IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
This paper appeared in The Wall Street Journal.
When the economic crisis struck in 2008, the French government assured its citizens that our social model would protect and cushion us; that we would not be hit nearly as hard as other countries in the downturn.
Two years later, one can hardly claim that France has been shielded by its social model. Unemployment has risen constantly, even more strongly than for our peers such as the U.K. and Germany. Even Germany has emerged better off than France, with its excellent export figures.
It would seem that, again, in the post-crisis period, the French model does not bring us good news. The 0.6% increase in France’s GDP for the second quarter falls well short of the 2.2% registered for Germany, which is expected to grow more than 3% (and as high as 3.5%) this year, against a 1.4% forecast for France. Similarly, the U.S. and the U.K. are expecting growth of more than 2.4% this year.
As always, we’re told that next year will be better. Paris predicts that it will enjoy growth of 2% in 2011, which would be some reversal of fortune given that next year the euro zone is only set to grow 1.4%. As this newspaper reported on Monday, Natixis economist Jean-Christophe Caffet highlighted this wishful forecasting with his prediction that the French economy will grow only 1% next year, after factoring in France’s spending cuts and weakening exports.
So it turns out that before, during, and after the crisis, the French social model so highly vaunted by our political leaders has been of no great help for the French economy. On the contrary, it has become the major obstacle to long overdue economic reforms. French leaders are right: The French social model does protect us. But not from the crisis—it protects us from economic growth.
The glorious past of this social model has been forgotten too quickly. Since the end of the 1970s, France has been bogged down in double-digit unemployment—more than 10% for adult workers and 21% for young job-seekers. Angst in the suburbs has increased without pause, and the national education system has sent hundreds of thousands of young people into the world without degrees, condemned to long-term unemployment.
Over the past 25 years, the number of young, qualified graduates fleeing France to find jobs abroad has continued to grow, while the wealthy continue to seek foreign shelter from the rapacious state. In France, where our supposed social model of “solidarity” functions so beautifully, we had 15,000 citizens die during the heat wave in the summer of 2003, abandoned by public social services and labor unions that work only to defend their privileges rather than their workers.
The French social model is above all a model of inequality between the public and the private, between those who enjoy lifetime employment and those who have to fend for themselves in the labor market. It is paradoxical, if not grotesque, to speak of equality and solidarity in a country where more than six million people live on public money and oppose every attempt at reforming the state. When it comes to salaries, retirement, or vacation, the public sector is clearly better off than the private. Remind me again, where is France’s famed equality?
Worse still, France breaks all records for withholding taxes, but it redistributes less of this money than most members of the OECD. Paris confiscates more than half the wealth created by French people, and redistributes less than the U.S., which only collects about 30% of its citizens’ riches. Where does the money go? The answer is that the French “model” has become a huge cheese: It has engendered an enormous bureaucracy, profiting more than one million civil servants. Politicians exploit it for electoral purposes and the unions hold it up as the model to follow.
It seems that the upper-most echelons of France’s bureaucratic elite are the only ones who can’t understand that income taxes and withholding taxes are counterproductive to growth, and that raising them will do nothing but harm efforts to reduce the public deficit. Meanwhile, thanks to laughable control mechanisms, much of the citizens’ welfare contributions never wind up reaching the poor, but instead are eaten up by armies of bureaucrats who are entrusted with “redistributing” my nation’s wealth. We have not created an equal, just, and brotherly society, but rather assisted in the rise of a caste that profits from the largesse of the providential state and the unlucky masses who are forced to pay into it.
The Petit Robert dictionary associates the word “model” with another word, which is “to copy.” Well, as far as the French social model is concerned, one could say that it’s the model that the whole word envies but that no one would ever copy.