The economic system of France strongly resembles the German one. There is also a socially-oriented model of the economy, in the center of which is the “welfare state”. It is because of the high role of the state in the country’s economy that such a system is often called the statist model. The role of the state in the French economy is evidenced by the following facts: the state redistributes 54% of GDP, and the number of people employed in the public sector is 24% of the total number of employed.
The largest French TNCs (oil production and refining, automotive industry, electronics, etc.) are, first of all, enterprises with a state share of participation.
A social market economy with elements of statism smoothed out the negative features of capitalism in France, and the state stood on the protection of the interests of the working people. The strong traditions of the socio-market economy, especially in the post-war period, contributed to the acquisition by the French of significant gains in the social sphere.
However, the modern economy of the country is developing in new conditions: the globalization of the world economy and the unification of Europe have a significant impact on the national economy. Successful global development now requires economic liberalization, deregulation, and new technologies that can serve as a scientific and technological basis for economic growth.
In France, as in Germany, economic development is hampered by social safety nets, brain drain and public finances.
Since 1968, the system of social guarantees has consisted in the fact that the salaries of civil servants were much higher than those in private business. They were not subject to reduction, they retire at the age of 50-55, the level of their pension exceeds the level of wages. Unemployment benefits are also higher than the national average wage. However, all these positive social guarantees have not stopped the aging process of the population and growing unemployment. The unemployment rate in the country in 2000 was about 12-13% of the economically active population.
Social guarantees are financed mainly by taxpayers. Not only indirect and individual income taxes are high in the country, but also social contributions of entrepreneurs. For example, if in the United States social contributions are only 6.3%, then in France – 19.3% of the country’s GDP.
Pensions and unemployment benefits weigh on the working. Thus, working French people support pensioners and the unemployed, and in some enterprises one worker supports not only himself and his family, but also at least two pensioners. It should be noted that high social guarantees exist only in the public sector of the economy. The difference between the public and private sectors economically exists not only in the level of wages and guarantees. In France, an almost negative attitude towards private entrepreneurship has long been formed. The civil service is still considered the most promising, and all the French seek to enter it. Due to the high level of wages and a set of social guarantees in France, even such professions in the public sector of the economy that are considered non-prestigious in other countries of the world are popular, for example: construction workers, laborers, etc. Access to public service for foreigners is closed. Higher educational institutions of the country also focused on the professional training of civil servants. Even in the field of R&D, the state provides support, subsidizes the public sector, and venture business as an engine of scientific and technological progress and applied technologies is not encouraged. The state does not pay due attention to the development of the technological base. Civil servants are not interested in freeing up high-paying jobs as a result of the use of new technology and new management methods. The French management model ultimately suffers from inefficiency, encouraging arbitrariness and corruption among public officials, and, of course, restrains scientific and technological progress.
Brain drain is also characteristic of France. Higher education institutions train mainly government officials. The isolation of the system of higher and vocational education from the problems of the development of private business leads to the fact that graduates of educational institutions, not finding a job in the public sector, remain out of work, cannot find a job. As a result, the most promising and educated young people find no demand in the labour market and prefer to work abroad. For example, in
In 1997 , a fifth of French university graduates preferred better than in France, and higher-paying jobs (with low taxes) in the United States and Great Britain.
The problem with public finances in the country is that the financial performance meets the Maastricht criteria for currency convergence of 3% of the budget deficit and 60% of public debt in relation to GDP. Nevertheless, the modern social market system of the country is able to worsen these indicators after some time. This is reflected in the fact that the pace of economic growth is slowing down, employment is declining, the number of pensioners and the level of social incomes of the population is growing. The existing balance of the country’s financial system may be disturbed if appropriate changes are not made to the economic course of the government. This reduces France’s competitiveness in both the global and European economies. The high cost of French labor, as in Germany, makes manufacturing in France unprofitable for both national and foreign companies. They seek to find a country with a more favorable level of taxation and a more flexible labor market. There is no incentive in the country for the development of the private sector, which, at present, serves as the engine of the economy in almost all developed countries.
Thus, the socio-market model of the development of the French economy needs to be changed.
In the 1990s, France’s economy went through two phases of reform. The first stage of transformations was associated with an attempt to introduce neoconservatism into the economy (reforms of A. Juppe). The task of the neoconservative reform of the social economy included: to overcome the crisis of the social system of the French economy, to reduce a number of social guarantees; to reach the level of the criteria of the Maastricht Agreement on the state of public finances of countries preparing to introduce the euro; carry out tax reform; to combat unemployment by increasing the flexibility of the labour market.
This program most of all concerned civil servants and meant for them the loss of the previous high social guarantees. Civil servants were against the reforms, and this caused a wave of protests across the country. The private sector supported the transformation, but could not act as consolidated as the unions of civil servants. As a result, the reforms were suspended. The only program that was carried out was privatization. Tax reforms were carried out and a new immigration procedure was introduced.
Hoping to gain voter support for neoconservative reforms, in 1997 the president called early elections to the National Assembly, as a result of which the left gained a majority and a new prime minister, L. Jospin, was appointed.
He and the left-wing majority of the National Assembly believed that for France, a country with long social traditions, conservatism according to American or British recipes was unacceptable. France has its own path of development, which does not imply elements of the old mechanism. The principles of the development of the French economy are being revised slowly, but, most interestingly, reforms in a neoconservative style began to be carried out by the left. Their transformations are called a “quiet revolution” in France.
The results are particularly tangible in entrepreneurship, and as a result, the role of the state in the economy is declining. During the restructuring, the interests of shareholders were primarily taken into account, and remuneration was gradually commensurate with the results of activities. In the labor market, the new government managed to solve the problem of resolving labor disputes. Greater flexibility was manifested in the wage system, in the strengthening of the single European currency through the strengthening of the French franc, in high technology. The state changed its previous position and began to encourage private investment in R&D.
Nevertheless, French society continued to oppose change, which naturally led to an increase in economic difficulties. If the economic growth of 1998 in the country was quite successful and the rate was 3.1%, then in 2000 – only 2.4% with the remaining high (11% of the population) unemployment. However, the government continues the course of the “third way” of France’s development. This means accepting the principles of a free market economy, but denying the principles of developing a free market society. And the French succeed. By 2002, government spending in GDP is expected to be reduced from 54% to 51%, and the budget deficit from 3% to 1% of GDP.