When
the first demonstrations on the streets of Paris were reported seven weeks ago,
nobody could have foreseen the endurance, the tenacity and the viral effect of
the Yellow Vests movement. After all, the French are known to protest and to
strike, it’s part and parcel of their culture. However, by the time this
article is being written, protests, marches and demonstrations have broken out
in a multitude of European cities.
Why was it different this time?
To
begin with, it is worth taking a closer look at the situation in France, the
point of origin of this “contagion”. There are a few very important elements
that set the Yellow Vests apart from past protesters. For one thing, unlike
previous demonstrations, this one wasn’t led by the unions, nor was it
organized by any identifiable political body. The protesters had no unified or
homogenous political beliefs, party affiliations or ideological motivations. In
fact, through interviews and public statements of individuals taking part in
the demonstrations, it would appear that any organized elements, or members of
the far-left or the far-right were a slim minority among the protesters. And
while those few were the ones largely involved in the violent clashes with the
police and the destruction of private and public property, the crushing
majority of the Yellow Vests were peaceful, non-violent and largely
unaffiliated with any particular political direction.
As the movement grew and
spread, many political figures have tried to co-opt it, without success. Front
National’s Le Pen, hardline leftist Melenchon, far-left factions and various
union leaders, all tried to place their flag on the Yellow Vests, claiming that
they align with and can represent their grievances. They all failed. The Yellow
Vests might contain individuals with all kinds of political inclinations, but
as a whole, the movement remains apolitical, and if anything, suspicious and
hostile to the political class in its entirety.
The common denominator
The
evolution of the grievances themselves is also of particular interest. What
started as a protest against a new fuel tax, gathered momentum and ended up
being about the economy, the cost of living and the public resentment toward
the establishment. These underlying problems that the Vests are protesting
against are far from unique to France.
Even
though Yellow-Vest-inspired protests were reported in many European countries,
the most extensive demonstrations took place in Belgium, Hungary, the
Netherlands and Spain. The causes and aims of most of these protests were not
aligned with their French counterparts, as the citizens of different countries
had different grievances. For example, in Belgium the focus was on immigration
and in Spain on the Catalan independence. With the notable exception of the
Hungarian protests, that we will look into later, the rest of the
demonstrators’ complaints did have one thing in common: No matter what headline
issue their complaints were wrapped in, the core problems were largely of an
economic nature, while they also targeted the political class that is widely
seen as being out of touch with reality.
The
corrosion of purchasing power, the ever-increasing taxation levels, the
restriction of business and free markets through regulations and manipulations,
are issues most of us face in the West. Add to that mix the surge in
immigration of the past years and the projected nonchalance of the political
leaders, and it’s plain to see how discontent came to its current boiling point.
During the demonstrations, the French chanted “Couper la tête du roi!” (cut off
the king’s head!) and the sentiment appears to be shared by their protesters
across Europe. Only in France, over 4,500 people have so far been arrested in
connection with the Yellow Vest movement, in an environment highly corrosive to
“Liberté” and “Égalité” and toxic to “Fraternité”. The combination of these
issues manifests in a decrease in the quality of life of all citizens, however,
it is the working and the lower-middle class that feel it the most. And it is
these citizens that have been taking their grievances to the streets over the
last two months.
What
is especially problematic at this stage is the way the establishment is
choosing to resolve those complaints and to deescalate the demonstrations.
President Macron, the first one to capitulate to the demands of the Yellow
Vests, chose to scrap the fuel tax hike and to provide an increase of the
minimum wage, as well as a tax cut for most pensioners. These measures are set
to place the county’s already strained budget under severe additional pressure.
As a result, the short-term financial relief that the protesters have won is
bound to be massively overshadowed by the long-term effects of their
government’s excessive spending. The way President Macron, and the other
leaders who will likely soon follow chose to appease the protesters and his
concessions just to stay in power will only serve to make the economic
situation much more dire for the public and make the problems they protested
about much worse.
What lies ahead
Overall,
the sharp dissatisfaction of the public with the way things are, esp. in
Europe, is becoming increasingly apparent and hard to ignore. Nevertheless,
short-sighted demands and corresponding capitulations do next to nothing to
solve the real, underlying issues that forced the people to the streets in the
first place. The refusal of the French Yellow Vests to stop their protests even
after President Macron’s concessions proves that their concerns run much deeper
and cannot be papered over that easily. So far, the Yellow Vest movement has
shown great promise in its potential to bring about change, yet at the same
time it has also shown troubling signs of a collectivist and statist
inclination, that, much like the original French revolutionaries, might simply
replace one centralized and illiberal system with another, updated version of
the same idea.
This is highlighted by the
exception of Hungarian protests, fueled by complaints that were of a very
different nature than those in the rest of Europe. While the French, the Dutch,
the Belgians, the Spanish and the rest of the protesters stood up against state
overreach and the added pressures on personal and financial freedom, such as
excessive taxation, unpopular immigration policies, denial of
self-determination and similar issues, the Hungarians complained about the
exact opposite. Opposing a wave of reforms misleadingly dubbed “slave labor”
laws, the Hungarians actually protested a move by the government to throw out
Soviet-era regulations and to liberalize and open up the labor market. By
striking down laws that hitherto limited the amount of overtime that a worker
has the right to accept, the reforms actually pave the road for a much
healthier, competitive and robust labor force, where the state gets out of the
way and each individual is free to work and earn more, if they so choose. The
opposition and the resulting protests against this move are therefore a very
worrying sign as to the true nature of the protesters’ motivations, a concern
that might not be unique to Hungary.
In
this backdrop of social unrest and contagion of demonstrations, it is important
to remember that protests alone cannot be enough to solve anything. Without a
viable solution, reasonable counter-proposals to the existing system and an
open dialog on the core problems, one cannot hope for progress to be made. It
still remains to be seen if the Yellow Vest movement will prove to be yet
another political pressure group that still believes in centralized authority
or if they see that the solution lies in the competition of ideas and in the
understanding that “man is not a means to an end, but an end in themselves.”
As
2019 is set to pile additional pressures and challenges on the economy, with
projected slowdowns and rising interest rates, the discontent will only spread.
How this discontent will be vented and whether it will be productively or
destructively channeled, will likely be defining questions for the long-term,
not only socially and politically, but also economically. Nevertheless, for
short- and mid-term, hopes for serious structural reforms, potent enough to
steer us clear of the next debt-fueled crisis seem overoptimistic and even
naive.
From
an investor’s point of view, it might still too early to tell exactly when this
avalanche will be triggered, however it is becoming increasingly clear that the
current situation is unsustainable. As political and social tensions continue
to rise and as the economy slows down enough to reveal the deep cracks in the
system, responsible investors would be wise to be prepared and to plan ahead.
In tumultuous times, precious metals are set to do what they always have: protect
one’s wealth, retain purchasing power and provide a much-needed hedge and
isolation from heightened systemic risks.
Reprinted with permission
from ClaudioGrass.ch.
Claudio
Grass is an independent precious metals advisory based out in Switzerland.
Copyright © 2019 Claudio Grass
https://www.lewrockwell.com/2019/01/claudio-grass/yellow-vests-shockwaves-felt-across-the-continent/
