WHAT'S REALLY THE TROUBLE WITH FRANCE?
Few people can be unaware that ever since the French public voted against the EU constitution two months ago, the mainstream media (MSM) has begun spewing forth all manner of commentaries and opinion pieces disguised as news declaring how the French model is anachronistic and needs replacing. Although French prime minister Chirac chimed in with a succinct and, as it happens, accurate defense of the French model, the idea that France suffers from a pronounced economic 'malaise' is now something of an orthodoxy among the MSM commentariat. In fact, no MSMer seems capable of penning an article about France on any subject whatsoever which does not use the word 'malaise' at least once. (EXAMPLE)
BELOW: Think France? Think Malaise!
What's not obvious is what's at the bottom of the insistence that France finds itself in desperate need of reform. By most conventional indexes, the country is doing well. Certainly, the economy is not stagnant: 'since 1998, the French economy has expanded by 13%, not much less than Britain's 17%.' (SOURCE) Per capita GDP is also well above EU average - 113%, or almost exactly the same as Sweden - and a little bit higher than Germany. Although it is admittedly a little lower than the U.K., France is by almost every other conceivable measure doing better. For one thing, each year the French work 240 hours less per employed person than do the British (2003 OECD data). That extra leisure time might be one reason why the French obesity rate - 9.4% - is considerably lower than the U.K.'s rate of 22.4%, which is the second worst in the OECD after the U.S. Infant mortality is appreciably lower (1.2 deaths per thousand live births) and life expectancy longer (1.2 years longer) in France than in the U.K. So France would seem to be doing most everything right.
So what's the problem, then? The only acknowledged explanation for all the doom and gloom is France's official unemployment rate of 10.2% (2005). But it's hard not to smell a rat here. For one thing, Finland suffers from an almost identical rate and that hasn't stopped it from being trumpeted as as one of the brightest spots in the EU. Unemployment rates are also very similar for Germany, Greece and Spain, so France is in no respect an outlier. What's more, France has at least improved with respect to its own recent past, the unemployment rate now being 1-2% lower than during the 1990s.
In any case, as David Webster has pointed out, the French unemployment problem is largely a statistical illusion. Although the 10 percent figure receives a great deal of attention, it is not obvious that it is all that bad. France suffers from lower hidden unemployment than the English-speaking countries and the Netherlands, all of which boast lower official unemployment rates. However, these low rates have at least partly been achieved by shifting significant proportions of the unemployed to the disability lists. Although the U.K.'s official unemployment rate is among the best in the EU, this is only because it has a higher proportion of its unemployed on disability than in other countries. As Webster explains:
'The UK has the highest rate of working age sickness of all 15 European Union (EU) countries. The UK rate of 7.0% compares with only 2.1% in Germany and 0.3% in France.* FIGURE 3 shows that, as commentators frequently point out, Britain compares favourably with the rest of the EU in terms of ILO unemployment, with 8 countries having a higher rate. But if the working age sick were to be added to the unemployed, Britain would become the third worst, after Finland and Spain.'
Also in France's favour is the fact that part-time employment remains relatively low. One of the chief reasons other countries appear to be doing well on the employment front is that they have high levels of part-time employment. The U.K., for example, has a part-time employment rate of 23.3% and the Netherlands 34.5%. (2003 figures) But in France, the rate is only 12.9%. Official unemployment rates, no matter how low, should not be abused to distract us from a far more impressive accomplishment, which is the preservation of proper, full-time jobs. In this respect, France ranks among the real winners. Of all OECD countries, it has the fourth lowest rate of part-time employment. So the great majority of French still have real jobs, while too many Dutch and British are forced to make do with contingent employment. Whether or not unemployment is really higher in France than in the U.K., underemployment is far lower - meaning that France has largely avoided creating a large class of working poor.
In short, France's unemployment problem looks like a red herring - after all, why should we care just about unemployment and not about underemployment? - and in any case not serious enough to warrant the overhaul of the country's social model. So what could the problem be? Since the MSM voices the attitudes of the dominant social stratum, which is the banking sector, I had a hunch that the problem might lie with banking interests. It didn't take much research to find out why the bankers - who can hardly be attributed with anything by way of sentimental concern for the wellbeing of the unemployed - might not be too happy with France the way it is now. What I did, essentially, was look for areas in which France is an outlier and connect the dots.
The key to unlocking the problem is France's record on economic inequality. France is actually one of the few countries in which inequality declined during the 1980s and 1990s. Since 1980, it has actually been falling continuously - the reverse of the trend nearly everywhere else. (Smeeding 2004, pp. 8-9. Cf. Figure 3. PDF available here) By comparison, the U.K. had the worst performance in Europe and second only to the U.S. among OECD countries - what Guardian columnist Polly Toynbee recently called 'the social disaster of the past 25 years.'
