What is happening with France

francois-hollandeFrance is in decline.

This is a natural consequence of the demographic equation. As French population in relation to the world population slowly decreases while its GDP growth is around or slightly above zero, so does it commercial, economic and finally political weight decrease. Meanwhile large countries like India, China or Brazil have both population growth and strong GDP growth. Hence they become more and more prominent economically and ultimately politicaly.

But both the French people and the political class seem to be unaware of this simple equation leading to the slow but inevitable decline of France on the international scene. They still act as if France was a great nation as at the time of Louis the 14th or Napoleon Bonaparte. More worryingly they do not seem to realize that if they do not get their act together and try to reform and improve French competitiveness in key markets, this decline will be faster and more pronounced.

French is now the 5th largest country by GDP. Of course the USA is still the number one with a large margin over number two China. Next are Japan and Germany and the top 4 are not expected to change in the foreseable future given the large difference in their GDP. But what France should be concerned about is the countries just behind it. The UK has more growth then France and it is close to surpassing it.  Brazil currently number 6 and India number 9 are certain to surpass France soon given their rapid growth.

One more disadvantage France has against these rising nations is that they are not plagued with a long tradition of social welfare. We know that the communist system as envisioned by Lenin or Mao Zedong does not work as shown by history. Likewise a socialist system with generous unemployement and retirement benefits is not sustainable when competing with more aggressive countries. China, India or Brazil do not provide this kind of protection to their workers. So yes life is a little tougher for their people, but it is much easier for companies which are not burdened by labor laws and costs like the French do. And the workers themselves do not get lazy, which is good for the economy.

Because this is an old tradition in France, every class of workers has its privileges and they all go to the street at the first sign that the Government is considering removing some of these privileges. For example some Government employees can retire at 55 if not earlier. Note that France is a so-called etatist system with a very large involvment of the Governemnt in many aspects of society. And they have about 5.5 millions government employees. All these people retiring earlier with large benefits must be paid by everyone else. With live expectancy reaching 85 years for women and 78 years for men, this is an immense cost for the economy.

No wonder taxes keep on rising for the past few decades. Such trend has recently reached a climax, leading to a flow of persons and companies leaving France for a better place like the UK or the USA.  That`s why people say that London is one of the largest French cities, with over 400,000 French people living in the British capital.

So will France wake up to the challenge and change its outdated ways of managing the economy and work force. Only time will tell, but it seems it will get worse before it gets better.

 

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