Desperate to get something in the economy going up, the Chancellor switched to Help to Buy in April and October 2013, which insured banks for a 15 per cent loss on 95 per cent mortgages. This has certainly contributed to the recent surge in house-buying and the rise in house prices.

It should be noticed, however, that both attempts to boost bank lending are fiscal policy by the back door, as the contingent subsidies are liabilities for the taxpayer.

Because of the disappointing results of bank lending, the Bank of England came to rely more on the second transmission channel, portfolio rebalancing, to stimulate the economy. Bond purchases by the Bank swell the cash deposits of the sellers, encouraging them to spend. Simultaneously, they reduce the supply of gilts in the market, which causes the price of gilts to rise and their yields to fall. The “search for yield” then induces investors to switch from gilts to stock-market securities and other assets, making it easier for businesses to raise capital. The increase in the price of these assets also expands the net wealth of the asset-holders, causing them to spend more. These various effects will result in growing GDP. Certainly the rise in stock-market and house prices has contributed to a “feel-good” factor, which is bolstering the current optimism about future prospects.

Set against these benefits are two costs. By encouraging excessive risk-taking, QE may reignite the pre-crash asset bubble, against which the new governor of the Bank of England, Mark Carney, has warned. The second is the increase in inequality. Of this, John Kay wrote in the Financial Times: “In the modern financial economy, the main effect of QE is to boost asset prices . . . the one certain outcome of QE is that those with assets benefit relative to those without . . . these policies may not benefit the non-financial economy much, but they are helpful to the financial services sector and those who work in it.”

The trouble with unorthodox monetary policy was that it is not unorthodox enough. Rather than try to increase private-sector cash balances, the Bank should have lent the money directly to the government to spend on public investment. We can be sure the government would not have hoarded the cash! But this operation would have blurred the line between monetary and fiscal policy, and thus the sacred ideological divide between the private and public sectors.

To put the matter crudely: a recovery based on stuffing the mouths of bankers with gold will be weaker and less durable than a recovery based on an upsurge of mass spending power. 

Conclusions

Wealth and income have been growing more unequal in Britain since the 1980s. George Osborne has not created the inequality; but he has exacerbated it by dragging out the slump and using lopsided means to bring about the recovery. Britain may well emerge from the recession with a problem of structural underconsumption. Investment is driven by consumption, so when consumption falls off, so does investment. A tendency to domestic underconsumption – unless offset by a buoyant demand for exports – will result in what economists such as Larry Summers have started to call “secular stagnation”. The chief symptom of this will be rising structural underemployment: a slackening of demand for labour which does not reverse itself with recovery.

This brings us back to the ideological fundament. It is the Chancellor’s firm belief that the government’s share of total spending should be reduced as much as possible. Spending financed by deficits is twice cursed, not just because government spending is wasteful, but because it enables governments to pass on the cost of waste to future generations. Hence Osborne’s pledge to eliminate the Budget deficit entirely. This is tantamount to saying that the government expects to pay out of taxes for all the schools, hospitals, housing and transport systems that it builds. Because all Conservative governments want to reduce taxes as well, this amounts to a vast programme to privatise virtually all public services.

At this point, the ideology destroys sane economics. A sensible view of public spending would distinguish between capital spending and current spending. It would enable one to say that deficits resulting from excessive current spending are bad because they do not generate any revenue and add to the national debt, but deficits that are incurred on capital spending can raise productivity, improving the country’s long-run potential. A sensible Osborne policy would have been to confine cuts to the current account and offset these fully by expanding public investment in green projects, transport infrastructure and social housing, as well as export-oriented small and medium-sized businesses (SMEs). The Business Secretary, Vince Cable, has been arguing this case inside the government; lip-service is paid to the principle, but public investment is still 35 per cent down from the pre-crash levels.

What George Osborne has done is to bring an ideological fervour to a defective theory of macroeconomic policy: the theory that additional government spending can, under no circumstances, move the economy to a better-equilibrium growth path. What may be rational to believe when the economy is fully employed is palpably wrong when resources stand idle.

Moreover, it is not Osborne and his friends and bankers and Top People who suffer. It is the ordinary people of this country, whose lives and prospects are wrecked or diminished. Four years of George Osborne have been four years too many.

