Internet Connection in France and the U.S. and the Need for Regulated Competition.

As a European traveling regularly to the United States, my experience with the internet in north America has been mixed: easy free access with decent speed in some institutions like libraries (the NY or Chicago public libraries for instance) or campuses (UMD, or UW Madison, but not so much UCLA), easy and free in cafés in most big cities (Starbucks has now made it free), and expensive and bad in most hotels (even downtown New York).

Now more tellingly, my experience with the internet connection at most of my friends' homes has been rather disappointing. Their connection is usually rather slow, the wi-fi is not very strong, and then they seem to pay a whole lot more than we do in France. This is surprising for someone like me who grew up looking to America for the cutting edge stuff in everyday life. 

Of course I live in Paris so my experience is slightly biased and does not necessarily reflect what it may like in French rural areas. Besides, I'm always suspicious of personal impressions. They may reflect something but they are clearly not scientific and can be highly subjective.

Then, I started reading articles that seemed to confirm my initial impressions. This latest article in Slate last week summarized the finding of a recent report that "suggests that the U.S. is lagging behind many of its international counterparts, most of whom have higher levels of competition and, in turn, offer lower prices and faster, with the exception of a few places like San Francisco,( and more surprisingly Chattanooga;  Tenn.; Lafayette, La.; and Bristol, Va.

The Slate article makes a parell between electrification and modern broadband policy which makes sense since, today the internet is as important for economic development as the electricity was at the end of the 19th century. But the crux of the article is in its somewhat political conclusion:

But unlike electrification, our present inside-the-Beltway policymakers have mostly ignored nonprofit approaches as a solution to expand affordable, reliable, and fast access to the Internet. And since community networks don't have lobbying arms working the corridors of power in Washington, key decision-makers have silently watched as cable and DSL lobbyists have created substantial new barriers to community networks in 19 states—limiting both competition and local authority and leading to worse, more expensive service than in a growing list of other countries that don't create these regulatory barriers. (Slate)

In other words, this is yet another good example as to why government is needed to regulate the market. Interestingly, a complentary conclusion can be drawn from the French example.

What has made internet connection cheaper and more efficient is a policy that forced the former state-owned monopoly, France Telecom (which sells mobile and Internet services as Orange), to open its network to rival operators such as Free.

 Almost immediately, independent ISPs and carriers from other countries began to lease access to France Telecom’s infrastructure and compete to offer broadband services. New companies like Iliad (offering services since 2002 as Free) emerged as fierce competitors, benefitting from the fact that they did not have to pay the initial costs of laying wires. And now, those companies are beginning to build their own infrastructure in order to meet a growing demand for faster speeds at low prices.
Free, for example, has always charged the same monthly rate, but continued to add new features to its service. Today, Free offers competitive DSL prices in Paris, and has begun to lay its own fiber in the city to provide even faster speeds. Eligible customers can get a connection with download speeds of up to 100 mbps (50 mbps upload) for the monthly fee of €29.99 ($34.47 adjusted for PPP), the same cost as Free’s standard DSL package. To get comparable speeds in most major US cities would cost over $100 per month.
 (.../...)
(As a result), Paris has emerged as a model in providing fast speeds at competitive prices—a shift which can be traced back to government policies instituted a dozen years ago. (New America Foundation)

So one can conclude from the experience in both France and the United States that the solution is half way between unregulated free market, and  state-owned monopoly since in both cases competition is limited, either by large corporations or by the state.
What is needed then is a regulated market, but in order to do that one needs to go beyond the blind ideological faith in laissez-faire economy as it is often the case in the United States or the blind ideological fear of competition as it is often the case in France. 

French View of Welfare Shifts towards America.

The controversy in France this week was the criticism of France’s welfare system by the Minister for European Affairs who called the excesses of French “assistanat” [a derogatory term which can be loosely translated as “nanny state”] the “cancer” of French society (France 24) – a provocative statement if any in a country where social policy has been more or less a national consensus.

In practical term, the young Minister, Laurent Wauquiez (who is seen as a moderate in the Sarkozy government) proposes to force welfare recipients to do community work in compensation for the checks.

First a note of cultural background – while this criticism of welfare may not be such a provocative statement for the conservatives in the U.S, it is something unheard of in France. It has actually created division even in the ruling conservative party (UMP) and the young Minister was strongly criticized by the Prime Minister.