BELOW: The UK's 'social disaster of the past 25 years' at a glance:
France thus belongs to a select group of rich countries which have blessedly become more, not less equal, in recent decades. This is a fact of great consequence, for when income distribution becomes more unequal something happens which ends up benefiting bankers: households separate into 'financially constrained' and 'financially unconstrained' groups. The latter group - finding themselves in easier circumstances - are more likely to borrow to finance additional purchases or, perhaps more commonly, upgrade to a better car or house. A classic example is Australia, where economic growth is fuelled by rising household debt. But it's not the case that the borrowers are lower-income earners resorting to credit to make ends meet. In fact, 'much of the rise in debt appears to have been due to unconstrained households taking on more debt.' (Reserve Bank of Australia Research Discussion Paper 2003-08. PDF version available here)
In fact, the OECD countries which are generally singled out for praise by the MSM tend to be ones whose economic growth is very largely driven by rising household debt. Thus we've had the 'Dutch miracle,' the 'Danish miracle' and now - as if it's the only show in town - the 'British miracle.' But what we don't hear much about is how the latter 'miracle' owes itself almost entirely to a culture of indebtedness. According to Grant Thornton's Consumer Debt Report, 'In recent years, the UK's economic performance has outstripped that of both France and Germany. However, without the increase in debt, UK economic growth rates would have been much lower.' (SOURCE)
Governments trying to look as if they are scoring victories on the economic front therefore tend to do whatever they can to cultivate debt-based economy - in other words, impressive economic growth figures now based on their citizens' future earnings - lest they face low rates of economic growth and politically-embarrassing allegations that they are allowing their countries to stagnate. This is, in fact, the formula for what has happened in the Anglophone countries over the last 10-15 years: government-promoted income polarisation policies have created a larger pool of people who are inclined to borrow money but also likely to be able to pay back what they have borrowed, even though they usually have to work longer hours to do so. Household savings plummet, as surplus cash is used to service credit payments.
Needless to say, bankers LOVE societies with lots of these people. The alternative - a society with a more equal income distribution - is one in which the reservoir of potential borrowers is smaller. People who are just comfortable - who are neither particularly constrained nor particularly unconstrained - are less likely to borrow and much more likely only to indulge in pleasures for which they can afford to pay upfront. So debt to (disposable) income ratios are 100% or above in all the following countries: Canada (115%), the U.S. (115%), South Korea (120%), Australia (122%), Japan (138%), New Zealand (140%), the U.K. (145%), the Netherlands (195%) and Denmark (230%). In all these countries except the Netherlands, where savings have inexplicably risen from 4% to 10% since the 1970s, household savings are at historical lows or have virtually disappeared: for example, Japan (6.8%), Canada (3.1%), the U.S. (1.7%), Australia (0.1%), and New Zealand (-6.9%).
But - in my opinion, enviably - France is one of the rare countries that defies the general pattern. 'Only in France has disposable income growth kept pace with consumption in recent years.' (SOURCE)
Because their disposable incomes have continued to rise, the French have therefore been able to avoid becoming deeply mired in consumer debt. This is readily apparent from the household savings rate, which has only fallen slightly since the late 1970s (down from 13.2% to 11.2%). Until recently, the country's debt to income ratio was well below Spain and Germany, where it is only just now creeping up to 100%, although not as low as Italy, where the ratio is only around 40%. Although the trend in France is toward higher household debt - it has grown from 78% to 84% over the last five years - the pace is presumably not fast enough to gratify the appetites that are being excited.
In short, we are being told that France is doing badly because the French people are doing well - too well, at least, for the liking of bankers who can smell a feast coming on, and they can barely wait before the country is locked into the same credit-based economy that is making life so miserable for many people in most other OECD countries. But bankers are not interested in anybody's happiness, only their profits. To the bankers, a society not driven by credit is 'stagnant' and 'unsustainable' - whether it enjoys a high standard of living or not. They see no reason why banking should not be just as profitable in France as elsewhere.
But no one outside banking circles should fall for the propaganda campaign the bankers and their journalistic mouthpieces are mounting against the French social model: there are no compelling reasons why France needs to abandon it. What's more, the French are likely to reap long-term benefits from not having taken the short road to artificially-stimulated economic growth. Since we cannot postpone for very much longer the work of creating more environmentally-sustainable societies, it is likely that the societies least ensnared by debt will be among those most able to manage a smooth transition. As Europe confronts the harsh reality of global warming - and it's already clear that France is being harmed sooner and more intensely than most other European countries - France has far greater priorities than placating people like Blair, Mandelson, and the other corrupt sycophants of the international banking community.