Robert Skidelsky is a cross-bench peer and a leading biographer of J M Keynes. His most recent book is “Five Years of Economic Crisis” (Centre for Global Studies, £5)

This article first appeared in the 12 March 2014 issue of the New Statesman, 4 years of austerity

Andre Carhillo
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The decline of the Fifth Republic

With the far right and far left surging in the run-up to a defining presidential election, the French seem intent on blowing up the political establishment.

On a cold Saturday evening in late February, cycling back to my flat in southern Paris, I accidentally ran into a pack of lads on a rampage. They were turning over bins, kicking over expensive motorbikes parked on the street, and obviously looking for someone to fight.

It wasn’t the first time that I’d seen this sort of thing, even in this relatively gentrified part of the city. Usually the best course of action is to stop, let them swarm past and allow the police to do their job. But on this particular night, although I could hear the buzz of a police helicopter above us, there were no officers on the ground. As I nervously became aware of this, one of the lads, no more than five yards away, looked at me and screamed: “T’es qui toi?” (“Who the f*** are you?”). His mates turned and gathered round. Now panicking, I saw that he was pointing a screwdriver at me.

I pelted down the street, heart racing as the young men followed me, so shocked that when I reached my apartment building I twice tapped in the wrong entry code. It was only once indoors, now safe but genuinely scared and sweating, that I understood what had happened.

This was a gang from one of the local ­cités – council estates – that border this part of Paris. They had been flushed out of their normal dens, where they deal in weed and mess about, by police using helicopters and unmarked cars, and were now taking their revenge on these unfamiliar surroundings. When they saw me, a tall, white, male figure, watching in the dark on my bike (stupidly the same dark blue as a police bike), they assumed I could only be one thing: a police spotter. In other words, their most hated enemy.

In the past few weeks, in Paris and across France, there has been a new and special danger in being identified by such gangs as a lone policeman. This is because the ever-present tensions between police and the youth of the cités have become particularly acute following the so-called Affaire Théo. On 2 February in Seine-Saint-Denis, north-east of Paris, four police officers violently attacked an innocent black man, identified only as Théo. The assault was caught on camera and allegedly involved the man’s “rape” with a telescopic baton.

The details of the case caused widespread outrage, right up to the highest level of ­government. In the banlieue, the suburbs where many young people feel excluded from mainstream French life, some felt a desire for revenge. And though their anger related to a specific incident, it was in keeping with the emotions sweeping across France, at all levels of society, in the lead-up to the first round of this year’s presidential election on 23 April.

***

France is in a state of political disarray. This much was obvious during the first live “great debate” on 20 March, organised by the television channel TF1, featuring five front-runners for the presidency.

Probably the greatest loser on the night was François Fillon of the centre-right party les Républicains, who served as prime minister from 2007 to 2012. Fillon has gone from being a sure favourite to outsider in the presidential contest, following allegations of dodgy financial dealings. Most damagingly, a formal judicial investigation has been launched into reports that he paid upwards of €800,000 of taxpayers’ money to his wife and other family members for jobs they didn’t actually do. Fillon, who denies any wrongdoing, has also been accused of failing to declare a €50,000 loan from a French businessman in 2013 (which he has since repaid). He held himself in check during the debate, trying to look dignified and presidential, but he has become the object of scorn from all sides, including his own.

Benoît Hamon, the candidate for the Parti Socialiste (PS), the party of the outgoing and discredited president, François Hollande, did not perform much better in the debate. Hamon identifies with the far left and green wings of the PS and favours a basic income, the legalisation of cannabis, and euthanasia. He resigned from Hollande’s government in 2014 claiming that the president had abandoned socialist values. But at every public appearance Hamon still looks surprised to be in the race. Although he has positioned himself as the “anti-Hollande” candidate – no surprise, as Hollande has the lowest polls ratings of any French president – even Hamon’s supporters concede that he has no reach outside the party faithful, and his dismal poll ratings reflect this.

