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The French Malaise and the Entitlement Generation

Harry(15 Janv 2005)

INTRODUCTION

This article is about providing a fresh outlook about the French malaise that has occurred since the 1970s up to this present day. Although the content of this article is still a draft paper, the Jeunes Francophiles' team asked if I could post a preliminary version in order to open a discussion with their members. Interestingly, a few days after I wrote this summary, Holman W. Jenkins from the Wall Street Journal wrote an article with a similar theme under the title "Shall We Eat Our Young?" (WSJ 1/19/05).
Many books and articles have been written on the French decline, but few have explored the intergenerational causes and underpinning of the French malaise. Can a generation have a soul and a mind of its own? The answer seems to be a definite yes: from the early 19th-century romantics to the early 20th-century pacifists, each generation seems to develop passions and a mind of its own. The soul of a generation is mostly shaped by the circumstances and the historical context surrounding its growing-up phase.
It is not a mere coincidence that the French decline has occurred along with the rise of the "1968" (the baby boomer) generation, which I will provocatively label the "entitlement" generation.
Paradoxically, the baby boom generation has self-cultivated its romantic image for many decades, starting with the 1968 "revolution". The media have brainwashed the public of their "accomplishments" during the sexual and social revolution of the later sixties.
However, the reality is that the baby boomers came to adulthood on a silver platter and with a strong sense of entitlement. They had inherited from their parents a prosperous economy and had been shielded by the "iron curtain" from the devastating wars of the previous centuries. They had been spoiled. While the previous generations experienced various kinds of suffering, the baby boom generation was determined to avoid any kind of struggle and to provide itself with an easy and comfortable life, even if this meant mortgaging the future of the following generations. One of the most astonishing fact, has been the total inability of this entitlement generation to reform itself and to change track. It has continued to head for the end wall at maximum speed despite the obvious failures of its social and economic experiment.
Can France come back from the shadows of irrelevancy any time soon? I heard many times people say that France is a nice museum, but what about France as a modern nation. Unfortunately, the outlook is pretty grim. There is very little hope of France giving up its failed experiment until the last remnants of a failed and inept generation lose their grips on power -- an occurrence that may not happen before at least another couple of decades. As a last point, it is interesting to note that this analysis could be easily extended to other European continental countries notably Italy and Germany.

THE FRENCH DECLINE

First let's recall some facts: After catching up in the aftermath of W.W.II, the French economy has been stagnating since the 1970s and the French society has been engulfed in a downward and vicious spiral. As a consequence, France, and the eurozone more generally, have lost ground economically, culturally and socially to the Anglo-Saxon world for the past two decades. Over the course of two or three decades, the gap has now reached worrisome proportions.
In the mid-1960s, the coming of age of the baby boomers led to a radical and profound restructuring of the French society. During this period, the entitlement generation progressively monopolized all levels of power and decision (backed by the sheer numbers of their cohorts) for its own benefits.
According to Jenkins, "Europe is not a model of genteel living and social concern, but an encrusted social compact in which the old pull up the ladder against the young." During the last decades, the French society ossified and chose the road of a slow downward path from which it still has to recover. The role of the state was greatly expanded and a welfare mentality took hold. Jenkins describes "a system geared most richly to support long-term idleness among the middle-aged. For folks in their peak earning years aged 55 to 64, only 38% hold jobs, versus 54% in the US."

