Since the announcement of the amount of France’s public deficit for 2023, at 5.5% of GDP compared to the 4.9% forecast, the sky seems to have fallen on our heads, with the government constantly announce the most rigorous reforms. Nothing new, however, under the sun, since our country is accustomed to exceeding the limit of 3% of GDP authorized by the EU. More broadly, France, for decades, has demonstrated its preference for high public spending, which equally high taxes can never match. As proof, the ratio of public expenditure to GDP rose from 14.4% in 1900 to 41.1% in 1950, then to 49.5% in 1972, up to 57.3% in 2023. This year- there, according to INSEE, public spending amounted to 1,607 billion euros. In this area, our country is among the world leaders.
To understand this apparently inexorable increase and hardly correlated, in recent years, with the increase in the quality of service, we must distinguish two phenomena, the dynamic inherent in rich countries and the singularity of French choices.
The existence of high public spending seems to be an intrinsic characteristic of advanced democracies. The modern State being synonymous with centralization of power, its perimeter increased all the more as the Leviathan had to respond to crises. When Alexis de Tocqueville wrote, in Democracy in Americathat “war does not always deliver democratic peoples to military government; but it cannot fail to immensely increase, among these peoples, the attributions of civil government; it almost necessarily centralizes in the hands of the latter the direction of all men and the use of all things”, he sagaciously exposed a reality that the following centuries would largely validate.
“Ratchet effect”
Economic theory confirms this. As the professor of economics at the University of Bordeaux Bertrand Blancheton recalls in a deep analyze, the American economists Alan Peacock and Jack Wiseman showed, in the 1960s, the influence of external shocks in the progression of public spending. “The demand for public intervention would be latent within society, he explains, but rationed due to the refusal to assume the fiscal cost. Faced with exceptional circumstances (war, financial crisis, pandemic), the financing of increasing intervention by administrations is accepted by the population. This level of intervention is subsequently sustained even if the nature of expenditure changes (for example from the military to the civilian after a war), the population being accustomed to a highest levy”. Through what these economists called a “ratchet effect”, it then becomes socially impossible to go back. In fact, after the Second World War, the oil crises of 1974 and 1979, the oil crisis subprime or the recent Covid-19 pandemic, expenses have increased and then no longer decreased.
On the other hand, according to “Baumol’s law”, named after the American economist William Baumol, the relative cost of services, including those of administrations, tends to increase. Indeed, productivity gains in the tertiary sector being negligible compared to those in industry and agriculture, and the demand for services tending to increase, the relative price of services compared to that of industrial goods and the share of services in the value of total consumption can only increase in the long term. In the end, explains Blancheton, “the taxpayer must agree to pay relatively more for the same public service since it was necessary to increase the salaries of public agents to align them with those of industry”.
A third theory, that of “public choices”, represented in particular by the Americans James M. Buchanan and Gordon Tullock, explains the progression of expenditure and levies by the role of pressure groups which demand public interventions whose advantages are concentrated and dispersed costs. In doing so, the rest of the population, who finances this intervention “at a loss”, cannot oppose these requests due to excessively high coordination costs and limited individual gains.
France, perfect candidate for spending drift
These mechanisms have found their perfect nourishment in the social developments of advanced countries. Since the 19th century, the sovereign mission of the State has been supplemented and then exceeded by its protective mission. The field of social protection, from unemployment to retirement to health, has continued to grow, due to social demand, increased life expectancy and advances in medicine. Today, the State goes so far as to finance energy and food dependence, the recent “energy shield” having cost nearly 24 billion euros. Sometimes it even becomes a “nanny state”, financing for example our repairs of shoes or household appliances, for an overall cost that is certainly modest, but which sets the bar for public intervention, each time, higher. The aging of the population, in this context, hardly helps, since it increases health and retirement expenses, reduces their financing base and slows down growth. Finally, a new risk has been added to the previous ones, climate change, with the cost of supporting the ecological transition by the State proving potentially exorbitant.
In this context, France stands out for having higher public spending than its neighbors. As Blancheton notes, “for several decades, the progression […] was driven by expenditure on social benefits”, i.e. old age, health, family, unemployment, housing and poverty. In 2021, this expenditure represented 45.5% of public expenditure then that investment spending only constituted 6.3%. In 2022, 31.6% of French GDP was devoted to it – an increase of 73% since 1973 -, compared to 21.1% of GDP on average for all OECD countries, 30.1% in Italy, 28.1% in Spain, 29% in Belgium, 29% in Finland and 26.2% in Denmark.
France proves to be a perfect candidate for spending drift. Covered by a centralized State, it can only want to persevere in its existence, the ratchet effect being permanent and little counterbalanced by counter-powers. As for the pressure groups, which take the place of “civil society”, they are numerous and listened to. Added to these offices is the symbolic weight associated with the National Council of the Resistance and its 1944 program, which strongly influenced our welfare state model. Based on the existence of a large and salaried active population, the latter seems ill-suited to an aging country where work is more precarious. This was precisely what was stated in Challenges the former boss of Scor Denis Kessler, who left us last year, in 2007. “Today it is about getting out of 1945, and methodically undoing the program of the National Council of the Resistance”, had- he launched, causing a scandal.
Think deeply about the role of the state
France, in this case, should undoubtedly refocus its public spending on its main missions which are defense, police, justice, health, education and research. In the short term, two candidates for weight loss stand out. Housing policy, which represents 1.3% of French GDP while the EU average is 0.7%, has an upward effect on prices and does not allow better access to housing. real estate. More broadly, certain social expenditures would no longer be necessary if the State further deregulated our economy, since the abundance of standards and constraints presents a cost ultimately borne by the consumer. Pensions, then, represent next to 14 points of GDP and are 3.4 points of GDP above the average of EU countries, to the point that French retirees have a higher standard of living than the active population and their Western counterparts. The latest pension reform, however, did not address this delicate subject in any way. On the contrary, it provoked the anger of many young people, who preferred to march in the street to defend a model… which impoverished them.
Above all, it is clear that the State, in France, and unlike Canada, Germany and Sweden at the end of the 20th century, has not carried out any in-depth reflection on the role that its administration must play in 21st century, and therefore on the prioritization of its missions and their scope. Quite the contrary, decentralization, for example, caused additional local expenditure, as if the administration itself produced its own needs, which it then had to fulfill, which necessarily led it to grow. It is wrong to accuse civil servants of not working enough; it is precisely because they work a lot that our administration is so expensive. Some reforms have been attempted. But the organic law relating to the finance laws of 2001, which aimed to better regulate expenditure, the RGPP carried out from 2007 under the leadership of Nicolas Sarkozy or even the modernization of public action launched in 2012 have not halted the upward momentum. This is not so surprising: simply wanting to “cut spending” without thinking deeply about the role of the State is doomed to failure, as the government’s recent announcements will undoubtedly be.
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