An Examination of the French Economy

France is considered to have one of the top five economies in the world. They also represent about 20% of Europe's net gross domestic product, ranking alongside Germany. France's economy specializes in services, with this sector making up approximately 70% of the economy's value.

France is also considered a strong leader in manufacturing in Europe. They lead the world in automotive, aerospace and railway manufacturing as well as in other sectors such as luxury goods. Their focus on manufacturing likely stems from their large population that is very educated, and has the highest rate of engineering or science-related degrees in all of Europe. With a highly educated work force and deep specializations, France's economy is currently one of the most stable economies in all of the world. French Background

Many trace France's contemporary economy back to its post-World War II decision making. Dirigism, otherwise known as state control of social and political matters, was launched under the leadership of Charles De Gaulle'. The state controlled important industries such as communications, energy and transportation, and set up a planning agency to regulate economic activity.

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In addition, De Gaulle began to set France up as a welfare state, setting forth initiatives such as social security as well as work councils - two initiatives that still exist in France's government today. De Gaulle also set forth economic development plans such as the Monnet Plan, which focused on seizing German areas which produced coal and steel to bring French production beyond initial estimates before the war. These plans became a signature of De Gaulle's regime.

These plans would end up becoming incredibly successful, rocketing France into a new age of economic prosperity, deemed as "Les Treinte Gloriuses," The Glorious Thirties. During this period, France experienced high economic growth, productivity increases; GDP increases, and rises in wages and their earning power. France's success did not last forever, however, as they soon fell into trading imbalance, mounting public debts, and inflationary pressure.

The French had to retreat from its economic policy of dirigisme into "de la rigeur," otherwise known as privatization of the economy. State-oriented companies began to be sold, and the state began to draw back its overall influence in the economy. It also began to set up policies which would help the market prosper, rather than focus on the state and its growth. However, not all of the dirigisme elements have been removed - the state still in contemporary society holds a majority stake in many of its best economic sectors.

Examples of French market policy began with proposals with other European nations such as Germany to begin to integrate their economies. France was a member of precursors to the European Union, illustrating that their specialization and uniting European countries together lead to a level of economic prosperity.

The government continued to favor capitalism and other policies which focused around its markets. Examples of privatized former national industries include Air France, France Telecom and Renault. The government, however, maintains a presence in certain arenas such as agriculture and moderates certain social economic inequalities in the market.

In contemporary society, France has begun to struggle again under their leadership". With stagnating growth and fiscal challenges, France began to implement austerity measures to tackle both budget deficit as well as the mounting debts. Under the regime of President Hollande, the budget deficit is sought to be fixed by creating higher taxes on the wealthy while continuing the quality of life by maintaining government spending. France still did not end up meeting deficit targets and still maintains weak growth rates.

If you examine GDP charts', France's economy has been unable to create any growth or progress in its GDP. With low market activity, it is nearly impossible to create growth through consumption. It is also important to consider that French economic policy decision is influenced and affected by European Union policies and targets, as well as the World Trade Organization and G7. In addition, France's unemployment rate remains rather high, which illustrates little to no progress in reinvigorating its economy. France's current problem, under President Hollande, is to continue to cut public spending while also spurring job creation". Contemporary Structure of France's Economy

France is currently structured as a privatized economy, with limited state intervention. Over the past eighty years, France has begun to limit its state intervention. Under dirigisme, France began to suffer trading imbalance and public debts which subsequently led to problems with inflation. Even as the economy began to surge towards growing its markets, the same problems began to emerge.

Budget deficits and public debts were two of France's biggest issues just a few decades ago. It still has not addressed these issues, with very little true GDP growth along with maintaining a high rate of unemployment. As a result, President Francois Hollande has transitioned the economy into about an equivalent mix of free market and command economy". We can confirm this by utilizing France's government spending as a percentage of GDP to get a result of 52.8%. Private enterprise is still allowed to run their own business, and government takes care of regulation of these businesses and spending money on public services.

France continues to specialize in many of the same industries that it did nearly a century ago. Steel, iron, machinery, aircraft, electronics and pharmaceuticals make up the majority of raw goods which are exported by France". The majority of its export go to European nations, with less than 33% going to economies outside of Europe. Most of

France's exports go to Germany, followed by Belgium, Italy and the United States. Goods such as machinery, equipment, oil, vehicles and aircraft make up the majority of France's economic imports. It also imported transportation as well as travel services. In contemporary society, France is considered a net importer of goods, consuming a large amount of imported goods and services. The majority of its imports come from European countries, with its main partners being Germany, Belgium and Italy.

France is the second largest exporter by volume in Europe, coming in after Germany. It also is considered one of the largest consumers of imported consumer goods, which are less expensive for the economy than products which are made in France. In addition, as a member of the European Union, it follows a weighted average tariff rate which is the same for all members of the union. As a part of being in the Union, France maintains a strong presence with bilateral and regional trade agreements, as well as being a part of the World Trade Organization.

With a 52.8% government spending divided by GDP, we can conclude France is still relatively a mixed economy. France's social welfare spending is a troubling statistic which could suggest one area in which it can make drawbacks. According to the Paris economic think-tank OECD, France spends approximately 32% of its GDP on social welfare, rather than the recognized average of around 22% in other nations such as the United Kingdom and 19% in the United States.

Maximue Ladique, an economics expert who works for OECD, states that current levels of spending on pensions and health care and other areas are no longer sustainable. "We have to keep in mind the population is getting older," he states. "When France introduced its social security system, there were seven workers for every one retired person, now there are only four workers and there are estimates that say in 30 to 40 years there will only be two people working for every one retiree." With a shrinking labor force and more retirees expected, France's economy is in trouble, no matter how strong or efficient the work force will be. According to OECD, almost half of the dedicated GDP goes toward pensions, and another 25% of the dedicated GDP goes towards health care for these individuals.

To put it simply, France's economy cannot sustainably continue in this manner. President Francois Hollande and incoming political candidates have suggested that cutbacks need to be made in the government in order for France's economy to begin thriving once again. For example, France's budget seeks to create cuts to social spending by cutting family allowances, an act which was previously thought to be unthinkable. Systemic cultural changes are needed to France's economy, which might create public uproar. OECD also states that most opinion polls in France show that the public accepts the fact that cuts need to be made in order for the economy to flourish in the future.

References

1. http://www.focus-economics.com/countries/france
2. www.data.worldbank.org
3. http://www.oecd.org/els/soc/OECD2014-Social-Expenditure-Update-Nov2014-8pages.pdf
4. http://www.heritage.org/index/country/france
5. http://www.spiegel.de/international/europe/economic-decline-in-france-the-failed-leadership--of-hollande-a-903732.html
6. http://www.bbc.com/news/business-36152571

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