If you could only rely on The Economist’s covers and slogans to understand the world, you would be forgiven for thinking that France was some kind of sclerotic, impoverished nation of losers, persisting in its misguided ways and refusing to heed Anglo-wisdom through Gallic delusion and sheer pigheadedness.
Indeed, every few months or so the venerable British magazine churns out a cover against France showing that the country is clueless, has been taken over by Muslims, must elect a Thatcher, must elect Sarko (who then proved awesome and non-existent), is flaccid, is in denial, and must not elect this dangerous man.
Of course, some of these are just playful attempts to boost airport kiosk sales (the Eiffel Tower is too iconic to not use), but most of them are exactly what they suggest: frontal attacks against the French economic and social model in particular, and the welfare state and government intervention in general.
The Economist has been arguing the same things against France for years. Its prescriptions can be summarized: cut taxes, cut spending, privatize everything, deregulate, remove labor protections, crush the unions, etc, etc, the usual shtick. This has gotten so repetitive that it has been rightly mocked in the leftosphere, with one economist suggesting that these editorials could be computer-generated.
However, in other times, The Economist‘s critique was more understandable. The defining assault remains that of spring 2006: “France faces the future,”helpfully illustrated with a blindfolded tricolor rooster. The magazine could not help resorting to ridiculous caricature (it spoke of “[t]he delusion [of] preserving France as it is, in some sort of formaldehyde solution”) but the overall argument could appear defensible. As it wrote:
Part of the blame [for France’s failures] lies squarely with President Jacques Chirac. He has presided for nearly 11 years, during which mass unemployment has never budged below 8%, France’s wealth per person has been overtaken by both Britain’s and Ireland’s, and public debt has jumped from 55% of GDP to 66%.
These were all true at the time and I think there is no better way of judging a country’s socio-economic model than by comparing its performance with that of other countries. But my, citing the United Kingdom and Ireland as models, that hasn’t aged well. Post-crisis, it is now clear that the successes of those laissez-faire paradises were largely based on the imaginary economy. The financial wizards’ bubbles burst, the taxpayer footed the bill, and the two countries remain in perma-recession and have surpassed France’s public debt.
The trouble is, The Economist is still at it, even after its economic models have been discredited by events. It is still there warning more-or-less-hysterically against French “protectionism” and the “rather dangerous Monsieur Hollande”. It is still arguing for Thatcherite reforms citing France’s “weak growth,” “lack of competitiveness,” “denial” about debt… In short, that France should become much, much more like post-Thatcher Britain.
The thing is, we actually can compare countries, notably one which remains partly Statist and in which government spending is 56% of GDP, and another which has decimated its unions and given free rein to its banks. It’s time to set the facts straight and show, stats and graphs in hand, how the post-Mitterrand French economy is crushingly superior to the post-Thatcher British economy.
GDP and productivity
Let’s take the most basic measure of economic effectiveness: gross domestic product. The French have made a choice of reducing working time to a greater extent than most countries. However, GDP has largely been maintained because French productivity is among the highest in the world. British workers create 20% less wealth for every hour worked than French workers.
Now, the French’s preference for work-life balance does come at a cost. The British work more and so their GDP per capita was 12% higher than the EU average in 2010, while France’s was only… 8% above. (It’s not clear whether France’s relatively poor overseas departments are included by Eurostat, which would have lowered the French figures.)
In short, despite all the harping about France’s “low growth,” Brits work 20% more than French people in order to achieve… almost exactly the same level of wealth.
Debt and deficits
The second alleged problem with the French economy is debt. The Economist‘s attack against the “dangerous” Hollande includes among its dark warnings the fact that “[p]ublic debt is high and rising” and “the government has not run a surplus in over 35 years”. Yet, when it comes to debt-driven growths, the French are decidedly typical, successfully matching Germany until recently:
The statistical anomaly of Ireland and Britain’s low debt has been shown to be an illusion. Once the boom-year private credit was seamlessly shifted to Joe Taxpayer, we find that Britain has almost the exact same level of debt as France at 85.7%. The British situation has continued to worsen. While France had a 5.2% government deficit in 2011 (including 0.7% of GDP in bailouts to other eurozone states), the UK had an 8.3% deficit.
Also note that the British economy’s growth has historically been driven by unsustainable private and household debt as well. British people suffer from credit-addiction and an aversion to saving typical of the English-speaking world:
The fiscal irresponsibility of Britons relative to continentals has led to a significant debt burden for them. In France, households have a 80% debt-to-income ratio, while in the U.K. this was 143%. The British model of bankster/consumer debt-driven growth is far less sustainable than the French model. Who, in this scenario, are the ones “in denial”?
