France and Fiscal Suicide, Part III

February 14, 2025 by Dan Mitchell @ International Liberty

1. In Part I of this series, I wrote about the size of government in France (it’s too big).
2. In Part II of this series, I wrote about the growth of government in France (it’s growing too fast).

For Part III of the series, let’s consider some of the consequences of France’s suffocating statism.

Using the Maddison database, I put together a chart showing inflation-adjusted per-capita GDP in France and three other countries from 1975 to the present.

Based on nearly 50 years of data (so no “cherry picking“), it’s apparent that France is falling further behind the United States and Switzerland And it’s definitely lagging behind Singapore.

If you’re wondering about the different growth rates in the chart, it all makes sense when you check out the Fraser Institute’s Economic Freedom of the world.

1. You’ll see that Singapore is one of the world’s freest economies, so its rapid growth is understandable.
2. You’ll see that the United States and Switzerland generally score in the top 10, so their decent growth is understandable.
3. You’ll see that France has much less economic liberty, ranking #36, so its slower growth is understandable.

By world standards, France looks good. Compared to other industrialized nations, however, it is not very impressive.

The reason we’re looking at France is that David Broder has a column in the New York Times that looks at France’s current malaise. Here are some excerpts.

François Bayrou, France’s fourth prime minister in a year, …acknowledged “all kinds of difficulties”: a debt mountain, political strife and, alarmingly, “the splintering of society itself.” …Mr. Bayrou is not wrong to talk of dangers. In France, malaise is all around: In one recent poll, 87 percent of respondents agreed that the country is in decline. …

The malaise is steeped in economic issues, …from energy-price inflation and low investment to the weakening of flagship industries. But it has a more fundamental cause: citizens’ declining faith in the state.

The much-vaunted French social model, a product of the postwar decades that combined state-led investment, welfare protections and labor rights, is foundering. Its slow capsizing has cast France into a deep hole from which there is no easy exit.

I’m not surprised the French model is “floundering.” Big government has never worked.

But here’s the part of the column that really grabbed my attention. Broder seems to think France doesn’t have to worry about a crisis.

For all its recent anxieties, it remains far from a Greek-style sovereign-debt crisis. If borrowing has risen sharply, the country has transgressed European Union deficit limits for much of the past quarter-century without risking economic meltdown.

What I want to focus on is whether France actually is “far from a Greek-style sovereign-debt crisis.”

Economists are lousy forecasters, so I freely admit that I don’t know when France will face a debt crisis. But reading the above sentences reminded me of the Authors’ Note in my recent book.

Here’s what Les Rubin and I wrote.

Imagine being a resident of Greece in 2007. Life seems good. Your nation’s economy has been enjoying strong growth, with annual inflation-adjusted GDP rising by an average of more than 4 percent over the previous 10 years. You have a job, the sunshine is warm, and the government provides you with lots of goodies. But there are some annoying people who don’t want to enjoy life. These Cassandras endlessly complain about government being too big. They whine that the government is spending too much, and that it is irresponsible to finance a big chunk of that spending with debt. They also make wonky arguments about an aging population and excessive levels of dependency. You dismiss these warnings.

Well, we know what then happened. And Greece still has not recovered. Its inflation-adjusted per-capita GDP today is lower than before the crisis. All because Greek voters and Greek politicians kept kicking the can down the road.  So I can’t help but wonder whether Mr. Broder is playing the role of my imaginary Greek citizen.

P.S. While I don’t like making predictions, I’m guessing Italy will face a crisis before France.