That being said, it has also been suggested that the “nanny state” (l’assistanat”) could be one of Sarkozy’s themes of choice for his reelection campaign in 2012 (Le Figaro).

This leads me to think that we may be in for some serious cultural change in France.

Since World War II, “social solidarity” has been considered a universal service which guarantees a minimal level of well-being and social support for all French citizens. It is not without fault and it is very costly. For better or for worse, the notion of “solidarity” is not simply part of the French Social Protection system; it is also part of its national identity (Liberté, Egalité, Fraternité) - very much like ‘freedom’ (including economic freedom) is part of the US identity. 

First let’s look at the obvious differences between Europe and the U.S. :

• the European governments redistribute income on a much larger scale than the
• European social programs are more generous and reach a larger part of the
• The European tax systems are more progressive.
• European regulation is more intrusive, including in the labor market and in the protection of the poor.

There are various tentative explanations for these differences. As this paper by the Harvard Institute of Economic research suggests, some of those differences may derive from differences in ways of thinking and in ideologies. In other words, they may have been shaped by culture and history :

A DIFFERENT VIEW OF THE "POOR": 

According to the World Value Survey:

• 29% of Americans think that the poor are trapped in poverty;
• 60%of Europeans believe the same.
• 60% of Americans believe that the poor are lazy
• 26% of Europeans share that view.

You might think this is because the United-States has more social mobility. But as the Harvard paper explains, there is no evidence that shows America to be a significantly more mobile society than Europe. (something we have already discussed on this blog) so either Americans overestimate social mobility in their country or Europeans underestimate it. 

HISTORICAL DIFFERENCES

Another possible explanations (not favored by the Harvard paper but one I like) is that two World Wars destroyed so much of European societies that the Socialist and Communist parties were able to take hold and influence policies (even if they didn’t rule), especially after right-wing governments lost their appeal after the defeat of fascist governments throughout Europe. At the same time, in this context of ample destruction,  only governments could manage the national efforts necessary to rebuild and help the millions who lost everything. 

Besides, America had a vast ‘open’ land which allowed many workers to go west for economic opportunities instead of revolting or striking. This historical context may have made welfare and strong social policies more acceptable and necessary in Europe than in the United-States. 

The Harvard Paper has two other explanations: 

PROPORTIONAL REPRESENTATION: 

One lies in a difference in political institutions: Contrary to Europe America has hardly any type of proportional representation which tends to empower the left, and has more checks and balances with the explicit goal of limiting political extremism and expropriation of private property by the state.

RACE

The other, according to the paper is American racial heterogeneity given than in more homogeneous societies it is easier for the relatively well-off to see the poor as themselves, and less so in a society with racial cleavages.

The paper finally evokes other possible explanations such as a culture of risk and individual success transmitted by immigrants to America or the Protestant Calvinistic views that tend to see success as God’s blessing. 

POLITICAL IDEOLOGIES

These are interesting explanations that make sense to me. But within the different cultural tendencies in Europe or the U.S. , there are also political patterns that remain along the lines of right vs. left, and in any given country, conservatives have a harsher view of the poor than progressives.

In the US it is the Republicans who are trying to trim welfare again, in France it is the conservative parties and the far-right. It is the old Victorian idea of the “undeserving poor”, and it is shared not only by rich people but also by the working poor.

At the core of this, there is the view that enough poor are taking advantage of the system and do not want to work that it is worth screening the worthy ones and make it harder for all of them. I do not deny there are bad apples, but the question is whether you believe the bad apples are numerous enough that it is worth stigmatizing an entire category of people.  Call me naïve if you wish, but  I do not subscribe to the view that most people on welfare like it this way. It is not just that a question of money but also of personal worth. 

Unfortunately, it is clear that this view is becoming increasingly popular in France, whether this is due to the economic crisis or to greater racial heterogeneity (and the view that immigrants and their children have become increasingly the beneficiaries of social welfare at the expense of the working middle-class).

A recent poll shows that 70% of the French favor the new proposed scheme that would force welfare recipients to do community work in compensation for the checks. In 2010, another poll showed that 80% of the French thought there was too much of the “nanny state” (“assistanat”) in France. This is definitely a major shift towards a much harder social system which may a sign of the times, just like the rise of the Tea Party in the U.S. or the far right in Europe.