If we apply conservative American economic and political dogma to France, that country should have imploded decades ago.
Here’s a short list of France’s blasphemous offenses towards self-evident laws of prosperity, as defined by America:
• A debt-to-GDP ratio of 90%.
• Average GDP growth from 1978 to present of 0.5%.
• A top tax bracket of 45%. The new government has proposed a “millionaire surcharge” effectively creating a 75% top tax rate.
• Universal health care and national health insurance.
• Labor laws that require a 3 to 6 month process to fire an employee, after which the employer incurs further costs for up to an additional year if the former employee stays unemployed.
• Perpetually high single-digit or even double-digit unemployment rates.
• State investment and management of industry, highlighted by companies such as Renault, EADS/Airbus, France Telecom, and SNCF, the French National Railway Corp.
• $8 per-gallon gas.
But rather than imploding, France is doing just fine. That applies particularly to its middle class. Consider the following:
• All three of the giant American ratings agencies rate France AAA, as compared to S&P’s AA+ rating of the U.S.
• According to the last World Health Organization Survey of health care systems, France was rated No. 1 in quality and No. 4 in costs. By contrast, the U.S. health care system was rated No. 37 in quality and No. 1 in cost.
• French workers get full-benefits retirement at age 60.
• There’s five weeks annual vacation for all full-time employees, plus numerous national holidays.
• France has a first-rate education system.
• French national infrastructure is the envy of the world. This includes perfectly maintained roads and highways, the amazing high-speed train network (TGV), and ubiquitous broadband Internet.
Of course France has its problems. There are assimilation issues with the large numbers of black and Muslim immigrants from its former colonies. There are economic issues caused by the Euro crisis and EU integration, etc. Nevertheless, the French middle class is doing quite fine and there are few who have any interest in trading it for our American way of life.
I suspect that most Americans’ gut reaction to the above is to argue the French system is unsustainable. However, with a few adjustments along the way, the French system has been in place since the end of World War II. That is long-term sustainability.
How do they do it? I don’t have the answers to that one. But I suspect two factors play large roles.
The first is military spending. U.S. defense spending is larger than the next 10 highest countries combined! It accounts for 25% of our budget, and apparently, that does not include overseas spending. While France’s GDP is about 15% of U.S.’s, its defense spending is only about 3.5% of U.S.’s.
The second issue is whether GDP growth automatically translates into improving the lives of the middle class. Could it be American-style capitalism has evolved so the middle-class benefits of GDP growth are disproportionately small and on a trajectory to shrink even further?
The fact is that while U.S. GDP has been growing at a reasonable clip since 1990, the average middle-class income has been stagnant or dropping. This is a bipartisan phenomena, given that we’ve had 12 years of Clinton & Obama and 10 years of Bush & Bush during this period.
It’s time for the American middle class to reassess and question the economic and political dogma that has taken root over the last 30 years in the U.S. The Reagan Revolution has had a good 30+ year run, but times have changed.
We can’t keep tweaking the status quo and hope for fundamental improvements. America needs to find a visionary leader willing to prune away obsolete dogma and set a new course for the next 30 years.
That course should be a new American way. But the new way must take into consideration the modern hyper-connected world, and pay attention to what works in it — and what doesn’t.