France – a troubled and obese welfare state

By admin
3 Min Read

Discontent among French citizens is apparently bigger than expected, reaching far beyond the fuel tax issue. The tax increase itself couldn’t jeopardize living standards of the French. The problem is, people think they spend increasingly more on taxes while public services do not improve.

Regarding the taxes, they have every right to feel under pressure. France is the second most expensive welfare state after Denmark as its tax revenue accounts to more than 45 percent of its GDP. Already back in 1965, France had tax-to-GDP ratio of 33 percent, which is approximately what the Czech Republic, Poland and the UK have now.

But at the same time, with 31.5 percent of its GDP, France spends the most on the social welfare, leaving behind above-mentioned Denmark. When socialist Mitterrand took office in 1980 with a support from the Communists, his radical leftist government started to spend public funds generously. A habit adopted by all following administrations. Economically speaking, these days every French politician is to some extent a Communist.

The French also love their welfare state and vote for those who sustain it. Therefore, even the far-right Marine Le Pen has a leftist economic doctrine and there is not a single relevant politician who supports economic liberalism. French people demand a social welfare but someone else should pay for it – businessmen, bourgeoisie and the wealthy.

Because taxation has its limits and France spoils its prominent companies, funds are to be found elsewhere. France has a national debt of 97 percent of its GDP, debt of French private companies accounts to 193 percent of its GDP, and household debt is also high etc. All in all, it means that any reform will be hard to sell to the public. Thus, France has to constantly increase its debt in order to feed the obese welfare state.

There is another dimension to this problem. While France is proud of its education and research, economic literacy of its citizens isn’t great. According to a Standard & Poor’s survey, only 52 percent of French adults understand fundamental concepts for financial decision making, such as compound interest and risk diversification.

Share This Article