The End of the “French Paradox”?

The purpose of this article is to provide a short- to medium-term analysis of the overall performance of the French economy. Unfortunately, this subject is all too frequently discussed in a manner that is perhaps not as clear as it could be. As a French economist trained in the United States, I hope to briefly outline what I feel are the major issues concerning the French economy in a way that I hope carries a few less biases than usual. First, we need to be clear that the performance of the French economy relative to most OECD countries has been less than what the underlying strengths of the country would lead one to expect. This problem is producing ongoing difficulties with the public finances. Without faster growth, paying for the social benefits the population prefers is becoming increasingly difficult. Third, slower growth coupled with structural impediments in the labor market are combining to produce shockingly high levels of unemployment among the young. As in much of Europe such reforms will be difficult but the need for change is pressing. Fourth, French banks are fortunately in rather good shape and problems in the financial system are not a major concern. Putting these factors together illustrates the “paradox” that is the French economy. This is a highly developed country whose economic performance in many ways is disappointing. However, France is, after all, a democracy. Navigating the country out of this paradox can be done, but only in a way that is French. Thinking that France will somehow transform itself into Germany is delusional. On the other hand, France needs to avoid becoming a larger version of Italy.