Poverty and inequality
So far, we have seen the British economy being one in which, despite people working 20% more and despite massive household and public deficits, output is roughly equal to that of the French economy. But ultimately, an economic model must also be judged on whether it actually benefits citizens.
Here we can legitimately fault the French model for its chronically higher unemployment since the 1980s and which today stands at 10% to the U.K.’s 8.2%. However, the overall social picture for the U.K. is significantly worse. The country is one in which inequality, poverty and class barriers are among the highest in the developed world.
Despite the Labour reforms that significantly reduced child poverty, it still stands at 10.1% in the U.K., a third more than France’s 7.6%. A British child’s success in life is among the least dependent on his own merits and most dependent on how rich his parents are (this can only get worse now that student fees are, incredibly, tripling to £9,000). France, with its still mostly-free and mostly-meritocratic education system, is one of the countries with the highest social mobility.
France is also relatively equal while the U.K. is among the most unequal developed countries. For regular people, inequality translates into less cold, hard cash. Net median household income in France was €20,000 in 2010, as against only €17,000 in the U.K. The typical British household is then 15% poorer than the French one.
Note that this also means that the poverty chart above understates the situation. The poverty rate is defined as people with less than 50% of national median income, which is to say that one needs to be 15% poorer to count as a “poor Brit” than a “poor French”.
Thank God the U.K. is not in the euro
French economic superiority is particularly noteworthy given its adherence to the euro. France has had to give money to other eurozone members, it has not been allowed to directly finance itself via the European Central Bank (instead it is dependent on the financial markets), and it has not been able to devalue its currency to make exports more competitive. The euro has thus proven extremely detrimental to the French economy in this crisis. As Der Spiegel notes, France has “an economic model killed by the euro”.
In contrast, the pound has been allowed to fall by almost a third relative to other currencies and the Bank of England has pumped untold hundreds of billions into the economy via “quantitative easing”. This, and the incoherence of the eurozone, has meant the U.K. has been able to get loans on the financial markets at relatively low rates around 2%.
The U.K., like Spain, is now back in recession. The two countries have about the same deficit but British debt is significantly higher. Had the U.K. been in the eurozone, its profile suggests it would have fit very snugly among the crisis-suffering GIIPS (GIBIPS?). It goes without saying that the evidence for French economic superiority would be even more glaring.
Why does The Economist hate France?
These differences are predictable. If you cut taxes on the rich, destroy workers’ bargaining power, abolish labor rights, cut social spending, and let the banks do as they please… You get Britain. That’s what happens. You get poor people and banksters. But you don’t, as the comparison between France and the U.K. shows, necessarily get a better economy.
Given these facts, the French would have to be out of their minds Thatcherize France and make its economy more like Britain’s. It would mean Frenchmen working longer, for less pay, and more debt. Though super-rich people would have more to be happy about.
But why does The Economist, relatively erudite as far as magazines go, keep singling out France for “economic failure”? Is it simply “anti-France” (the magazine felt the need to answer the charge)? The short answer is, put simply, “yes”. France-bashing is, I believe, a necessary part of The Economist‘s ideology and business.
The Economist is liberal and laissez-faire capitalist, fine. People pay money to read it in order to feel smart and informed, yes. But its particular market – rich businessmen, powerful policymakers and other people of high-value to advertisers – doesn’t like information that clashes with its world-view (no one likes cognitive dissonance). In this case, the mostly Anglo-American readership of The Economist believes in (Anglo-)American power and the free market. Period. (This goes some way to explaining the magazine’s other particularly absurd positions, such as its consistent Iraq War advocacy and bank deregulation fetish.)
But what are laissez-faire capitalists to make of France and of the French? The very existence of these cheese-eating Statists and economically-successful skeptics of globalization is a threat toThe Economist’s fundamental beliefs and its very raison d’être. Facts be damned, that nation must dragged through the mud and fully discredited. Sleazy, sure, but it has no other choice.
– Concerning productivity: France’s good productivity figures are misleading. France has a relatively low labour force participation rate (less than 70%) and a high unemployment rate (10%). This means that a lot of very unskilled people are simply not counted in the productivity figures, because they don’t work. Britain, by contrast, has higher labour force participation and lower unemployment : this automatically brings down it’s total productivity. This has a potentially huge effect.
– Corruption: Britain is consistently ranked higher than France by Transparency International.
– Innovation and knowledge: Britain has better universities, British companies invest more in innovative technology (check the OECD’s ICT indicators). This is encouraging for the future of the British economy. Indeed, productivity was growing at a faster pace in Britain than in France before the crisis.
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