France: paradox of the efficient socialist
A recent editorial in the Asian Financial Times (9 May 2007) looked at the relative economic performance of France, Germany, Italy, the UK and America. The data showed much of the usual information — with America clearly leading in GDP/capital and America and the UK having lower unemployment.
It was the extra piece of economic data that caught my eye — productivity (measured as GDP per hour worked). The first thing to note was that the highest productivity was with France, Germany and America… with the UK and Italy lagging behind. At first glance this seems to suggest that France (with it’s socialist tendencies) is more efficient than the UK and as efficient as America.
However, the “paradox of the efficient socialist” was solved in this case by noting the impact of unemployment on productivity. In their attempts to protect low-skilled workers from low-pay, the French and German governments are “protecting” them straight into unemployment. Highly skilled workers remain in the labour market and lower-skilled workers are unemployed. By excluding the low-skilled (low-productivity) people, the average productivity of the workforce will be high.
This relationship is re-enforced by noting the changes in unemployment and productivity in Italy over the past 10 years. Over that time Italian unemployment has dropped from over 11 percent to under 7 percent. This change has seen more low-skilled workers enter the labour market and consequently the Italian productivity (GDP per hour worked) has shown a relative decline from French levels to UK levels.
The important point to note is that the productivity measured in the article was productivity of workers, not the productivity of a country. High-skilled French workers are productive. Unfortunately, by wasting resources (eg 9% unemployment), the French economy is not.
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Would australias decline in productivity growth and decline in unemployment be correlated in much the same way?
(1) Perhaps French unemployment has a different definition than Australia. Perhaps UNDERemployment figures would make useful reading.
(2) If the Germans are protectionist, then their US$220 Billion trade (merchandise only) surplus (rolling 12 months, and putting distance between China’s $200 Billion) suggests that protectionism is good. Meanwhile, we are left holding our breath until the US trade/current deficits hit a trillion (Mar-2008 is my guess) and the Australian current-account to trade deficit ratio rises to 4:1.
Why is a trade surplus good? It means that you enjoy no net inbound investment. Which could mean that your policies make you a lousy place to invest.
I didn’t mention protectionism. And German trade policy is determined by the EU anyway, not Germany.
Dave is of course correct that Australia and America continues to attract very high levels of net foreign investment. He seems to think this is bad, but it isn’t.
I don’t know what Dave is on about. KA = -CA. A current account deficit is a capital account surplus. Current accounts use to be useful to central bankers who had to keep track of gold point flows.
echo, echo, echo…
Is there a better measure of productivity than GDP per hour worked that reflects the impact of unemployment? By imputing the hours of unemployed people, perhaps?
Try GDP per capita.
This (GDP per hour worked) is a silly measurement of course.
When a resource is fully allocated to maximise output, the last unit will have a miniscule marginal effect on productivity and average productivty has already fallen.
This goes back to introductory microeconomics courses about the theory of the firm and what the supply curve is. Having greater average productivity for an input isn’t necessarily good. In other words, as others are implying, France suffers from underemployment.
When it comes to employment/ productivity who cares if aggregate lags? It’s a fallacy of numbers.
Productivity comaparison between say france and Us is hidden away in the aggregate.
I would bet that if you took the same block of US workers that are employed in France productivity would be higher in the US than it is in france. It has to be because American workers in similar jobs get paid more than the french.
I think people here too focused on unemployment, and not labor force participation. The second of these measures is high in France — hence the argument that France has more productive workers because they have less relatively useless people in the labor force is probably incorrect. There are certainly also socialist reasons why they do have such high numbers which are well known — free childcare, for instance, increases female workforce participation and productivity.
Also, the idea of whether a current account deficit/surplus is good or bad is obviously mixed. It would be nice to know the proportion that is investment in capital versus plastic junk, before determining this.
I am curious about one thing in regard to the french economy- why aren’t the rich people spending their wealth in hiring tradespeople, and thus stimulating more employment? Is it that the dole is set high enough to discourage individual enterpreneurship- people prefer to stay on the dole, rather than seek unregulated work?
