Will the economic impact of the Olympics for France ensure a rebound in French growth after the 0.3% growth in the second quarter of 2024?
That would have been the case without the dissolution because a small momentum could have been created with a recovery in consumption driven by a moderate increase in real wages and continued business investment efforts. The third quarter will be slightly better than it would have been without the Olympics, but it won't be sustainable. The dissolution has created an uncertainty that is even more unbearable because it has strengthened the parties that want to tax capital—return of the wealth tax—whose main component today consists of company shares. These parties promise a revival of activity while announcing a considerable tax increase on those who are at the heart of economic activity: entrepreneurs who determine productive investment efforts, engineers, and innovators in new technologies whose incomes would be drastically reduced by a significant increase in income tax. These destructive reflexes against effort and excellence, rooted in an economically and intellectually closed world, do not even imagine that all these wealth creators are entirely mobile and will settle in more welcoming countries, which will destroy the dynamic of wealth creation. The June 2024 dissolution will remain, like the one in 1997, a textbook case of political blindness causing massive damage to the country.
The French celebrated their champions. Can this have a more long-term effect on national cohesion in a country that has been deeply fractured for years?
The fractures undermining national cohesion are deep, even if the French people can come together during exceptional events that are not manipulable by politics, like the Olympic Games. The central problem is that we are no longer capable of long-term action in key areas of economic competition, excellence in education and research, or the return to republican order. We love effort and discipline in sports but not in economics. In economics, the political body and the media mainly focus on redistribution in a country that is already one of the least unequal in the world due to massive redistribution. France indeed holds the world record for social protection with a public social expenditure of 34% of GDP compared to 28% of GDP in the rest of the Eurozone and 24% of GDP for the OECD. Yet it is never enough, as shown by the fiscal project of France Insoumise. If we were at the Eurozone average, the public deficit would disappear. In education, all the reforms implemented over the past three decades have resulted in breaking down pathways of excellence and lowering standards, particularly in primary school, with the effect that 17% of students leave primary school without mastering the three basic skills (reading, writing, and arithmetic). In republican order, the measures already implemented in Sweden or Denmark are immediately presented in France by the media and the left, even the center, as liberticidal. By celebrating our champions, the French implicitly called for the implementation of a long-term policy of excellence, something the political class has refused to do for too long to restore lasting national cohesion.
Employment is declining in the United States; is the world's leading economic power heading towards a recession? A further drop in U.S. rates seems inevitable in September… Financial markets are worried…
Job creation has slowed down in the United States after a long prosperous period, but I don't think we are on the brink of a recession because the United States is competing for global dominance with China. They will continue to invest massively in their defense system, in catching up on microprocessor production, and in a supply-driven ecological transition. Moreover, the U.S. population continues to grow, and consumption will remain dynamic in the long term. But you are doubly right about interest rates. Not only will they fall, but it is because the Federal Reserve did not lower them at the end of July that we experienced a financial storm in global markets in early August. It was a warning from the markets to the Fed that they need to stop delaying the downward adjustment, which should occur in September.
Germany cannot seem to get out of its economic stupor. Is this country permanently the "sick student" of the Eurozone? What are the consequences for the French economy?
Germany operated for twenty years on a model of importing cheap Russian gas and exporting machine tools to Asia, particularly China, which was building its colossal manufacturing industry. But China no longer really needs Germany as it has replicated the production of German machine tools in its own giant factories. In the automotive sector, the rise of Chinese electric vehicle production is destabilizing the powerful German automotive industry. However, I am not fundamentally worried about Germany in the medium term because it still has powerful industrial and technological groups and is investing massively in digital technology, much more than France in building microprocessor manufacturing plants, for example. Its medium-sized companies, the ETIs, are twice as numerous as in France and remain dynamic. Germany is gradually evolving its economic model, not spectacularly but genuinely, and we will see the first effects in the second half of this decade. France should continue to invest and modernize if it does not want to be left behind.
With the current political crisis, how is the social return to work shaping up in our country?
I am much more worried about the political situation in France than about any other issue besides the war between Russia and Ukraine. We are the only major European country with a double deficit, an external deficit, and a massive public finance deficit. France is dominated by a sterile ideology of redistribution without considering the imperative of production, which alone can provide the sustainable and well-paid productive jobs that the people demand when they prioritize purchasing power. Above all, there no longer seems to be any affectio societatis in the country, with the extremes, totaling more than half of the votes in the last legislative elections, shouting at each other or even physically excluding one another, as seen in the July elections for the National Assembly office. With a largely delegitimized president and a National Assembly without a majority, France appears politically like a ship adrift. I am very angry to see irresponsible politicians destroying the country's future when we should be accelerating investments in the future and structural reforms to make France a competitive and dynamic country again. The evolution of the CGT towards an ultra-political Marxist union will not help. If the people do not wake up, as they did during the Olympic Games, the future will be bleak.
Interview by ERE
(*) University economist
Latest book: "The Sino-American Conflict for Global Domination" published by Editions Alpha.