BELOW: France, you too could be just like this!
BELOW: Think France? Think Malaise!
What's not obvious is what's at the bottom of the insistence that France finds itself in desperate need of reform. By most conventional indexes, the country is doing well. Certainly, the economy is not stagnant: 'since 1998, the French economy has expanded by 13%, not much less than Britain's 17%.' (SOURCE) Per capita GDP is also well above EU average - 113%, or almost exactly the same as Sweden - and a little bit higher than Germany. Although it is admittedly a little lower than the U.K., France is by almost every other conceivable measure doing better. For one thing, each year the French work 240 hours less per employed person than do the British (2003 OECD data). That extra leisure time might be one reason why the French obesity rate - 9.4% - is considerably lower than the U.K.'s rate of 22.4%, which is the second worst in the OECD after the U.S. Infant mortality is appreciably lower (1.2 deaths per thousand live births) and life expectancy longer (1.2 years longer) in France than in the U.K. So France would seem to be doing most everything right.
So what's the problem, then? The only acknowledged explanation for all the doom and gloom is France's official unemployment rate of 10.2% (2005). But it's hard not to smell a rat here. For one thing, Finland suffers from an almost identical rate and that hasn't stopped it from being trumpeted as as one of the brightest spots in the EU. Unemployment rates are also very similar for Germany, Greece and Spain, so France is in no respect an outlier. What's more, France has at least improved with respect to its own recent past, the unemployment rate now being 1-2% lower than during the 1990s.
In any case, as David Webster has pointed out, the French unemployment problem is largely a statistical illusion. Although the 10 percent figure receives a great deal of attention, it is not obvious that it is all that bad. France suffers from lower hidden unemployment than the English-speaking countries and the Netherlands, all of which boast lower official unemployment rates. However, these low rates have at least partly been achieved by shifting significant proportions of the unemployed to the disability lists. Although the U.K.'s official unemployment rate is among the best in the EU, this is only because it has a higher proportion of its unemployed on disability than in other countries. As Webster explains:
'The UK has the highest rate of working age sickness of all 15 European Union (EU) countries. The UK rate of 7.0% compares with only 2.1% in Germany and 0.3% in France.* FIGURE 3 shows that, as commentators frequently point out, Britain compares favourably with the rest of the EU in terms of ILO unemployment, with 8 countries having a higher rate. But if the working age sick were to be added to the unemployed, Britain would become the third worst, after Finland and Spain.'
Also in France's favour is the fact that part-time employment remains relatively low. One of the chief reasons other countries appear to be doing well on the employment front is that they have high levels of part-time employment. The U.K., for example, has a part-time employment rate of 23.3% and the Netherlands 34.5%. (2003 figures) But in France, the rate is only 12.9%. Official unemployment rates, no matter how low, should not be abused to distract us from a far more impressive accomplishment, which is the preservation of proper, full-time jobs. In this respect, France ranks among the real winners. Of all OECD countries, it has the fourth lowest rate of part-time employment. So the great majority of French still have real jobs, while too many Dutch and British are forced to make do with contingent employment. Whether or not unemployment is really higher in France than in the U.K., underemployment is far lower - meaning that France has largely avoided creating a large class of working poor.
In short, France's unemployment problem looks like a red herring - after all, why should we care just about unemployment and not about underemployment? - and in any case not serious enough to warrant the overhaul of the country's social model. So what could the problem be? Since the MSM voices the attitudes of the dominant social stratum, which is the banking sector, I had a hunch that the problem might lie with banking interests. It didn't take much research to find out why the bankers - who can hardly be attributed with anything by way of sentimental concern for the wellbeing of the unemployed - might not be too happy with France the way it is now. What I did, essentially, was look for areas in which France is an outlier and connect the dots.
The key to unlocking the problem is France's record on economic inequality. France is actually one of the few countries in which inequality declined during the 1980s and 1990s. Since 1980, it has actually been falling continuously - the reverse of the trend nearly everywhere else. (Smeeding 2004, pp. 8-9. Cf. Figure 3. PDF available here) By comparison, the U.K. had the worst performance in Europe and second only to the U.S. among OECD countries - what Guardian columnist Polly Toynbee recently called 'the social disaster of the past 25 years.'