Terje — GDP/capita also fails to fully measure productivity because the higher GDP could come from each worker simply working more hours.
Conrad
That’s a good point.
Certainly in the UK, ‘unemployment’ numbers have become meaningless. I dont have the numbers to hand but remember being astonished when i saw how small the UK unemployed figure is (about 900k from memory) compared to the number of people of working age but out of work, becasue of ‘illness’ (about 2.2 million).
The UK has an ‘unemployment rate’ of 4.5% but the actual rate of people of working age yet not in work is more like 13-15%.
why aren’t the rich people spending their wealth in hiring tradespeople, and thus stimulating more employment?
I’m fairly sure one contributor is the rigidity of the labour market. Once employed, staff are very difficult to shed and have all sorts of entitlements. Thus contractors would be reluctant to take on employees.
Does this mean that France has no self-employed people, no one-man businesses, keskoosay?
With the option for overtime limited and the tax wedge high many people probably do there own handyman work were possible.
John – no arguments with the problems in using GDP per capita. However if you are trying to factor in underemployment and unemployment you may as well assume that everybody has 24 hours a day and everybody is underemployed. The result is a measure of output per person so it is a productivity measure of sorts.
Nicholas,
If I remember correctly, France uses a typical European style social security system, where the amount you earn is some proportion of your previous job, and this decays over time (too bad if you haven’t been employed — its a crazy system in my books, if rich people can’t be bothered to save money, i can’t see why the government should for them). I can imagine that this makes people less inclined to find work quickly, but its not the biggest cause of unemployment in France — this is centered around poorly education workers (generally young and/or Arabs/North Africans) — the unemployment rate among French French is probably relatively low — which suggests to me that all the weird and wonderful restrictions have only a small impact on employment outcomes for the latter group.
ALso, there are lots of one-man bands in France — that isn’t the problem, its two+ man bands where the problem is — because of this, the biggest thing you notice missing are all the optional services that require more than one person (fast food , opening hours of stores etc. ), but where profit margins are slim.
Check the data on French electricity-use per man-hour.
You might get something there.
There is no paradox of communism/socialism and productivity.
At their peak the USSR had weapons superiority over the west, they launched the first man into space. Do you really think that was due a lack of industrial productivity through socialism?
After Afghanistan and Chernobyl their power declined, the west could have taken note but they will fail in a similar manner.
The paradox is your idea of productivity.. Most of what you refer to as productivity is actually destructive for human beings and their environment through pollution and predatory economic practices.
You really need to sort your ideas out otherwise we will put a lock on your thinktanks from the outside and you wont get out for a few generations until you evolve.
Producing bias political commentary is transparent idiocy, Catallaxy found out the hard way. Dont make the same mistakes.
Dream on Parkos. People like you are the reason we keep recreating the socialist experiment and exposing millions of people to its disasterous consequences. The USSR was at best a third world country with lots of bombs and a comfortable ruling elite while the serfs suffered endlessly. It was created not through the productive labours of happy free people but by some of the worst bloodshed in human history, (maybe the worst). Whereas the free West was created by the most part through free people undertaking productive achievement to make their lives better.
There is no paradox of communism/socialism and productivity. Fuck, I can barely contain my laughter. Now here we go again with Venezuela: what do you reckon Parkos, gonna be a shining light of happiness and prosperity?
There is no paradox because there is bugger-all productivity under socialism.
We want to find the answer to this. And one place to look would be energy. If these guys have cheaper energy and can therefore consume more energy per-man-hour that might be one thing that is giving them that edge.
One of the ways the USSR survived was by eating it’s neighbours. Once NATO the USA and geography combined to put limits on that strategy it began to fail. It was the last true empire of any global significance.
That’s a relief, Terje! I was convinced that someone must have adultnapped you- nothing else could account for no comments for days and days!!
As for empires falling apart, on the Von-Mises blog, they mentioned a secession movement for New Hampshire. Maybe the USofA is next? (That could be their name- Usofa! South Canada didn’t appeal to them, this might!)
The USA is not an empire.