A. Wealth Redistribution and Youth Unemployment

When confronted with the 1974 recession, the baby boom generation proceeded to viciously protect their own jobs to the detriment of the younger and older generations. They progressively pushed their elders out of the work-force and by instituting high labor costs and wages, they prevented the younger generation from entering the work-force. Labor participation fell to record lows while they redistributed wealth for themselves.
Using early retirement schemes (pré-retraites), the baby boom generation kicked out the older generation out of the work-force. Simultaneously, high taxes on wages made young workers entering the work-force uneconomical for employers, except if they had advanced degrees. In the later case, various quasi-mandatory internship programs for young graduates and the civil service alternatives to the military draft institutionalized low entry level salaries for young graduates. Up to the late 1990s, the military draft provided French companies with a cheap pool of qualified labor as most young graduates tried to avoid being drafted by working for little or no pay for a French company abroad -- a loophole offered by French law. The draft was only rescinded a few years ago after widespread abuses but the mandatory internships programs that French students are required to complete in order to graduate are still in place.
As a consequence, the youth unemployment rate in France has soared (youth unemployment is currently running at 20%) while the labor participation rate has sunken to an all time low. High taxes on wages and labor prevented the younger generations to build up capital to become independent as the major source of income for a young adult is derived from its labor until he/she can accumulate enough capital to diversify their revenues.
The proportion of young adults (often past their 30s) still living with their parents soared and contrary to the propaganda, this had nothing to do with a greater sense of family values in France. Jenkins adds "Don't kid yourself that this reflects Europeans simply opting to enjoy the freedom of leisure. EU polls routinely showing that what locals want above all else is jobs, jobs, jobs."
According to INSEE, the proportion of the population under 40 owning their home decreased during the 1990s. In the meantime, during the 1990s, the older households increase their proportions of financial assets relative to the younger households.

B. Lack of Economic Opportunities

The ossification of the French economy has had many indirect consequences. First, the birth rate plummeted : how can you think of having a family when you must rely on the subsidies from your parents for a living, don't have a steady job or cannot be sure to find one if you lose yours? Undoubtedly, there are many other factors that may influence the birth rate, but this economic factor is just too important to ignore. This plummeting of the birth rate has not been limited to France but has been a general feature of the eurozone demographic landscape for the last decades.
Second, the French immigration model collapsed and the xenophobic tendencies of the French society were exacerbated. Without economic opportunities, France has failed to integrate millions of immigrants that came during the past four decades. The unemployment rate among the immigrant population rose to appalling levels. The entitlement generation having fought for their rights, would arrogantly refuse any ungrateful task, relying on immigrants to perform the low-paying jobs but failing to provide their offspring the ability to climb the social ladder.

C. Ossification of the French Society

The French society has become ossified.
French like to brag that the French society has less income inequality than the "Anglo-Saxon" ones. But studies on income inequality often miss a point which is the internal turnover within each quintile. It may be the case that the French have less income inequalities, but the people at the top quintile have been the same for decades and the "ascenseur social" is definitely "en panne" (out of service). Furthermore, the "ascenseur social" will not restart any time soon if taxes on wages and labor are not lowered and pointless regulations eliminated. These changes are necessary to allow the younger generations to accumulate enough capital for themselves. Only then will they be able to pursue their own dreams and start new businesses.

CONSEQUENCES OF THE FRENCH DECLINE

A. Education

Another interesting legacy of the selfish generation is the destruction of strong higher education institutions in France. It is notable that in order to protect its status, the entitlement generation first action was to abolish any form of competition that might have led to changes in the status quo.
France has no known institutions of higher education with worldwide renown anymore. Its "Grandes Ecoles d'Ingénieurs" are very parochial and offer limited appeal for foreigners (excluding students from former French colonies). Very few actually enroll and even less finish their programs.
Concurrently, French universities have been relegated to oblivion. The "carte scolaire" and the tutelage of the "Ministry of Education" have ensured that no strong institution can emerge because of severe limitations in their autonomy and ability to compete. Some consolidation among the French educational institutions will be necessary in the not too distant future if they want to be able to compete internationally.
It may sound good in a cocktail to laugh at an American who doesn't know where the Middle East is on a map or that France can produce many more products than just cheese, wine, baguettes and croissants. Cheap talk may sound fancy but ultimately getting the job done is what really matters.
And to acquire the skills and competencies to get it done is indeed important. In many fields, the French still have to prove they can do the job as well as they can talk about it, be it in the economic, cultural or military sphere.