BELOW: The UK's 'social disaster of the past 25 years' at a glance:
France thus belongs to a select group of rich countries which have blessedly become more, not less equal, in recent decades. This is a fact of great consequence, for when income distribution becomes more unequal something happens which ends up benefiting bankers: households separate into 'financially constrained' and 'financially unconstrained' groups. The latter group - finding themselves in easier circumstances - are more likely to borrow to finance additional purchases or, perhaps more commonly, upgrade to a better car or house. A classic example is Australia, where economic growth is fuelled by rising household debt. But it's not the case that the borrowers are lower-income earners resorting to credit to make ends meet. In fact, 'much of the rise in debt appears to have been due to unconstrained households taking on more debt.' (Reserve Bank of Australia Research Discussion Paper 2003-08. PDF version available here)
In fact, the OECD countries which are generally singled out for praise by the MSM tend to be ones whose economic growth is very largely driven by rising household debt. Thus we've had the 'Dutch miracle,' the 'Danish miracle' and now - as if it's the only show in town - the 'British miracle.' But what we don't hear much about is how the latter 'miracle' owes itself almost entirely to a culture of indebtedness. According to Grant Thornton's Consumer Debt Report, 'In recent years, the UK's economic performance has outstripped that of both France and Germany. However, without the increase in debt, UK economic growth rates would have been much lower.' (SOURCE)
Governments trying to look as if they are scoring victories on the economic front therefore tend to do whatever they can to cultivate debt-based economy - in other words, impressive economic growth figures now based on their citizens' future earnings - lest they face low rates of economic growth and politically-embarrassing allegations that they are allowing their countries to stagnate. This is, in fact, the formula for what has happened in the Anglophone countries over the last 10-15 years: government-promoted income polarisation policies have created a larger pool of people who are inclined to borrow money but also likely to be able to pay back what they have borrowed, even though they usually have to work longer hours to do so. Household savings plummet, as surplus cash is used to service credit payments.
Needless to say, bankers LOVE societies with lots of these people. The alternative - a society with a more equal income distribution - is one in which the reservoir of potential borrowers is smaller. People who are just comfortable - who are neither particularly constrained nor particularly unconstrained - are less likely to borrow and much more likely only to indulge in pleasures for which they can afford to pay upfront. So debt to (disposable) income ratios are 100% or above in all the following countries: Canada (115%), the U.S. (115%), South Korea (120%), Australia (122%), Japan (138%), New Zealand (140%), the U.K. (145%), the Netherlands (195%) and Denmark (230%). In all these countries except the Netherlands, where savings have inexplicably risen from 4% to 10% since the 1970s, household savings are at historical lows or have virtually disappeared: for example, Japan (6.8%), Canada (3.1%), the U.S. (1.7%), Australia (0.1%), and New Zealand (-6.9%).
But - in my opinion, enviably - France is one of the rare countries that defies the general pattern. 'Only in France has disposable income growth kept pace with consumption in recent years.' (SOURCE)
Because their disposable incomes have continued to rise, the French have therefore been able to avoid becoming deeply mired in consumer debt. This is readily apparent from the household savings rate, which has only fallen slightly since the late 1970s (down from 13.2% to 11.2%). Until recently, the country's debt to income ratio was well below Spain and Germany, where it is only just now creeping up to 100%, although not as low as Italy, where the ratio is only around 40%. Although the trend in France is toward higher household debt - it has grown from 78% to 84% over the last five years - the pace is presumably not fast enough to gratify the appetites that are being excited.
In short, we are being told that France is doing badly because the French people are doing well - too well, at least, for the liking of bankers who can smell a feast coming on, and they can barely wait before the country is locked into the same credit-based economy that is making life so miserable for many people in most other OECD countries. But bankers are not interested in anybody's happiness, only their profits. To the bankers, a society not driven by credit is 'stagnant' and 'unsustainable' - whether it enjoys a high standard of living or not. They see no reason why banking should not be just as profitable in France as elsewhere.
But no one outside banking circles should fall for the propaganda campaign the bankers and their journalistic mouthpieces are mounting against the French social model: there are no compelling reasons why France needs to abandon it. What's more, the French are likely to reap long-term benefits from not having taken the short road to artificially-stimulated economic growth. Since we cannot postpone for very much longer the work of creating more environmentally-sustainable societies, it is likely that the societies least ensnared by debt will be among those most able to manage a smooth transition. As Europe confronts the harsh reality of global warming - and it's already clear that France is being harmed sooner and more intensely than most other European countries - France has far greater priorities than placating people like Blair, Mandelson, and the other corrupt sycophants of the international banking community.
BELOW: France, you too could be just like this!
