French economy- how can it not collapse

[JPC]

French economy- why hasnt it collapsed yet ?

Hey i live in France, and i wonder how the French economy can keep it itself from collapsing

I mean : they have all sorts of taxes (regular taxes, social security, retirement, and all sort of others)
these taxes often take u away 50 percent of ur profit (before 60, but sarkozy hopefully reduced it a little to 50) (very motivating for companies to set themselves up in France)

Thus, once u have hired someone its very hard to fire him , if you do, there's always big manifestations, strikes, or the unions are all charging up against you (btw in france , a union = communist party) (ok so a company will not hire much because they are scared of getting bad elements that they cannot get rid of)

If you are unemployed you get like almost as much money as if you work, and if the government finds u a job you can refuse it (man , the state is already generous to give them money, and they refuse ; and very motivating to work if u almost get as much when u do nothing)

Thus , its hard to work more than 35 hours per week, but zarkozy is trying to change that by instoring extra hours (Man , would it be easier to just get this stupid law instored by lazy communists)

And, the social security taxes are way too expensive, those who pay them usually don't use half of it for healthcare

And, the taxes system is very complicated, can't they just simplify it, instead of complicating everybody's lives

Thus, they have 5 weeks of payed holidays, that's way too much taxes for companies, they are not going to encourage economy like this

And now , the strikes here are of the worse. When there were people manifesting / striking against the CPE (a law that had been voted by the senate and Congress that meant that you could fire more easily for the 2 first years, so that companies can see what their new workers are worth) , well they were under illegality :
- they blocked roads, schools , Factories (there is a law which says that you cannot block education or transport to other people, and that you cannot impose your cause to other people) : and of course if we try to stop them from doing that all the human rights associations and unions come down on us and say we are dictators. This should not be, you got to respect the law ! and this CPE had been voted by a democratic system . Denying this law would mean denying the very principles of democracy !
We should not have taken it away just because 1 million lazy socialist/communists don't like it

Ok , and now you wonder why France hasn't collapsed yet

 

[Art]

Ok , and now you wonder why France hasn't collapsed yet

Guess they must be doing something right then

Seriously though, in world rankings they may not be trail blazing but they are far from being basket cases either. Their rankings on most economic metrics is around the average for developed countries whilst in social areas such as health they are excellent.

They tried the standard capitalist route and didn't like it very much hence their revolutionary past and for some years in the recent past they swung too far the other way and seem to have it about right now.

By the way being a representative democracy has nothing to do with single issue majorities. As Benjamin Franklin said that sort of democracy is two wolves and a lamb voting for what's for lunch.

 

[edward]

The Bush administration pays for everything with borrowed money. How much in debt is France? You might give it a try.

The USA is at 9,053,374.164,766 and counting.

http://brillig.com/debt_clock/

 

[Futobingoro]

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2186rank.html

 

[EnumaElish]

Ok , and now you wonder why France hasn't collapsed yet

The great abstract scientists of the modern age were British, the great philosophers were German, and France had all the engineers. Even their economists were engineers first, economists second!

 

[JPC]

ok so :
USA dept : about 30 000 dollars / citizen
French dept : about 15 000 euros / citizen
USA total : about 9 billion and counting
French total : about 1 billion and counting

For the depts, i don't understand, can't they just say "if you don't have the money to do that, then you don't do that"

But for USA, i don't understand, don't other countries have depts onward USA ? i mean that if you to the substraction of the USA dept by the sum of all the depts that other countries have onward USA, does it end up positive or negative ?

And who benefits from these depts ? which countries have given the most credit to the world ?

 

[russ_watters]

Debt is not the key issue here. The USA's high gdp growth rate enables us to be ok (not as good as we could be with lower debt, but still good). France is in trouble because of low economic growth, low productivity, and high unemployment. France is in trouble, as you said above, because of it's belief in socialism. Debt stretches an economy thin, but pushes it along. It is an enabler.