B. French Emigration

According to INSEE, between 1991 and 2002, the number of French registered abroad grew by 34%. And these statistics exclude the French that do not bother to register with their consulates. This is most likely the case for those emigrating to developed countries as registration brings little benefit for those who do.
A notable feature of recent French emigration is that the new French expatriates have emigrated to the US and other EU countries instead of going to Africa, the traditional destination of French expatriates in the past. The French population living in the US and in other EU countries jumped from 480,000 to 704,000 between 1991 and 2002.
Another interesting feature is that most French expatriates in those countries become bi-nationals or permanent residents, indicating that they have no intention of returning back to France.
The young French are voting with their feet and looking for a more "sunny" place to live and raise families. Similarly, in the 1990s, 14% of German engineering and science PhD graduates headed for the US every year in search of better opportunities (according to the German Scholars Association). Among the thousands of Europeans going to study in the US, surveys have shown that the vast majority (more than 70%) will not bring the education they receive in the US back home.
Overall, more than 400,000 European scientists emigrated to the US in the 1990s. This is a tremendous brain drain almost as bad as the toll exacted by W.W.I (the apex of European power) for Europe -- albeit a non bloody one this time.

CONCLUSION

As the baby boom selfish generation has proved incapable of reforming itself for the past three decades, France's only hope is the emergence of a future generation that will stop whining, accept to roll up their sleeves and get back to work. This new generation will need to eliminate all the disincentives (taxes) to work in order to create jobs and provide with new economic opportunities for those that have been left behind by the selfish generation. Although changing the institutional framework is crucial, the underlying causes for the institutional rigidities should not be forgotten: the mind-set of a spoiled and selfish generation.
The problem is that by having delayed too long the necessary changes, the solutions have become more difficult to implement with every new day. And it should not be a consolation that other continental European nations share a similar boat.
By Harry Rive © (January 20, 2005)
Scola(05 Fév 2005)
Very interesting post.

I would like to add that the attitude described here might not be limited to the 1968 Generation. After living for more than a decade in the US, I moved back to France for family reason at the beginning of 2003 and discovered things one cannot easily see when living far away. More and more French of all ages have adopted the 1968 way of life: they want less and less work, more and more free time (vacations, etc.). For the last 20-25 years France has been on the way to what I would call a Leisure Society. Working becomes more and more secondary to everything else. A childhood friend of mine who never lived outside of France is putting it more bluntly: “During the last 20 years we have created a nation of lazy people”. He’s not too far from the truth.

France recently went through a week of strikes by civil servants (January 2005). According to a survey, 65% of the French supported the strikers. After the strikes, there was a debate on television on January 23rd. One participant said that the strikes were just the beginning of the action against the government policies, another one said it “was not possible to accept the actions of that government anymore and that we should go for another May 1968”. She also stated that France was sort of living under a dictatorship because the government was not doing what the strikers wanted! Not one single participant to the debate thought that the statement was out of line. The journalist moderating the discussion didn’t say anything neither. It’s simply accepted as a mainstream attitude.

What is the government doing to cause such an uproar? After a few years with the 35-hour workweek, France still has an unemployment rate around 10%. That reduction in the number of the worked hours did not create real jobs for the French. But they work less and less, pay more and more taxes, in particular to support an over generous welfare system, so they are less and less rich. Companies are, like simple citizens, overtaxed and the labor laws are so strict that laying off someone is very difficult: therefore they do not hire many people. The current government decided to soften the 35-hour workweek law (but they won’t revoke it). That simple move created the current situation. What unions want is a broad increase in wages for workers. They do not want to work more to have more wealth created. They, and a majority of French with them, see business owners as profiteers making huge fortunes on the workers’ backs. They do not want to accept the fact that working longer hours would create a richer country for everybody. They believe it would be benefiting rich people only. They know that the 35 hour work week did not create jobs but they now have no shame to claim that it must be kept as is because in their eye the French need more free time (and for those who do not know the French labor world, the 35 hours are part of the “avantages acquis” or acquired advantages, a French notion which means that a social rule favorable to workers should not be overturned, whatever the circumstances).

