Third way as a dead end:French experience

Pierre GarelloAix Marseille University, IES-Europe, IREF

M.R. Stefanik Conservative Institute

Bratislava, March 2008

Third way à la française

• The situation in France Sluggish growth and growing worries

• The « Third way » in theoryWhat it is and why it does not work

• The other wayBack to the French classical liberal school

1. The situation in France

The situation in France : growth

The situation in France: GDP per

capita

The situation in

France: « Official »public debt

The situation

in France:

the opinion of the 16-29

years old QuickTime™ et un

décompresseur TIFF (non compressé)sont requis pour visionner cette image.

Is it possible to change society?

Do you think your professional life will be bright?

Is globalization source of opportunities?

Are you ready to pay for the old generations?

2. The French way

The situation in FR : public spending

Public money: what for?• Level of public

investment is low• Level of

redistribution is high

• Inefficiency of the public administration

Figure 5: The Nature of Public Spending (France, Budget 2005)Source: Own calculation based on loi des finances 2005 and INSEE

Interest charges on Public Debt 11,26%

European Union 4,68%

Investment 8,75%

Transfers 20,35%

Operating cost 22,96%

Labour cost 32%

Recent illustrations of the French way

• High price of housing

• High prices in retail shops

• Fake reform of higher education

• The « no-reform » of the retirement pension scheme

• A messy decentralization

• A very centralized health care system

3. Why it does not work

More public debt, more taxesFigure 11: Public Debt and Fiscal Burden

UKDenmarkNorway

Sweden

USA

SpainNederlands

Belgium

ItalyGreece

Poland

SwitzerlandIceland

Ireland Czech Republic

Finland

Austria

France

Portugal

GrmanyCanada

Hungary

Slovak republic

LuxembourgEstonia

Japan

0

20

40

60

80

100

120

140

160

180

0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 4,0 4,5 5,0

Fiscal Burden

Pu

bli

c D

ebt

as %

of

GD

P

More debt, less growthFigure 13: The Debt-Growth Relationship

(Average level 1992-2004)

Sweden

Canada

Irland

J apanItaly Greece

Austria

Germany France

Danmark

PortugalSpain

Norway

United KingdomIceland

Finland

Holland

Luxembourg

USA

Belgium

0

20

40

60

80

100

120

140

0 1 2 3 4 5 6 7 8

Average Annual Grow th Rate

Ave

rage

Deb

t/GD

P R

atio

The logic of third way’s failure

• The Complexity argument– pretence of knowledge

• The Motivation argument– Public choice, time horizon

• The destruction of the rule of law

4. The way to peace and prosperity

« The State: this great fiction through which everyone believethey can live at the expenses of others » Frédéric Bastiat

Few directions

• Get your economics right: learn to see further down

• Challenge the State’s achievement• Keep competition inside Europe• Stick to Principles rather than Pragmatism• Trust the values of freedom and responsibility