In France, we regularly proclaim the benefits of “attractiveness” and we loudly congratulate ourselves when external countries, such as Qatar recently, announce investments in its territory. However, we must understand that these investments prepare above all the predation of part of the work of the future generation. We also support the benefits of consumption in terms of growth, when this consumption is fueled by a high level of imports and therefore a trade deficit. However, financing this deficit requires France to deliver its public securities, its market capitalization and its real estate to foreign investors. We finally imagine, without qualms, moving to a 4-day week when the weakness of French production makes the country incapable of maintaining the share of its exports in world trade.
In fact, what France suffers from is not too low an attractiveness. It suffers from excessive demand which, not finding a sufficient national supply, focuses on imports. As a result, France accumulates external deficits, the consequence of which is a transfer of financial resources to its suppliers, and more generally to the rest of the world. As it cannot sell enough to cover the cost of its imports, it sells itself, its commercial partners using the proceeds of their sales made on its territory to buy its assets.
Concretely, France’s net foreign assets, that is to say the difference between the value of what the French hold abroad and that of what foreigners hold in France, continues to deteriorate. In 2001, this asset was slightly negative (-40 billion euros, or 2.7% of GDP).
Since then, to fill the systematic deficit in its current account balance, France has increased its net foreign assets which amounted, at the start of 2023, to -630 billion euros. In doing so, it is getting dangerously close to the ceiling set by the European agreements, i.e. 35% of GDP. It is also on the verge of joining the countries of Southern Europe, often singled out for their laxity. At the same time, Germany has a net external surplus of more than 2,000 billion euros, a surplus which tends to increase because it is fueled by a regular surplus in its current accounts.
Net foreign assets, justice of the peace between “holders” and “detainees”
More broadly, we must note that on the surface of the planet, there are “holding” countries whose net foreign assets are positive, and “holding” countries which have a negative net foreign assets. In practice, “old” countries have an interest in being “holders”. By generating current account surpluses, they invest in “young” countries, which are therefore “held”.
This process is generally positive. Indeed, the growth of “young” countries is supported by investments from “old” countries which provide them not only with financial resources, but also with cutting-edge technologies. In return, the “old people” benefit from this growth thanks to the remuneration of their investments. The case of Japan is particularly edifying. This country, which is the oldest in the world, has a positive net foreign asset of more than 3,000 billion euros, the income from which is used to guarantee the maintenance of its standard of living.
France, which is an increasingly old country, is paradoxically an increasingly “detained” country. As a result, its youth, which is becoming rare, will have to devote an increasing part of the fruits of its labor to remunerating foreign investors. France must reverse this trend and work more to produce more, sell more, and ultimately balance its external accounts. As for its leaders, they must concentrate their policy not on the appeal to foreign capital but on more rigor in the management of public finances whose deficit artificially maintains demand and absorbs savings which are lacking in productive investment.
*Jean-Marc Daniel is an economist, essayist and professor at ESCP.
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