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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