I wonder if the American Indians would agree with your statement? Usofa was originally thirteen states allied together- the rest of the country was not uninhabited. Where did the other nearly-forty states come from? Did the original people ask to be admitted to Usofa? And the colonies were founded by what- the British Empire, wasn’t it? Like Father, like son.
American settlers displaced native Americans and then volunteerly joined the Union. That is not Empire. Empire is subjugating a majority in a foreign locale and incorporating them against their will, not overwhelming their will through displacement. Even when the Soviets tried to overwhelm the Baltic sttes through immigration, it was not voluntary by either the ethnic Russian immigrants or the Estonian, Latvian and Lithuanian deportees.
Not completely true, Brendan! The Mormons wanted their own Theocracy, but the Usofans incorporated them into their republics! And I’m reading right now about how Hawai’i had a monarchy that was overthrown by American Settlers, in the interests of their sugar plantations, and forcibly incorporated into the union. And the Usofans have treated Central America just like an Empire, breaking up Columbia so that Panama could sign a treaty favourable to Usofa, and overthrowing the Nicaraguan Republic when it wasn’t subservient enough (They were trying to create a Nicaraguan Canal, the wretches!!) If it walks like an Empire, and talks like an Empire, why is it not an Empire?
Hawaii and Utah still voluntarily entered into the Union.
American policy in Latin America was not one of territorial aquisition nor subjugation of its people. You might be thinking of Spain and Portugal’s policies! Empire is the claiming of soveriegnty over an unwilling people, not supporting grubby dictators or installing client governments.
I’m not claiming that US policy has always lived up to its republican ideals, but it in no way has endorsed Empire and the American public have always shunned any policy movements in that direction. Even in Hawaii, it may have been US citizens that overthrew the monarchy, but they did it with no authority or mandate of the US government. The military only stepped in to protect US citizens and their property. Definitely a bit extra-territoriality there, but it was only after the Hawaii republic was established and the new government requested annexation by the USA did President McKinley agree to it.
Nicholas – Are Australia, Canada and South Africa also empires then?
Australia (Queensland) did engage in vicarious Imperialism. In 1883, Queensland annexed New Guniea for the Queen and Empire.
http://en.wikipedia.org/wiki/Territory_of_Papua
I would prefer that we offer union with troubled south pacific states, failing that, isolation except for free trade, as opposed to bleeding welfare to a series of inept and corrupt Governments.
Terje, maybe Australia, and Canada, and South Africa, should be called Empires! Though none of them has acted as bad as Usofa- we haven’t yet sent the marines in to sort out those unruly Papuans! As for Utah and Hawai’i ‘voluntarily’ joining the union, that’s not how they see it! In 1993, the Hawai’ian government apologised for the coup that overthrew the monarchy! It took them 100 years, but they did it! And Utah might have decided that discretion is the better part of valour, but they originally emigrated to get away from other governments entirely! They set up a Theocracy, with ‘Prophet’ Brigham Young as President for life, and they hoped to escape Usofa altogether!
So the 17 to 1 vote in favour of statehood vote in Hawaii in 1959 was falsely representative of the wish of Hawaiians from 70 years previous? Hawaii entered voluntarily into the Union after a series of domestic political upheavals that involved settlers of American and European origin interfering in the government of their chosen home. It was not sponsored or endorsed by the US government at the time and Clinton’s apology in 1993 is no different than a theorhetical apology from the current German government to Russia for its involvement in the Bolshevik Revolution in returning Lenin to St Petersburg. The apology has no legal meaning nonetheless, it is merely a gesture of goodwill.
Soveriegnty over Utah was exchanged from Mexico to the US at the end of the US-Mexican War in 1848, Utah was never formally independent. It can’t have been too bad, because they actually tried to join in 1849 as the State of Deseret covering a land area much larger than present day Utah, but the US government were wary of admiting such a large state and were opposed to the policy of polygamy. The Church of LDS formally renounced polygamy as a condition of admitance, but they still did it voluntarily. They did not declare their independance from Mexico or from the US. The military response to the LDS authorities was entirely a domestic response. Not pretty perhaps, but not imperial in nature.
