Perhaps there is such a thing as an island unto itself. It's called France.
Instead of acknowledging that protectionism doesn't work in a globalized economy, French students, unions and even business executives succeeded in pressuring French President Jacques Chirac to abandon a youth labor law intended to make hiring more flexible. As Jean-Claude Mailly, leader of the leftist union Force Ouvriere, described the fate of the labor law, "Dead and buried."
Labor unions and French youths may view these events as a victory, but in a global economy, labor and social protections cannot be sustained long-term. The global marketplace demands businesses that are nimble and cost-efficient. The French labor model does not conform to marketplace needs.
Chirac had sought a law that would have allowed employers to fire workers younger than 26 at any time during a two-year trial period without stating a reason. From an American perspective, the notion of guaranteed employment is laughable. Most American workers are accustomed to relatively brief probationary periods during which they demonstrate their ability to contribute or they are shown the door. A capitalist society demands competition, not only between companies but among workers in companies. Build a better mousetrap and your business will thrive. Fail to evolve and compete and you're doomed.
Now the playing field is the globe. American companies have outsourced jobs to countries such as India and Pakistan, where the workers are well educated and will work for less than American workers. If France wants to compete with the likes of China and India, it has to change.
Perhaps Chirac, fearing no end to two months of strikes and violent protests, backed off the economic reforms to address the short-term problems of pickets shutting down universities and potentially harming tourism.
But in the long-term, Chirac's instincts to liberalize France's rigid labor market were correct. Unless France becomes a world player in trade, it will suffer in a global economy that rewards free traders. Couple that with its declining native population and tensions with a growing number of Muslims, and France will face unprecedented economic and social issues in the coming years. Not only will its inaction hobble French businesses, it will scare off foreign firms from locating there.
The French may celebrate this "victory" today, but it is, in reality, another step backward for an already foundering nation.