Socialism is just an anchor. No penalty for failure + reward for succeess = malaise. France is going down the economic path the Soviet Union took to its death.

It does have one big, big, big positive, though, which may just save it: nuclear power. France is positioned to win big in the coming Nuclear Power Revolution. (you heard it here first)

 

[russ_watters]

For the depts, i don't understand, can't they just say "if you don't have the money to do that, then you don't do that"

But for USA, i don't understand, don't other countries have depts onward USA ? i mean that if you to the substraction of the USA dept by the sum of all the depts that other countries have onward USA, does it end up positive or negative ?

And who benefits from these depts ? which countries have given the most credit to the world ?

Debt doesn't work fundamentally differently for countries than for individuals or businesses. Few people have enough money lying around to buy a house, so they get a loan. I bought a house last year and had only 10% of the cash that the house cost, so I got a loan that will take 20-30 years to pay off.

 

[JPC]

ok, i agree

and as for france
i hope its going to step out of socialism
the problem is that about 35 percent of the population are either communist or socialist, and that these person always show up , while the rest are more reasonable : the 65 other percent don't go on huge strikes on the roads, ect
I hope Sarkozy ,unlike the preceding presidents, will not give up the laws he creates through democracy because of socialist/communist strikes pressure

 

[jostpuur]

But for USA, i don't understand, don't other countries have depts onward USA ? i mean that if you to the substraction of the USA dept by the sum of all the depts that other countries have onward USA, does it end up positive or negative ?

And who benefits from these depts ? which countries have given the most credit to the world ?

This debt business between countries is a complete mystery to me. In fact, I could be a little bit interested in economics as a science, but I don't have much time for it now, since I'm too busy with mathematics and physics.

Debt doesn't work fundamentally differently for countries than for individuals or businesses. Few people have enough money lying around to buy a house, so they get a loan. I bought a house last year and had only 10% of the cash that the house cost, so I got a loan that will take 20-30 years to pay off.

If an individual is unable to pay his debts, or refuses to pay them, some officials can take his stuff and house away, and put the person in some service, or something like that... If a country refuses to pay its debts, then what? There is nothing above the big countries, so it looks like different kind of debt to me.

 

[jostpuur]

If I've understood correctly, there's a some kind of inequality problem in the France, and this is encouraging people to the extreme left.

 

[JPC]

what, inequality pushing people to the extreme left ??

People who create their small companies, either without employing anyone because its so expensive because of the taxes, or with some workers.

Now, Its not fair for them to have to pay 50 percent taxes on what they earn.

Thus, they have to pay for their retirement (in the form of taxes), and most of it won't come back to them, but will pay the retirement of lazy people.

Thus, these people don't have the 5 weeks of payed holidays, and they sometimes cannot afford 5 weeks holidays because of the high taxes.
And worse, for farmers, they can't go on holidays because they have no-one to take care of their farms while.
And, these payed holidays should not be, the slogan of the french republic involves 'equality'. Is it equal for one to be able to have 5 weeks of payed holidays thus working only 35 hours per day, and the others working probably 2 times more, without payed holidays, and giving 50 percent of their hard work to the government (in final not earning that much more than a worker)
For example , my dad who is a doctor (8 years of hard study) , only gets a few more euros than a plumber (because of taxes)

Communist have often claimed that the companies were exploiting the workers. In France its the workers who exploit the companies. (not saying that all workers are like that, but there are quite a lot)

So, in conclusion , the workers have nothing to complain about (even if they still do). Its the Others who should.

 

[russ_watters]

If an individual is unable to pay his debts, or refuses to pay them, some officials can take his stuff and house away, and put the person in some service, or something like that... If a country refuses to pay its debts, then what? There is nothing above the big countries, so it looks like different kind of debt to me.

If a country decides they aren't going to pay their debts, their economy implodes instantly.