I am still convinced that it was an imperious response, and how did the yanks get Western America? Pure expressions of gratitude from the Mexicans for all that the Yankers had done to Mexico over the years, was it?
And I notice you’re ignoring Central America, and how the US has bullied the entire region over the last century. What else was ‘Manifest Destiny’, but an Imperial Charter?
When President Truman connived to have Panama secede from Columbia, that was a naked piece of Yankee aggression, which he was quite proud of! Panama would not be a nation without him!
American citizens settled and displaced native populations in Mexican held territory, either declared their independence as in Texas and California or did not seek it formally as in Utah. Mexico did not accept Texas’s independence and when Texas was voluntarily annexed by the US, declared war. They lost and America claimed all Mexican territory north of the Rio Grande, which was agreed by Mexico. Mexico’s imperial ambitions in their north west colonies (they were considered colonies, inherited from Spain) were thwarted because of a failed war of aggression against the US over the voluntary admission of Texas (a recognised independent nation) into the Union. Californians took advantage of Mexico’s weakness and declared independance, short lived as they were occupied by US forces to prevent the Mexicans reclaiming them.
Although there was meddling in Mexico’s affairs, the US was merely enforcing the wishes of the American and European settlers in Mexico’s north west colonies who did not want to be part of a corrupt Mexican regime but wanted self-determination within the Union. That is not an imperial action.
As far as Latin America is concerned, the Monroe Doctrine was a pretty comprehensive statement of opposition to colonialism in the Americas. In Panama, the US has a mixed history, one of militarily suppressing independence at the invitation of the Columbian government, then supporting Panamanian independence when it looked like local administration were going to agree to their treaty demands for the proposed Panama canal. Truman didn’t connive anyone, Panama gained independence while Roosevelt was in power in 1903. Panama were not entirely a client state, but neither were they completely independent. The US never claimed soveriegnty over Panama (just the canal zone), only extracted a one-sided treaty. Not nice, but not entirely imperial. This is probably the most imperial action that the US ever conducted. Still doesn’t make them an empire though, especially not today since they gave up the canal and their military bases in 1999.
The worst thing the US government did in my opinion was the invasion of the Confederacy in 1861. That might be considered an imperial action, since the Southerners clearly didn’t want to be part of the Union any longer. However under international conventions, that was a civil war, as the Confederacy gained no formal independence.
Whilst they chose not to outrightly rule Panama, it is still imperialistic, and they have often behaved in ways that they would abhor, if other nations treated them that way. Cuban anti-Yankeeism isn’t just a recent idea.
And none of this addresses the issue that New Hampshire has a state-wide petition to secede from the Union. They seem to think that Washington is behaving too much like a dictator for their piece of mind. They think Washington is imperial. They, who live there, would know best, wouldn’t they?
According to the Free State Project, all they want is to create a significant enough minority in New Hampshire to have an influence over state politics and eventually tighten up the state’s constitution to enforce small government. They do not endorse secession.
As far as I aware, there is no state wide secessionist movement, although two towns did consider seceding from the state (not the nation) over a state wide property tax.
I got my info from the Von-Mises blog. They must have been exaggerating, though there are plenty of Americans who say that the Union is an empire.
And the European Union, with new regulations from Brussels, is that an empire?
Something that is voluntary is not an Empire. Empires have autocratic control of their territories, they don’t involve the conquered lands voting in their overlords in free and fair elections.
Not many countries volunteered their soveriegnty to the British Empire, nor the Russian or German Empires, or even the Austro-Hungarian ones, or the Ottoman, or the Mongol. All of these empires were created through force of arms and involved denial of self-determination of the conquered peoples.
I’d better not mention Puerto Rico, then, which is still classed as a colony, and was taken from Spain in the war of 1898. The Cubans had been rebelling for years, and so were not as grateful as the Yanks had been led to expect, especially when the Americans then did not live up to their own statements, and decided to stay to ‘civilise’ the place. The Platt amendment meant that the Cubans could have any government they chose, so long as that was alright with the Americans. As a bonus to the war, the americans got The Philipines, and promptly put down a native uprising against the spanish so they could Christianise the place. They eventually gave them independence, but did they have a right to them in the first place?