Why France’s Financial Woes Are Pushing Its Government to the Brink. The French prime minister has proposed drastic spending cuts and tax increases to shore up the country’s accounts, but his plan could backfire.

2 comments

1. Doubling down on neoliberal solutions does not resolve disorders of inequality. The false assumption is that providing greater incentives will get those who already own almost everything to invest more and create a bigger, more productive economy, while cutting life support for most people who are just getting by. That only creates greater inequality, and shrinks the capacity of the economy to meet real needs.

   Of course an economy cannot consistently spend more than it produces. But if we look at the real economy — not just the financial metrics — the best way to economize on real resources is to tax those who get the cream to provide abundant public goods, which would allow most people to live better on less. Best example is to build so that people can use reliable desirable public transportation rather than congest and pollute in private vehicles at escalating cost.

   When people have the sense that the wealthy are paying their fair share, and that public goods are worth using, it becomes possible to have genuine reforms, associated with greater equality of living standards,

   Is that vision too idealistic? Perhaps. But the alternative is a dead end, which will only lead to social conflict and failure, or fascist order in the defense of great wealth.

2. This is demographic collapse in full display here.

   France spends $400 billion Euros a year in pensions alone. That is 14% of the GDP. There is no way for them to tax their way out of this crisis. If the French government were to outright confiscate France’s largest company by market value LVMH and magically transform its current market cap into hard cash (not possible, but let’s do it as a thought experiment) that would cover about 6 months of pension expenses. Not a year, just six months, and then LVMH is gone. L’oreal and Hermes International combined could cover another 6 months of pension expenses and then the French government would start running out of large companies to confiscate.

   And before people get their pitchforks out, I do agree that our current tax system is unfair and the rich should pay more. But taxation alone is nowhere near enough to get countries out of the hole once the demographic pyramid inverts, as we are seeing it now.

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