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Emmanuel Macron unveils €30bn plan to boost French industries

October 12, 2021

Here again we are in the French industrial planning at its best (pick the winners). The state does not have to invest in innovation or brand-new sectors because this is not its job.

The French manufacturing VA accounted for 16% of GDP in 2000 and 11% in 2020 (against 20% in Germany in 2020). Why this manufacturing decline? Because the State did not invest in the manufacturing sector? Of course, no.

Among the various reasons of the French manufacturing decline, there is the French fondness for Keynesianism, this is a key factor which explains this dramatic situation.

The French economic policy is fiscal deficits for any reasons (growth is below potential, there is unemployment, more expense for social needs (which are often confused with costly bureaucracy), there are street demonstrations, tomorrow climate investment, etc.), the result of it, is that there is no fiscal space when there is a true economic crisis. Of course, this deficit is realized through a (permanent) increase in expenditure. There is a limit to fiscal deficits; also, the French governments raise (a little bit of course) taxes to reduce the gap. The expensive social model is not financed by income tax or tax on consumption (as in Denmark) but mainly by taxes on wages supported by entrepreneurs. The result of it, a shrinking industrial sector. The enterprises who sell goods at expensive prices (luxury goods) can survive but, given global competition, it is impossible to sell average quality goods at high prices (which have to support the expansive French social model).

Economy is not the main strength of Enarques. If Macron wants to revive French industry, he has to reduce public expenditure (the highest ratio in the world) and definitely cancel taxes on production (turnover) and wages. Private investors will take care of production in the manufacturing sector.

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