"France has become the most deindustrialized European country"

Claude Sicard is an economist and international consultant.

FIGAROVOX.- The French economy is at an impasse with the crisis, and Prime Minister Jean Castex has proposed the establishment of a new “Commissioner General for Planning”. What does this function consist of and why is it necessary to put in place a structure that has disappeared since 2006?

Claude SICARD.- A new “Commissariat Général au Plan” (CGP) will have to be set up, and he will have to get down to work quickly. We will not be able to rebuild the country otherwise. And we remember that General de Gaulle spoke, in his time, of an "ardent obligation". The Planning Commission disappeared in 2006, and it was replaced by a simple think tank, whose role has become, over the years, quite marginal. This resulted from the fact that we changed the model, as Jean Louis Beffa explained in his book La France Must ChooseWe abandoned our traditional model which he described as "commercial-industrial" to adopt the Anglo-Saxon "liberal-financial" model, this is explained by globalization and the thrust of liberalism. In fact, our country has not really turned towards liberalism, it has opted for a mixed system in which the State still intervenes a lot in the economic life of the country. We therefore made a mistake in abandoning the CGP: it was an organ of study, reflection, and consultation, much more than a planning organ, and the word "Plan" in no way meant planning. restrictive and authoritarian in Soviet fashion. It was simply indicative planning which reflected the major strategic options of the public authorities. We must therefore come back to such a system.

In your opinion, which sectors require urgent action from the State?

The Dutch government, in its policy of intervention in the country's economy, qualifies as "top-sectors" the key sectors which support the country's economic activity. Automobile construction, the food industry, machine tools and chemicals in the case of Germany; automobile construction, food processing, aeronautics and space construction as well as the luxury industry, in our country. France, in the luxury sector, is a world leader, and it is a sector that will undoubtedly recover from the crisis more easily. We will therefore have to support the other three sectors more vigorously.

First of all, the auto industry was already in trouble, before the current crisis. For two reasons: the fact that the European market has now entered its phase of maturity, which means zero growth, and the rapid and forced change towards the electric vehicle where the battery represents 40% of the value of a vehicle, a key component, which comes to us from China. As for the agro-food sector, beaten for export for a few years by the Dutch and the Germans, it was in difficulty long before the arrival of the coronavirus. We will therefore have to vigorously help these two “top-sectors” to restructure. As for the aeronautics sector, it will have to overcome the crisis, it being understood that the recovery will be very slow. The automotive sector is, of the four top-sectors, the most worrying, and it is therefore necessary, in line with what European Commissioner Thierry Breton wants to do, to place our country at the heart of a European armaments industry, a sector in which we have many assets, and which could become, if Thierry Breton could win his bet, the fifth "top-sector" of our economy, orders coming in abundance in the coming years from various other European countries.

But it will obviously be up to this new Planning Commission to determine which sectors we will have to invest in to ensure the future of our country.

Is the collapse of our industrial sector attributable to the crisis, or should we go back further?

Evil comes from far away. Our industrial sector, which since Colin Clark has been called the “second sector of the economy” has gradually melted away since the beginning of the 1980s, that is to say since the end of the prosperous period of the “Thirty glorious years”, without let the public authorities be moved by it: it employed 6.5 million people and represented 28% of our GDP. This decline continued, regularly, from year to year, the public authorities not intervening because they considered that this was, there, the very sign of a modernization of the country, our leaders blindly trusting the law. well-known of the natural evolution of the three sectors of the economy of a country that Jean Fourastié had taught them, a law which would like a modern economy to be a "post industrial" economy, that is to say without industry .

We have therefore arrived at the current situation characterized by the fact that our industrial sector employs only 2.7 million people and contributes to the formation of the GDP for only 10%. France has thus become the most deindustrialised country of all European countries, apart from Greece. And we only notice it today, with the coronavirus crisis! Germany has an industrial sector which has not melted away and which has even remained very vigorous: it represents 24% of its GDP. And Switzerland, a country that we do not suspect of being so industrialized, is at 22%. These two countries are on our doorstep and their economy is booming, but this has not shaken our leaders in any way. their blind adherence to the thesis of the three sectors of the economy.

What do you think are the consequences of this sharp decline in our industrial sector?

The consequences of this steady fall in industry in our country are manifold. First of all, a very high unemployment rate: it was only 3.5% at the end of the glorious thirties, a figure which corresponds to a situation of full employment, and it has been increasing, reaching 10% in recent years . We have, today, 5,450,000 people registered with Pôle Emploi, in categories A, B and C, and there are added 645,000 people in categories E and D. We remember that François Mitterrand was there. publicly shown distressed, saying to apologize: "We tried everything!". Recently, there has been a slight improvement, but with the crisis we have started to reach new heights. It follows, but this is never underlined by the media, a rate of the active population which is the lowest today of all European countries. In France, people employed at work represent 45.7% of the total population, while it is, for example in Germany, 52.2%, and 58.3% in Switzerland. By simply referring to the German rate, we see that we are missing 4.5 million people at work. What are all these people doing who are out of work? They are supported in one way or another by the community, and live at its expense.