The French people got used to the dual situation: leisure society/assisted society. As stated above the welfare system is far too generous, creating many situations where people prefer to be on welfare or getting unemployment benefits instead of going back to work. Many laws in the 80s and 90s were voted to help people in need. Unfortunately, along the years they became a mean for many people to stay on welfare far longer than necessary. Some people even try really hard to be laid off (not fired), so they can go on unemployment benefit for as long as 30 months. Similar situation with the RMI (Revenu Minimum d'Insertion or Minimum Income to Favor Insertion): it was created for people with lower education or with no resource, so they would have a minimum income to move ahead with their lives. But in far too many cases it became a way of life, with people obtaining it from the State without trying to get work or trying to obtain a better education. The control system is very lax and many controllers allow the abuse to go on, although they know or strongly suspect fraudulent situations. Some recipients even have another income aside of that welfare money but they keep it anyway. The rule seems to be: get the most out of the system and try to give back the less possible amount. So the Government (read: the taxpayers) has become a permanent provider.

At this point the situation is critical for France. The country is loosing ground on many Western powers (USA of course, but also Great Britain, Japan,...). Other emerging countries are gaining over the French economy and may go ahead of France in the next couple of decades. The combination of shorter working hours, a large welfare system and a strong resistance to changing the labor laws in favor of more work has also created a country with very high taxes. The tax rate is among the highest in the world (43.8% of GDP. I have met people working as independent workers, like doctors, who give 70% of their income in taxes to the government). Sales taxes are at 19.6% on most goods. The high tax rates make the French less rich than the British, for instance. They also favor something pretty common in such situation: widespread fraud.

It is interesting to look at France and Great Britain (U.K.) side by side because they still have comparable economies and their populations are practically equal (60.27 million for the U.K. and 60.42 million for France, July 2004 estimate for both). The growth in GPD in 2003 was +2.2% for the U.K. but 0.5% only for France. Due to the early retirement age in France and to the welfare situation explained above, the French work force has 2.2 millions workers less than the UK. The unemployment rate is much lower in the U.K. at 5%, compared to 9.7% in France (2003 estimates for both). This is not likely to change because of the high cost of labor in France.

AS with Great Britain, when it comes to other European countries, it seems that things are moving there. In countries like Germany or even Italy, I see more progress there to strongly modify the welfare state. The Netherlands recently moved back the retirement age to 65. That did not cause a revolution. France may be the last country in Europe to act in that department. Everybody knows that the French system for retirement will be out of business soon (as a reminder, retirement benefits are paid by the government and the money comes from taxes paid by current workers). When one combines a retirement age set at 60, and in too many cases at 55, an aging population and a decrease in the percentage of the younger generations, one realizes that this system is going toward bankruptcy if strong measures are not taken as soon as possible. But it seems that the current conservative government wants to preserve a large part of the French social system. I suspect that they realize that because of the general attitude of the French people, acting decisively in the right direction may cause important social movements that could topple the government (the French are used to that). So they may prefer to act in small steps. But going too slow is not the right solution and when the French realize that, it may be too late. As for myself, I am moving back to the USA.
Harry(05 Fév 2005)
You are touching an interesting point about the dual nature of the French society: leisure vs. assisted.

What I think is missing though is the emphasis on the generational aspect of this duality. On the one side, the have (read the 68 generation) who jealously guard their privileges. On the other side, the youngs, the olds and the immigrants. In particular, the youngs lost on two counts. If they have a job, they are not able to build capital (because of the high taxes on labor and the depressed entry level salaries) and are made dependent in one way or another. If they don't, they will join the "laissés-pour-compte" of the French society.

The employment situation also creates a plethora of other problems (lack of risk taking because peolpe are afraid of losing their precious jobs, a demographic deficit resulting in part from the financial personal insecurity etc). The jobless are assisted; they may not live in absolute poverty, but they have no way of breaking out of the down cycle in which they are stuck.

I don't share your argument where you seem to imply that all French are lazy. I don't think that people are naturally lazy, I think that the system has made them so. The 68 generation's selfish and greedy attitude has led French society to sclerosis. Then you have to look at why we have such a system and to look at whom set it up. And there, the generational responsibility of the 68 generation comes to the fore. As for the high cost of labor in France, I would qualify that statement. Entry level jobs are overpaid given all the associated costs but a lot of qualified job is underpaid (another consequence of lousy growth prospects of the French economy). What is missing is flexibility and the end of a one size fits all solution mentality.
Will(25 Fév 2005)
I mainly agree with the author of the article.

