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Notes on France Notes on France
by Joseph Gatt
2020-03-23 10:41:20
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Political, economic, social notes on France.

-France's growth has been stagnating over the last 20 years or so. This means two lost decades for France. This means the French who were born in 1980 and who entered the workforce in 2000 have, in many, many cases, very little to show for in their resume. Those people are now 40, and the French labor system is a rigid labor system where every month and year for formal work experience counts toward being hired and getting good retirement pensions. So France needs to launch a campaign explaining that there have been two lost decades, and that rigid labor and hiring policies must end.

fra01_400-Causes for economic stagnation? The way I see it is, first of all, complicated and opaque networks. For the economy to grow, you need to network your way around business and politics. However, businessmen and politicians often refuse to mingle with up-and-coming businessmen, and tend to keep all encounters very, very formal. The result? France is kind of an aristocracy where your only path to business or politics is to have businessmen or politicians in your family.

-Furthermore, France has an elitist education system. I don't think elitist education is a necessarily bad thing. But here's how the system works. Most elitist schools require an admissions test. The admissions test usually requires about a year or two of studying, either at a preparatory school, or alone, studying to ace the test.

-Problem with this. I, Yossi Gatt, read every day, solve academic problems, speak several languages. I couldn't make the cut for those elitist schools. Why? Because like many French people, I could never afford to take a year or two off to study for an admissions test. Even if I did take a year or two off for an admissions test, I'm completely broke. I can't buy lunch, much less books. This is the reality of many French people, who dream about studying to join elite schools, but have to settle for a job as a waiter at a sushi bar or as a cashier at a bakery, because we have to put food on our plates. So, it's mostly the children of rich, ambitious families who end up attending those elite schools.

-Now I would advise politicians in France, Japan, Korea, China and elsewhere against using slogans like “digital economy” or “startups” because startups can absolutely not work when you have opaque business networks. If you want to make money in the digital or startup economy, you have got to have a few drinks with distributors, bankers, the transportation business, businessmen in the technology world, and businessmen in other industries. And if such encounters are too formal, what the French call with a “heavy tongue” you ain't getting no business done. Such encounters confuse businessmen more than anything else.

-Back to France. Now it's not just cultural factors that means that most networks are opaque. Government planning also has something to do with it. The United States are a confederation of semi-independent states, but oddly enough, it's a lot easier to move from on state to another in the US than in France, when France does not really recognize “regions.”

-In France, property taxes are around 50% (sometimes more). Let's say I live in Nice and want to sell my house so I can move to Perpignan. If I sell my house for 50,000 Euros, the government is going to take away 25,000 Euros. So I end up with 25,000 Euros to buy a 50,000 Euro apartment in Perpignan. This means most French people spend their entire life in one single city. This also means that social networks are very opaque in many cities, which is why even those younger people tend not to venture outside their hometowns.

-Taxes, pensions and the welfare state. Unfortunately, high taxes tend to discourage people from selling their homes, moving around the country, starting businesses, buying homes (rent is an a lot more viable option tax-wise) and if you work as a waiter at a pub you'll make way more money (after taxes) than a 35-hour a week accountant or engineer (don't forget that waiters at pubs get lots of tips, and don't mention those tips in their tax records. Waiters at pubs also make commissions for inflating invoices for business meetings).

-So few taxes come in, and they don't cover pensions and the welfare state. Labor unions don't want to government to remove or reduce anything when it comes to pensions or the welfare state. And the French government is worried that lowering taxes will cause the economy to collapse. I would tend to think that lower taxes will mean that the French will try their luck starting more businesses, will buy more homes and cars, will start spending more money and so on. But I also understand that the French are worried the lower taxes (in property or gas or transportation) will mean a massive exodus to Paris (basically people will all sell their house and move to Paris).

-So what I would suggest France do is develop the periphery, make business, commerce and housing easier to purchase in the provinces (such as by lowering taxes in many of the smaller cities) then start lowering taxes nation-wide. I know it's against the rules in France, but like my law professor used to say “nothing is against the rules in France.”

-Final note on the ENA, the elite administration school. Right now ENA graduates are worried about being able to work high-ranking positions in the future, because the school has a bad name in politics right now. I wouldn't think and “all or nothing” approach to the ENA is the best approach. Of course the best elements of the ENA should be allowed high-ranking political careers. It's true that over the last 10 years ENA graduates have taken everything for granted, and some of them do slack around on the high-ranking job. But some of them actually want to get work done, and shouldn't be punished for being ENA graduates.

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