The debt is in the form of bonds. You buy a bond, in a year or ten years, the government pays you back plus interest. If the government announces one day they aren't going to pay you back, the bond is now toilet paper. Worthless. People who buy and sell bonds on the open market stop trading them, the country's currency itself then becomes worthless, the money that is represented by these bonds doesn't get spent on the economy, and the economy stops. It would be a disaster.

Now you'r right that banks get collateral when giving out loans, so they are protected, but that doesn't protect them completely. Giving a loan to someone with bad credit in a bad housing market works the same as what I said above, and it did drive banks out of busines.

 

[Gokul43201]

France ranks #184 in GDP growth¹ and #3 (within the OECD) in unemployment². I imagine these numbers might start to improve after a few years of Sarkozy.1: http://www.nationmaster.com/graph/eco_gdp_rea_gro_rat-economy-gdp-real-growth-rate
2: http://www.nationmaster.com/graph/lab_une-labor-unemployment

 

[russ_watters]

If I've understood correctly, there's a some kind of inequality problem in the France, and this is encouraging people to the extreme left.

I'm not sure what inequality you are talking about it, but France has one of the smaller income inequalities in the industrialized world. And that's the problem - not enough inequality. Unemployed? No biggie - the government will keep you out of poverty. No need to look for a job. Have a job? Great, you're invincible - no need to work hard, you can't get fired!

 

[JPC]

I'm not sure what inequality you are talking about it, but France has one of the smaller income inequalities in the industrialized world. And that's the problem - not enough inequality. Unemployed? No biggie - the government will keep you out of poverty. No need to look for a job. Have a job? Great, you're invincible - no need to work hard, you can't get fired!

Yes i know.
And man, for what's contradicting is that its like so dramatic for them if theyre fired. I don't understand them , i wouldn't like to work all my life in the same company. And why they even making a big deal if they receve money from the government if unemployed. And this money that they receive is at the expense of hard working people, they should be greatful to them instead of striking against them.

And also another problem in france , its a democracy , but you cannot do what you want. For example you have to prepare your retirement with their system where you have to pay retirement taxes , where they would send it back to you little by little once you are retired. Well what if i just want to put money aside by myself, that i don't want to be assisted. If at retirement i use it all up in 3 years and after have none left, well its my problem. And this money, if i die before i have used it all up, it would have gone to my children , instead of staying in the government's pockets.

 

[jostpuur]

what, inequality pushing people to the extreme left ??

I'm not sure what inequality you are talking about

I don't know. I've merely been listening to people talking. You know its the complaining that leftists usually do the best. Most of my friends are leaning towards left in politics. It's in fashion over here :/ I'm staying out of it, because it would cause too much harm on me. I have other things to do.

 

[Art]

France ranks #184 in GDP growth¹ and #3 (within the OECD) in unemployment². I imagine these numbers might start to improve after a few years of Sarkozy.1: http://www.nationmaster.com/graph/eco_gdp_rea_gro_rat-economy-gdp-real-growth-rate
2: http://www.nationmaster.com/graph/lab_une-labor-unemployment

They're not far off the average GDP growth for developed countries.

 

[EnumaElish]

Debt doesn't work fundamentally differently for countries than for individuals or businesses. Few people have enough money lying around to buy a house, so they get a loan. I bought a house last year and had only 10% of the cash that the house cost, so I got a loan that will take 20-30 years to pay off.

Actually there is one aspect in which a country's debt is different from private debt. Depending on the denomination, a country can choose to pay its debt by printing money. As long as they are prepared to live with inflation for a long time.

 

[EnumaElish]

Ok , and now you wonder why France hasn't collapsed yet

Also, France's "special relationship" with the French-speaking peoples (e.g., Africa) doesn't hurt, I am sure.

Actually, all of Europe did collapse, before it was Yankee'd back to its feet following WWII (think Marshall Plan).

