Why France could implode.
This is Germany - the feedback loop of incentives to work to create wealth where a portion pays for a welfare state (a good thing) doesn't work anymore and it's getting worse, with this specific example. But now, let's compare it with France.
This is Germany - the feedback loop of incentives to work to create wealth where a portion pays for a welfare state (a good thing) doesn't work anymore and it's getting worse, with this specific example. But now, let's compare it with France.
France is a lot worse, the state is 60% of the economy vs Germany's 45% and it hasn't made a profit in half a century, so its debt is increasing.
And the cost to service that debt is increasing for France both because zero interest rates are ending and because the French debt is becoming more expensive than Germany's, meaning it has to cut spending or increase taxes.
And raising taxes is very hard as you can see here, because French taxes (where most are hidden in 'social charges') are already very high (red) compared to Germany (blue). So if you think Germany doesn't work, France really doesn't.
And reducing spending by making retirement ages the same as nearly every other country, caused violent unrest. This is despite the fact that retirements cost the state more than five times as much as the 70s as there are more old people for working people to support and people live longer, so it is the absolute fairest, low hanging fruit in terms of reform.
So the French have refused to accept reality, are voting out the most socially moderate and fiscally sound party for ones that are socially divisive and fiscally illiterate. Both the extreme Left and Right want to increase spending which will create a spiral of increased debt, increased cost of debt servicing, increased taxes and less incentives to generate revenue. This will result in a broken economic engine and a more divided society, which will further exacerbate social divisiveness and result in violence.
For those asking for the original source of the first graphic, which is an extreme, if real, special case, to illustrate the misalignment of incentives, It's is here
https://x.com/daveg/status/1805967502981169595
And for those asking what the underlying problems are and what the possible solutions could be, I talk about them in this interview. I fundamentally believe in the European model (relatively free markets balanced with a safety net) and it could be the identity that defines being European to keep people together. But the alarm bells are ringing and without the continued prosperity there is no welfare state. citywire.com/selector/news/…
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