In recent weeks, Jean-Luc Mélenchon, a veteran left-winger and now leader of his own party, France Insoumise (“Unsubmissive France”), has surged in the polls. He has been compared to Jeremy Corbyn but is more like George Galloway, in that he can be trenchant and biting and speaks fluently without notes. Some of his views – anti-EU, anti-Nato, pro-Russia – are close to those of Marine Le Pen, the leader of the far-right Front National (FN). The candidate of the centre or centre-left is Emmanuel Macron, a 39-year-old former investment banker and protégé of Hollande, under whom he served as minister of the economy, industry and digital data. Macron broke with the PS in 2016 to set himself up as an independent candidate with his new movement, En Marche! (“onward”). He presents himself as a voice of moderation and common sense. He defends the EU and the eurozone and is an unashamed liberal globaliser. But Macron is also hard to love: his enemies claim that he is self-serving, an opportunist who cannot be trusted, and, worse, that he lacks experience of high office. On television he can be vain and testy – as was the case when he came under attack from Marine Le Pen, during the TF1 debate.

In many ways, Macron was a gift to Le Pen. She accused him of being out of touch and of not knowing what he was talking about. Even non-FN supporters, who didn’t necessarily agree with her views on security and immigration, conceded that Le Pen was the most convincing speaker. As I was told by a neighbour with an impeccable PS background, it was as if she was the only politician on the night of the debate in charge of what she believed. Le Pen’s popularity increased as a consequence.

So is it now possible to think the unthinkable: that Marine Le Pen could triumph not only in the first round of the presidential election but in the second as well? If that happens, not only would she become the first female president of France but she would transform French politics and further destabilise the European Union.

***

When I put this to Jean-Pierre Legrand, the leader of the Front National in Roubaix, a town of 90,000 inhabitants in the north of France, he shook his head. He wishes Le Pen well but fears that in the second round the mainstream parties will gang up and back whoever her opponent is. “This is what always happens,” he told me. “This is why so-called French democracy is actually a form of dictatorship. You can never really get your hands on power. It belongs to an elite, people like Emmanuel Macron.”

Legrand, 69, has been a supporter of the FN for decades. He smiles a lot and can be witty, but he also likes talking tough, like the hard-headed factory boss he used to be. He admires the way Le Pen has reinvented the party, shedding some of the old-school neo-Nazi trappings. But he is also faithful to, maybe even nostalgic for, the old FN of her father, Jean-Marie Le Pen, who reached the second round of the 2002 presidential election (he lost to the centre-right Jacques Chirac). So I asked him if he was not really a democrat but, like Le Pen père, basically a fascist. “I am not afraid of being called a fascist, or even a Gaullist,” he said. “But all I really believe in is order and authority. And that is what France needs now.”

I had come to Roubaix because it is officially the poorest town in France. It is also, according to most media reports, one of the most troubled. It’s not far from Paris – just over 90 minutes on a fast train – but when you get there it feels like a different, distant place. The train station is scruffy and there is little sense of the usual Gallic civic pride; the stroll down the main boulevard to the Grand Place is drab and quiet, unlike in most French towns.

Roubaix has a large immigrant population, mainly from North Africa but comprising more than 60 nationalities. It has a reputation as a refuge for illegal migrants making for Calais and then the UK, and as a hotbed of Islamist radicalisation. In May last year the conservative news weekly Valeurs actuelles described Roubaix as “le Molenbeek français”. The magazine was referring to the suburb of Brussels where several of the terrorists and sympathisers involved in the November 2015 attacks on Paris, which killed 130 people, including 89 at the Bataclan concert hall, grew up.

Legrand and his FN colleague Astrid Leplat offered to show me around the town, just as they had done with the writer from Valeurs actuelles. The article was criticised by the local newspaper La Voix du Nord as depicting a fantasy version of France conjured up by the FN. I was aware of this argument, but also keen to take up the offer of a tour: it was a rare chance to see an ordinary French town through the eyes of the FN.

I quite liked Roubaix. With its sooty terraced houses, empty textile mills, iron bridges and dirty canals, it reminded me of Salford in the 1970s. The town is neatly laid out even if the streets are scruffy. It is also busy with small businesses – Arabic-language bookshops, kebab houses and tea shops, as well as traditional French cafés and bistros. It looked no more menacing than Bradford or Rusholme in Manchester.