 

[mgb_phys]

Unemployed? No biggie - the government will keep you out of poverty. No need to look for a job. Have a job? Great, you're invincible - no need to work hard, you can't get fired!

France has (had?) a unique system where your unemployment benefit was linked to your previous salary. In theory fair because it related to your tax paid, but it did create a scam where you paid someone to hire you at a high salary then make you unemployed soon after.

 

[Gokul43201]

They're not far off the average GDP growth for developed countries.

Among the 30 OECD countries, France is ranked #27 for GDP growth. The mean growth rate among these countries is 3.83%, and the standard deviation is 1.62%. France, at 2.1% (which, is itself a "lucky" choice for France, whose average growth rate over the last 5 years has been only 1.6%) is more than a standard deviation below the mean. I think most people would consider this pretty far below average.

 

[russ_watters]

France has (had?) a unique system where your unemployment benefit was linked to your previous salary. In theory fair because it related to your tax paid, but it did create a scam where you paid someone to hire you at a high salary then make you unemployed soon after.

The US has a similar system. But you have to work for a certain amount of time before you qualify for unemployment at that salary basis.

 

[JPC]

yes but see
The difference is that most people in america get a job way faster than in France
and some in france even try all sort of things to not get a job
some do that, and go to live in thailand for example, where life costs less, and just go back to france to get the money

The solution would be :
- make it easier to fire and to hire (you loose your job, no big deal you'l get another one tomorow)
- make sure , once the government finds you a job, that if you refuse it you don't get money from the government anymore (for now , you can refuse 3 times)

 

[Art]

Among the 30 OECD countries, France is ranked #27 for GDP growth. The mean growth rate among these countries is 3.83%, and the standard deviation is 1.62%. France, at 2.1% (which, is itself a "lucky" choice for France, whose average growth rate over the last 5 years has been only 1.6%) is more than a standard deviation below the mean. I think most people would consider this pretty far below average.

Only if they didn't understand the principles behind standard deviation and it's main purpose which is to measure the degree of variability in a data set. The reason the Std dev is small is because all of the developed countries are clustered around the mean as opposed to the world set wherein variability ranges from +34.5% to -4.5%

 

[russ_watters]

The point of focusing on developed nations only is that developing nations can have double-digit growth for a little while because they have so far to develop. But it isn't sustainable or stable. So it isn't reasonable to compare developed and developing nations. The point then is that among nations with mature, stable, developed economies, the French aren't doing well.

 

[Gokul43201]

Only if they didn't understand the principles behind standard deviation and it's main purpose which is to measure the degree of variability in a data set. The reason the Std dev is small is because all of the developed countries are clustered around the mean as opposed to the world set wherein variability ranges from +34.5% to -4.5%

Of course, the standard deviation is small compared to the dataset with all the world's countries. But you can't take the mean from one dataset and the standard deviation from another. That's just bad math. You said France is pretty close to average among the developed countries, and it turns out they are in the bottom 10%, and that is itself generous, because the growth data comes from a year that France had a GDP growth that was well above its 5-yr moving average.

 

[vanesch]

I'm not sure what inequality you are talking about it, but France has one of the smaller income inequalities in the industrialized world. And that's the problem - not enough inequality. Unemployed? No biggie - the government will keep you out of poverty. No need to look for a job. Have a job? Great, you're invincible - no need to work hard, you can't get fired!

This is what makes life so great in France, and allows me to spend time on PF

 

[vanesch]

I think views are a bit distorted. France is more capitalistic than you might imagine, and actually there's even a quite unhealthy mix between officials and private business which make that big business has a very strong lobby. France has quite a lot of very big companies which do very well (and doesn't hesitate to use political power to boost business - especially abroad). Think of Total, Areva, Carrefour, ...

On the other hand, in France there is a kind of "ideal of egalitarism" (which personally I don't like at all) which means that it is not politically correct to say that you make more money than your neighbour. If you work hard and are successful, then the idea (in popular culture, not in reality!) is that this is because you are more talented, and you should hence share this with your less fortunate countrymen. It has a nice name: "solidarity".

