The past three years have been hard ones for the US, especially for anyone who cares about good governance, democratic decency and the fate of open societies.
But there’s been one bright spot: An economy that defies expert predictions by continuing to deliver jobs, growth, dividends and higher wages. We were reminded of this again last week, with news that the economy added 266,000 new jobs last month, bringing unemployment to a 50-year low.
That being so, maybe now is not the best time for Democratic candidates to suggest we turn ourselves into an economic facsimile of France. That’s my way of reading a report which described the ways in which Sen. Elizabeth Warren and other progressives are trying to upend decades of economic thinking by insisting that sharp tax increases on businesses and the wealthy would accelerate growth, not depress it.
Under a Warren presidency, those tax hikes would be accompanied by monumental increases in government spending and fundamental alterations to the structures of the private economy.
The piece coincided with a fresh round of nationwide strikes in France, where at least 800,000 people took to the streets to protest Emmanuel Macron’s attempts to modernise the country’s Byzantine public pension systems. At least one of these plans — there are 42 in all — dates to the reign of Louis XIV, and some kick in when workers retire in their 50s, costing the state an ever-mounting fortune as average lifespans get longer.
Hard to pull back
Successive French administrations of both the left and right have been trying to reform this and other aspects of the country’s statist economy for decades, with limited results. Social benefits, once given, are hard to pare, much less withdraw. Hence the frequent strikes: Since 1789, French governments have been acutely sensitive to mass protests, and too often have capitulated to them.
Hence also France’s perennial economic crisis.
The country’s unemployment rate has not fallen below 7 per cent since 1983 and is now at 8.6 per cent. Long-term unemployment exceeds 40 per cent, compared with 13.3 per cent in the US. The country’s annual growth rate has barely exceeded an average of 1 per cent per year since the 21st century began. It’s expected to come in at 1.3 per cent for this year.
As of last year, the median monthly take-home pay was just $1,930, meaning half of all French workers make even less. It’s why the country erupted in protest when Macron proposed raising fuel taxes a few cents per litre.
How much of this is a matter of the French making different, arguably better, choices when it comes to balancing work and leisure? Surely some. And how much of it is made up for by quality public services, strong worker protections, and fewer economic inequalities? Some, too.
Then again, the health service that used to be the toast of Francophiles is overwhelmed, understaffed, and “on the brink of collapse”, according to a report in “The Guardian”. French universities, while cheap, are overcrowded, underfunded, and notoriously mediocre: “Too easy to get in and too easy to get out,” as one local observer put it.
French workers exercise their right to strike roughly seven times more frequently than German workers do, and 125 times more than Swiss ones.
An unequal state
As for income inequality, France is certainly much less unequal than the US But France’s top 1 per cent still held 22 per cent of the country’s wealth at the beginning of 2018. That was despite a draconian effort by the previous Socialist government to impose a supertax on high earners.
It raised scant revenue while accelerating the exodus of the rich. Like many European attempts at imposing a wealth tax, it was quickly repealed.
All of this should stand as a stark warning to Democrats. France has the highest overall tax take among OECD countries (46.9 per cent of GDP), the highest rate of government spending (56.38 per cent of GDP), the highest rate of safety-net spending and the third highest rate of pension spending.
Whatever else all this taxing and spending might be doing, it’s clearly not creating jobs or prosperity. As for making people happy, France doesn’t break the top 20 in this year’s World Happiness Report. Even Mexico ranks higher.
I don’t mean this to be relentlessly negative about France, a great nation with an almost unsurpassed depth of culture and capacity for excellence. If anything, it’s a tribute to the French that they continue to punch above their weight in so many fields, when the weight of the state lies so heavily on their backs.
But as far as models go, the story of France’s economy in the past 40 years is mostly one of bad turns, thwarted hopes, and forgone opportunities. Americans should not imagine that we can walk down that same familiar cul-de-sac and not hit the same dismal dead end.