It resulted from the collapse of our industrial sector, a progressive impoverishment of the country, and, oddly enough, this was not seen by our leaders. We cannot understand how it escaped them. Indeed, when we reconcile the data on the industrial production of countries with their GDP / capita, the indicator usually used to measure the wealth of a country, we discover that there is an extremely close correlation between these variables. The graph below illustrates this phenomenon, industrial production being measured, here, in dollars per capita according to data from the IBRD, an international organization that includes construction in its definition of industrial production. And we note that the correlation coefficient is surprisingly high, which allows us to suggest that the industrial production of countries is indeed the explanatory variable of their prosperity.

Data: BIRD. Screenshot.

We see, on this graph, that France with an industrial production per capita of 6,900 dollars has a GDP / capita of 40,493 US $; Germany, with a ratio of 12,400 dollars, obtains a GDP / capita of US $ 46,258, and Switzerland, which comes first in this international comparison, with an industrial production per capita of $ 21,000 ends up with an extraordinarily GDP / capita high: 81,993 US $, quite simply double the GDP per capita of the French.

Our country is therefore heavily penalized by abnormally low industrial production. The state was forced to support the standard of living of the population, by increasing public employment and fueling social spending. We have thus managed to have many more public jobs than other countries and a record social expenditure rate of 34.1% of GDP, compared to 16.7% in the Netherlands, and 25.1% in Germany. The average for OECD countries is 20.1%, and we therefore have, compared to the average for developed countries, 261 billion euros in social spending too much! Again, this is never the case. noted by observers of the country's economic life.

To finance increasingly high public expenditure, the State was forced to regularly increase tax revenues, the famous "compulsory levies" of economists, and these increased from 30% of GDP in 1960, at 48.4% currently, so that our country now holds the world record for compulsory deductions. This very heavy taxation gradually suffocated the country.

And, another worrying phenomenon: the steady increase in government debt. Despite considerable compulsory levies, tax revenues have been insufficient each year, and the State has been forced to resort to borrowing year after year to balance its budgets. This has been going on for forty years now. The country's debt level has therefore continued to grow and the country's external debt has thus increased from 21.0% of GDP in 1980 to 100.2% in 2019. With the Covid-19 crisis , we know that it will be raised to 120% at the end of the year.

France has thus become a country which lives on a drip, which is supplied both by new loans each year and by excess tax deductions. We have, in a previous article, estimated at 350 billion euros the loss of wealth due to the abnormal collapse of the industrial production of the country, and this estimate is certainly too conservative. This impoverishment of the country, an impoverishment which explains, moreover, the jacquerie of the yellow vests which broke out in November 2018, was offset by recourse to debt which oscillated between 80 and 100 billion euros each year, and by excess compulsory deductions of some 250 billion euros each year.

In this pernicious chain of factors linked to each other, as we have just indicated very schematically, companies have hardly been spared: they too have been subjected to excessive tax pressure which has harmed their competitiveness. A recent study by the Ministry of the Economy by Yves Dubief and Jacques Le Pape indicates that production taxes in France amount to 3.2% of GDP, while it is only 0.47% only in Germany. The Co-Rexecode institute confirms this figure and estimates the charge differential between French companies and their German competitors at nearly 80 billion euros.

During the July 14 interview, the president spoke of becoming again a great industrial nation "through ecology", while in his address to the French on June 14, he indicated that he wanted to "build a stronger economic model so as not to depend on others ”. It's not the same thing. Is the change in vocabulary disappointing?

This downward spiral that we have just described must be stopped: the country cannot continue to resort to 80 or 100 billion euros of additional loans each year, nor to maintain indefinitely on the whole country such a high tax pressure because it discourages initiatives and ruins the competitiveness of companies. It will therefore be necessary to rebuild the country's economy, as our President in his speech to the nation on June 14th had indeed shown the will. Sadly, as you point out, that was not discussed again in his July 14 interview. He simply spoke of a revival of the economy, specifying that it was going to be an "industrial, ecological, local, cultural and educational" revival . And to satisfy the ecologists whose strong rise we saw in the last municipal elections, he clarified for their attention: "I believe in this ecology of the best, not in this ecology at least". So here is ecology now placed at the heart of government concerns, Emmanuel Macron going so far as to advance: "In France, we can once again become a great industrial nation thanks to and through ecology" .

To read also: "To revive the economy, we will have to work more"

Recovery is one thing, it is a passing phenomenon, and the restructuring of the country's economy is a matter of a different nature. The recovery requires simple measures to stimulate demand and the temporary support of companies in difficulty to help them through a bad patch; restructuring a country's economy is much more difficult, because it requires reshaping the structure of the production apparatus and changing the business environment.

The project to rebuild the country's economy announced with fanfare on June 14 therefore remains to be developed, but no one knows what it will consist of, or how we will be able to proceed. We know that this will be extremely difficult because, in order to put the country's economy back on its feet, it will be necessary to change a considerable number of laws and regulations, in particular in terms of taxation and labor law. And public opinion has not been prepared for it.