As such, you have solidarity in health care: the people who make more money pay more, and the people who make less, pay less, and health care is free. Same for education: education is (essentially) free. There have been movements that even housing should be kind of free (you pay if you make money, and you don't pay if you don't make money, or make less money).

Retirement is called "solidarity between generations": the current generation pays the retirements for the elderly of today, and our children will have to pay our retirement in the future. People who made a lot of money get somewhat more retirement, but contributed also much more in the past. So it is not seen as "money you put aside for your old days", but rather a kind of "tax" you pay now used to pay current oldies, and the next generation will have to take care of us.

With reasonable people, the system can work. But people aren't "reasonable". If life is bearable while living on the cost of others for a long time, it's clear that you'll have too many people living on the cost of others, and that there are not enough "others" left to pay the bill.

I think that in recent years - but only very recently - in general the French public started realizing that this system is too vulnerable to abuse in order for people to continue this way. Sarkozy is the VERY FIRST political figure in France who said such things, even cautiously, in the open. No other politician before him ever dared to say so, even if they were right wing, because they knew that the French kept to this ideal and that it would be political suicide to touch this. Chirac, for instance (from the same political family as Sarkozy - the conservative right), never publicly put in doubt the "principles of solidarity". He just said that in order to PRESERVE the system, that some excesses should be reduced.

There is of course a lot of resistance to any change, especially by all those people who take advantage in the current system, or who are still idealistically devoted to this idea of "solidarity". In many countries, social care is seen as a kind of "temporary help to get you up and going again after something bad happened", but in France it used to be seen as a (permanent) "redistribution of wealth". Especially young people are fond of this idea, it's a deep ideological thing, and will take time to change. But it is changing...

 

[vanesch]

France has (had?) a unique system where your unemployment benefit was linked to your previous salary. In theory fair because it related to your tax paid, but it did create a scam where you paid someone to hire you at a high salary then make you unemployed soon after.

Well, that system is pretty much everywhere the same in Europe. I personally don't think that the French unemployment system is so bad. You get something like 80% of your last salary, but only at most for 2.5 years, and only if you've worked long enough. Now (and this was a big discussion), you're not allowed to refuse more than 2 or 3 offers that suit you.
However, what's not working well is the public service of helping unemployed find a job ; this administration is being cleaned out right now, to turn it into a more efficient system that HELPS people find a job (by helping them write up a CV, having a good database of job offers, have councellers to assist them etc...).

However, what you have in France, is that after you've used up your 2.5 years of unemployment fee, you get another allowance which is some kind of "minimum revenue" which you get for the rest of your life if you don't work. Ok, it is not a large amount of money, but nevertheless. You also get, if you are in this system, a priori to get (almost free) social housing etc...
Now, most people who fall into this system are really people who have difficulties: lone mothers with several children of lower age etc...

But there are also abuses. I have a distant family member who is quite wealthy, but who works every 2.5 years for about 9 months or so, just to get up to her "right for unemployment allowance". Then she takes whatever it takes to get fired or something, gets the allowance for as long as it lasts, and then takes on another short, well-paid job. Her real occupation is in real estate, and this is "state pocket money". The worst thing is that (apart from her intentions) it is completely legal (and she has a lawyer assisting her in all that).

 

[vanesch]

The solution would be :
- make it easier to fire and to hire (you loose your job, no big deal you'l get another one tomorow)
- make sure , once the government finds you a job, that if you refuse it you don't get money from the government anymore (for now , you can refuse 3 times)

This "3 times refusing and you're out" is in fact pretty new and gave rise to a lot of protesting. Before, you could refuse as many times as you wanted.