Legrand is proud of Roubaix, or at least of what Roubaix used to be, and has chosen to live here rather than in nearby Lille. Having been a blue-collar worker, too, he admires the noble ambitions and graft of the people who built the town. These were the original indépendants – the aspiring working class, much cherished by the FN, who believe in the values of hard work and public service. But Legrand told me that when he looks at the streets today he sees not the cluttered life of 21st-century, multicultural France but what he called “conquered territory”.

There are problems in Roubaix: 45 per cent of the town’s residents live below the official French poverty line of €977 a month. Describing the local poverty, Legrand used the term “misère”, a word that also translates as “wretchedness”. The unemployment rate is high (40 per cent in parts of town) and on a typical weekday afternoon there are many young men sitting around with nothing to do.

As we drove through some of the tougher areas, Legrand pointed out so-called Salafist mosques, most of them shielded from the streets by the high walls of disused factories. It is these places, unknown and unvisited by outsiders, which have given Roubaix its reputation for radicalism.

It is true that in the recent past Roubaix has produced many extremists. The most notorious is Lionel Dumont, a former soldier who is white and working class, and is viewed as the leader of radical Islam in the French prison system, where he is serving a 25-year sentence for terrorism offences that include trying to set off a car bomb during a G7 meeting in Lille in 1996. Islamists such as Dumont are, in effect, beyond the control of the penal authorities because French laws forbid the monitoring of prisoners on grounds of race or religion. One frustrated director of prisons in the Paris region complained to me that the French penal system was “the real engine room of radicalisation”.

The main reason why Roubaix has produced so many terrorists – including Mehdi Nemmouche, the gunman who fired the shots at the Jewish Museum in Brussels in May 2014 that killed four people – is not immigration, as the Front National would have it, but geography. This part of France is depicted in the media as “a security black hole”, partly because of its proximity to the Belgian border. You can drive into Belgium from Roubaix in ten minutes, as I did with Legrand; the border is just a roundabout and unmonitored. The French and Belgian intelligence services are minutes away from each other but do not share information or collaborate properly. This allowed some of the terrorists who led the 2015 Paris attacks to escape after the killing spree.

***

Crossing the border to Belgium, you notice that the roads are lined with gleaming new warehouses belonging to Amazon and other technology companies. ­Roubaix suddenly seems like a ruin from the early 20th century. It must be difficult for its people not to feel trapped and abandoned – by the French elite to the south and the new economy to the north.

“If you live in Roubaix it is hard to feel connected to the rest of France,” said Hélène Robillard, a junior civil servant. I had come across her in the centre of town. She was leading a group of young women, merrily banging tambourines, blowing whistles and chanting slogans outside one of the
offices of the local council. They were striking against work conditions at the council, but having a laugh, too, in the best Made in Dagenham style.

I asked the women about the film Chez nous (This Is Our Land), which had been released only a few weeks earlier and was playing to packed houses across France. Set in a fictionalised town much like Roubaix, it tells the story of a young woman, Pauline Duhez, a nurse who is seduced into joining the FN and standing for a seat on the council. As she learns the party’s true positions, she becomes disillusioned and angry. The film ends with Pauline returning to the socialist values of her unemployed father, a former steelworker, culminating in a family trip to watch a game featuring the local football team Lens.

The women protesting with Robillard were all determinedly anti-FN. Those who had seen the film were full of enthusiasm. “It is our real life,” said one of them, laughing. “It shows our true values – not fascism, but football, beer and chips.”

Like Pauline in the film, the FN’s Astrid Leplat is a nurse. Jean-Pierre Legrand explained to me that this was why she had been hand-picked by Marine Le Pen to stand
as a regional councillor. The party has adopted a policy of recruiting fonctionnaires (civil servants), especially those who work in the health and support services. This is partly to demonstrate that the FN has left behind its neo-Nazi origins and is now the party of everyday folk, but also to undermine PS dominance of the public services.

When I asked Leplat why she supported the FN, she said that she had witnessed the disastrous effects of repeated budget cuts on hospitals, with overstretched departments and increasingly run-down facilities. “The Front National are there to protect us,” she said.

