We can see it clearly today: the gap is getting bigger between the EU and the US. The EU forgot that productivity and energy costs were two very important points for economic development…
We talked a lot about the harmful policies that the EU has introduced with regard to energy, such as the commitment to develop renewable energy or the scrapping of nuclear power. The US today enjoys much lower energy prices thanks to shale oil and gas, which favors its consumers and businesses. JD Vance, Trump’s vice president, even said that he did not understand why the EU destroyed its industry with green policies. Simple observation of common sense shared by German industrialists and business leaders.
But beyond the price of energy, which can only be solved for Germany by a relaunch of nuclear power or an end to the war between Ukraine and Russia, there is another problem: productivity.
Sweden has made it the leitmotif of its economic system, unlike France. Thus, in a report published in 2022 by the Council for Economic Analysis, it is noted that France fell by 7 points in productivity between 2003 and 2019, which is more or less the difference in GDP per capita between the two countries in these years.
Serious decline in educational attainment in France
The report shows that France suffers from a deficit in human capital, from unoptimized education of its citizens and from excessive taxation of businesses. This report shows that France is suffering from educational attrition and that students should be directed more towards science and innovation. A crucial point considering that many politicians and civil servants are educated at Sciences Po or ENA, two schools that do not excel in science subjects.
We see this clearly in the overrepresentation of administrative staff in France compared to people who actually work to build, create, develop.
“The slowdown in the growth of the level of primary education – following the strong democratization of education between 1975 and 2000 – explains more than half of the decline in productivity since 2000.”
In short, we should completely review the system put in place to no longer select students, especially at the BAC and higher education levels, Parcours Sup being the pinnacle of this trend of non-selecting students. The report even notes that for the best students there is a dropout compared to other countries.
“The supply of skills in France is low today and has fallen over the past decades, even for the best students”: the observation is there. Despite the billions spent on national education, the results are not there.
The report also suggests better focusing business support on SMEs and VSEs, which currently mainly benefit from large companies via the research tax credit. “In the period from 2004 to 2019, France lost 7 points of GDP per capita compared to Germany, and the relative decline in productivity explains about 5 points. Compared to the United States, the decline in productivity is even greater, about 7 points, which roughly corresponds to the decline in French GDP per capita compared to the U.S. According to the OECD, France would be one of the countries where productivity increased the least between 2017 and 2022, with a GDP per labor hour of -3%, the 2nd worst score among OECD countries .Ireland, Latvia and Bulgaria are in the top 3 places.Thus our observation calls into question the traditional diagnosis of French economic downgrading, according to which productivity remains high and the main problem would be a low employment rate… Growth has fallen mainly due to low productivity gains in the companies themselves not due to a decrease in reallocations,’ states the report.
There are obviously still other problems, such as the very high cost of taxes, which weigh on wages. The net wage is strongly reduced in France, especially for the highest wages compared to Germany (see below). To obtain a net income of 27,326 euros (excluding contributions and taxes), the employer pays 59,458 euros gross, according to the Molinari Economic Institute. Furthermore, a large part of the pension deficit for public employees, i.e. 53 billion, is paid by all employees in the private sector contributing twice to their pensions and the public employees. Unlike Sweden, the schemes have not been harmonized or even the contributions. In Sweden, a public and private employee receives a fixed percentage each year of the amounts paid during their career, which is much fairer. But Sweden is a competitive country, ranked 9th in the world in terms of economic freedom compared to 52nd for France.
Since the job market is open, the best engineers go where the pay/purchasing power is strongest, either in the US or in other countries in Europe and Asia. There are many excellent French engineers in Silicon Valley.
With this policy, France keeps its administrative staff and exports its best engineers and business managers, which can only lead to bankruptcy in the long term in a competitive world that is about to happen like Greece.
In addition, we can clearly see that France and the EU have abandoned their high-tech industries. France, for example, sold Alcatel, one of the only high-tech companies in telecommunications and networks. Europe or France has no company capable of competing with GAFAM in the fields of social networks, web search, chips or smartphone manufacturers. But in the 60s, 70s and 80s my France was one of the world’s leading telephone manufacturers and produced some of the best digital technology in the world.
It is time to focus on science and new technologies because the gap is widening and soon the EU and France will no longer be part of the developed countries if they do not position themselves on 21st century technologies. France must also radically renovate its economy by inventing new political parties, where the right and left parties have pursued roughly the same policies since 1975, namely public deficits and increased debt. Curiously, although Gaullism had been a huge economic success, no party followed General de Gaulle’s line. But wouldn’t it be deliberate because France was powerful at the time? De Gaulle’s leitmotif was that withholding taxes should never exceed 35% of GDP: we are far from that.
SOURCE: Business travel.