But it is not true that all people who are unemployed are unwilling. I have known many people who really wanted to work, and it is simply not easy to find a job. The system is a bit locked up: as it is difficult to fire, it is also difficult to hire. For those that are "in", this is a security, for those that are out it is "bad luck". Usually, to get hired somewhere, you need to know people, you need to use your social network. Jobs are often given out as "cookies" to friends and relatives. The only "clean" way is often the entrance competitions in public service, for which France is well-known. They are because of market mechanisms (few places, lots of candidates) extremely hard! If you want to be a postman, you better have your masters in history or something, because the entrance competition is on general culture (a written exam). But once you're in, as long as you don't kill your boss or something, you're in for life. So French society is EXTREMELY competitive around 18-25 years: you play all your cards at that age, it determines where you will end up, and once you're in, you're in for ever. This is really rooted deeply in the French system. Sarkozy also wants to tackle that - only, I'm affraid that he's killing the good parts of it, and not solving the problematic parts.

 

[Art]

The point of focusing on developed nations only is that developing nations can have double-digit growth for a little while because they have so far to develop. But it isn't sustainable or stable. So it isn't reasonable to compare developed and developing nations.

Err yes that was the point I made in my first response to Gokul. Good to see you agreeing with me.

The point then is that among nations with mature, stable, developed economies, the French aren't doing well.

The question posed in the OP is why the French economy has not collapsed and when one sees that France fits comfortably into the very narrow band of growth for developed countries the answer becomes obvious.

And before becoming too 'holier than thou' when criticising France's social structures and it's 2.1% growth rate bear in mind the latest forecast from the IMF for US growth in the coming year is 1.8% (down from it's 1.9% this year ) against a world economic growth rate of 4.8% and the risk is on the downside as that's if the credit debacle sorts itself out quickly otherwise it's recession. They also say despite the already huge fall against the Euro the $US is still overvalued. As you know a strong currency is a reflection of a strong economy and vice versa! You will also find France's inflation rate was a full % point lower than the US's in the current year and this is expected to be repeated next year. No doubt French posters on here will be happy to tell you where you are going wrong .

 

[vanesch]

Err yes that was the point I made in my first response to Gokul. Good to see you agreeing with me. The question posed in the OP is why the French economy has not collapsed and when one sees that France fits comfortably into the very narrow band of growth for developed countries the answer becomes obvious.

Well, things could be better, but it is not as bad as it seems. As I tried to point out (maybe I failed), most of French "communism" resides in some idealized public opinion, not in real business (which is rather capitalistic). But this has side effects which have put some burden on the French economy, which is too fat and too inefficient a state administration, maybe too high taxes, and too much social security which kills some motivation. All this grew out of good intentions, but was mixed with too much zeal and abuse in the past. But my impression is that winds are changing here, and Sarkozy is probably the incarnation of that change. It will take some time, but I have the impression that things are in general, going in the right direction. Of course there will be some battles (especially with the very powerful unions), and it will take a very able politician to get his boat through the mine field. We'll see.
France might then settle for about the right mix in social wellfare and initiative. I'm pretty hopefull in fact. But, as I said, it will take some time to get the old ghosts out.

 

[JPC]

Well, things could be better, but it is not as bad as it seems. As I tried to point out (maybe I failed), most of French "communism" resides in some idealized public opinion, not in real business (which is rather capitalistic). But this has side effects which have put some burden on the French economy, which is too fat and too inefficient a state administration, maybe too high taxes, and too much social security which kills some motivation. All this grew out of good intentions, but was mixed with too much zeal and abuse in the past. But my impression is that winds are changing here, and Sarkozy is probably the incarnation of that change. It will take some time, but I have the impression that things are in general, going in the right direction. Of course there will be some battles (especially with the very powerful unions), and it will take a very able politician to get his boat through the mine field. We'll see.
France might then settle for about the right mix in social wellfare and initiative. I'm pretty hopefull in fact. But, as I said, it will take some time to get the old ghosts out.

Yes, I hope he will be able to step France out of it