Leplat told me she hadn’t seen Chez nous and that she probably wouldn’t, because it would upset her. There were also political reasons why she didn’t want to see it: it had been financed with public money from Hauts-de-France, the northern region that covers Roubaix, as well as the television companies France 2 and France 3. When I pointed out that most French cinema relies on public subsidy, she argued that the film’s release had been deliberately timed to undermine the February launch of the FN’s presidential campaign.

“How else can this be explained?” she said. “The Front National is always persecuted by the establishment elites in culture and politics.”

***

Back in Paris, as part of a documentary I was making for BBC Radio 4, I interviewed Émilie Dequenne, the actress who plays Pauline in Chez nous, and the film’s director, Lucas Belvaux. We met at the production company’s office just off the rue du Faubourg Saint-Honoré in the swish heart of Paris – a corner of the city that couldn’t be further removed from the streets of Roubaix. But both Dequenne and Belvaux are intimately connected with the region and the northern working-class life, because they grew up near the Franco-Belgian border and still have family ties there. I asked them whether the FN had a point about the film.

“The film is not ambiguous,” Dequenne said. “It is clearly a warning about being ­seduced by the far right. But it also has lots of [different] ambiguities. The main character, Pauline, is a good person, and not stupid. She wants to help people. She thinks that this is not the case with the main pol­itical parties. So she is attracted by a party that seems to care.”

“I agree it is a warning,” Belvaux said. “We are not yet a fascist country, but I do fear that this could happen.

“There are big social and cultural divisions in France. Not everybody who will vote for the Front National is a bad person, but there are many angry people in this country who feel hurt and damaged. When this is the case, fascism can arrive much more quickly than you think.”

Until now, voting for the FN has been a sign of protest, historically a safety valve for releasing discontent. Whenever the FN has got near to victory, right and left have come together as a bloc to exclude it from power. This is what happened in 2002, of course, when Jean-Marie Le Pen, the then leader of the FN, made it through to the second round of the presidential elections. Jacques Chirac won the run-off with 82 per cent of the vote, despite accusations of corruption. The rallying cry across all non-FN political lines was: “Vote for the crook, not the fascist!” Yet there is no guarantee that this will happen again, because Marine Le Pen has successfully reinvented and rebranded the FN, making it more acceptable to mainstream voters.

Even if Marine loses, there is another danger. If those French parties of the left and right which historically have been strongest continue to implode, there will be a new constituency of voters who in future will be “homeless”. Even if Macron wins – having blurred the lines between right and left – he will disappoint at some stage. When this happens, those who supported him may not find their way back to the established parties, thus opening up an avenue to power for the far right. Sylvain Bourmeau, an associate professor at the École des Hautes Études en Sciences Sociales in Paris, told me that this was part of the Front National’s long-term strategy.

The withering of a historically strong party has already happened in the UK, where voters’ movement to Ukip and the SNP has undermined, if not destroyed, Labour as a national force. Marine Le Pen has already voiced her admiration for Ukip for “breaking the mould”. However, it is important to remember that the FN is not “populist” in the way that Ukip, or indeed Donald Trump, is. Nor are Roubaix and the north of France the same as the “rust belt” of the United States.

Rather, the present conflicts in France are ideological, with roots in the antagonisms and turmoil of French history. The FN’s ultimate goal is to get rid of the present French Republic – the result of the “mistake” of the “liberal revolution” of 1789. In other words, the promise of liberté, égalité, fraternité is to be replaced by an “awakening”, which would lead to a “national movement”: that is, the rebirth of the French nation. The FN is not just about racism, immigration or identity: it wants to send French history into reverse gear.

That is how high the stakes are, and why the coming elections are the most important in France since the Second World War. There is a generalised tension right now – the tension that I encountered on my bike on my own street in southern Paris – which sometimes finds expression in gang violence, anti-police riots and even terrorism, all fuelling the rise of the FN.

For all the polls, signs and omens, it is ­impossible to predict the election result. Whatever happens in the coming weeks and months, with the old political certainties melting away, it seems more than ever that France is set on a long and unstoppable journey into darkness. L

Andrew Hussey is the author of “The French Intifada” (Granta Books). He lives in Paris. His documentary “Culture, Class and Le Pen” will be broadcast on BBC Radio 4 on 24 April (8pm)

This article first appeared in the 20 April 2017 issue of the New Statesman, May's gamble

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