For those of us on this side of the pond, France conjures up images of baguettes, beautiful women and lush countryside. For the French, the image conjured up might be taxes, taxes and more taxes.
More than 70 per cent of the French feel taxes are “excessive”, and 80 per cent believe the president’s economic policy is “misguided” and “inefficient”. This goes far beyond the tax exiles such as Gérard Depardieu, members of the Peugeot family or Chanel’s owners. Worse, after decades of living in one of the most redistributive systems in western Europe, 54 per cent of the French believe that taxes – of which there have been 84 new ones in the past two years, rising from 42 per cent of GDP in 2009 to 46.3 per cent this year – now widen social inequalities instead of reducing them.
Last year, the French government tried to implement a 75 percent tax on those earning one million euro or more. That got struck down, but it isn’t going away; it’s been suggested to lower it to 66 percent instead, as if that’s somehow more palatable.
The socialist economy of France is crumbling: with 25 percent of the entire nation’s workforce employed as a public servant of some sort, France’s young people either hope to get a government job or leave the country.
Today, one out of four French university graduates wants to emigrate, “and this rises to 80 per cent or 90 per cent in the case of marketable degrees”, says economics professor Jacques Régniez, who teaches at both the Sorbonne and the University of New York in Prague. “In one of my finance seminars, every single French student intends to go abroad.”
Even though France is not heavily unionized, the socialist economy cannot keep up with cost of pensions, short work weeks, and all the other perks it promised.
What went wrong, says Régniez, was a bill passed by the then socialist Lionel Jospin government reducing the working week to 35 hours. “Where our competitors, especially the Germans, saw the need to keep prices and costs down, France spent money she couldn’t afford.” The entire system, he explains, tilted fatally to the side of salary hikes, perks and a lowering of retirement age, in the face of every observable demographic trend. Investment slowed down in the private sector, and almost stopped in the public one. “Each year, France has missed out on four GDP points of capital investment. By now, after a decade-and-a-half, we are not only lagging behind, it’s not certain we can make up for it. It would cost a 4.5 per cent hike in VAT, and other significant hikes in payroll taxes. That, quite simply, is not realistic.”
Professor Régniez sums up France’s mess thus: “This should be a warning to other countries, like Britain…Think well: is ours the kind of future you want for your country?”
In Becoming Europe, Samuel Gregg examines economic culture - the values and institutions that inform our economic priorities - to explain how European economic life has drifted in the direction of what Alexis de Tocqueville called "soft despotism", and the ways in which similar trends are manifesting themselves in the United States.