However, I don't think the present failure in French economy is due to the "baby-boom generation" misleading. The poblem that faced France is high taxes (mentionned by the author) and the aging population. In the late 50s, unemployment rate was far lower than today, the social security fitted the situation since unemployment doesn't since exist. What has really changed is birth rate is lower than fifty year ago, as a result the age structure of France changed dramatically in the late decades, with elderly people accounting for an ever larger share of the total population. Maintaining a social security model built fifty years ago can only possible by rising more taxes.

Secondly, the fact that the number of French people living abroad has almost double between 1991 and 2002, has little to do with French economy. It is a global tendency, not just limited to France or to any European countries. As surprising as it might be, this due to the fact that communication is cheap. It is probably a far fetched reasoning, however I believe this true. The fact that there are more expatriates is a consequence of the globalisation, and globalisation, as it looks like today, is only possible because of the improvements in communication, transportation, and information technologies.

A third reason, for the French decline, is the strengh of the euro against other currencies. A strong currency make the products therefore less competitive; therefore the trade balance is likely to be negative (if the europeans goods are expensive, this mean that the imported goods are cheap).
Harry(01 Mars 2005)
Dear Will,

Thank you for your comments. Your macro economic analysis of the problems facing France is interesting, but it focuses too much on the symptoms while ignoring some of the main underlying causes of the French malaise. This state of denial actually predominates the French society.

For example, high taxes and lower birth rates are problems as well as symptoms of France's lack of vigor. The UK also has a lower birth rate, but it has fared much better than France over the last two decades. So the lower birth rate cannot entirely explain the lack of dynamism in France. The same could be said for the strength of the euro against the dollar (the third reason that you mentioned).

In addition, the lower birth rate could also be explained by the wealth redistribution that has occurred in France since the early 1980s in favor of the Baby Boom generation and to the detriment of the younger generations. As the younger generations have been less financially secure, they have had less children.

As for the high level of taxes, the structure of taxation cannot be ignored. The relative heavy taxation of labor in France has squeezed the younger generations in favor of the vested interests of the Baby Boom generation. This ossification of the French society has taken a heavy toll on its vitality.

And regarding the increased French emigration since the 1990s, globalization doesn't quite explain it.

Furthermore the link between globalization and emigration doesn't fit the historical data. In the 1990s, most of European emigration occurred in two countries: France and Germany. It didn't affect the UK nor Eastern Europe, despite widespread fears that Eastern Europeans would flood Western Europe. This hard data reveals a deeper problem that the French society seems to acknowledge.
Amy(20 Fév 2008)
I totally agree that the heavy taxes, primarily on labor, have had a huge impact on social mobility as younger generations have been shut out of capital accumulation. Unless you inherit, it is almost impossible to accumulate capital through savings in France. If you are lucky to have a job, once you subtract social security, income tax, local taxes and TVA there is barely enough to meet daily expenses for most French families.
This has made it difficult to start new businesses or even families. As for the much vaunted education system, it has mainly reproduced the existing inequalities (the carte scolaire creates a de facto segregation in schools). The French tax system favors capital (even taking into account the various taxes on capital) and has perpetuated the privileges of the few and the well connected. You are either born rich or must be co-opted to move up in the French society, with a few exceptions in sports and entertainment well overblown by the media. For many years now, it hasn't been possible to become climb the French social ladder without being co-opted by the entrenched elites. The glass ceiling, corporatism and 'pistonage' are very real in French society.
The younger generation of risk takers has been disenfranchised and has often emigrated overseas in search of better opportunities.
By the way, French emigration of its youth has been a huge relief valve for the political establishment and the baby boom generation, as it avoided a major upheaval such as in 1968. With the French youth tamed, it seems now that only the poor immigrants in French can challenge the existing status quo that has so much favored one generation at the expense of the others.
 

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