France must tackle its problems upstream – Natixis

According to Patrick Artus, Research Analyst at Natixis, France’s economic policies treat the country’s problems downstream: very large public transfer payments to households to bolster their incomes, subsidies for companies to prevent them from disappearing and to bolster employment; massive redistributive policies to reduce income inequality, when primary inequality (before income redistribution) is very high.

Key Quotes

“These policies, which address France’s problems downstream (low incomes, low profitability, unemployment, inequality) have now reached their limit: in place since the 1970s, they have led to continuous rises in public spending and the tax burden and, due to the very high level of corporate tax, they have aggravated France’s structural problems (low employment rate, high structural unemployment).”

“It is therefore time for France to start treating its problems upstream: getting production to climb up the value chain, lifting labour force skills and a modernisation of corporate capital would lead to market share gains, higher incomes and lower primary income inequality.”

“To this end, the government’s role is to reform the training and education system, introduce a tax system that is conducive to investment in technology and eliminate rents that impede innovation.”