Wealth inequality is causing many protests recently. Indonesia's protest was about wealth inequality where nepo babies flaunt wealth on social media while the poor are suffering. Exact same situation in Nepal. Seems to be the same generally in France even if the trigger for protests is not the same. The main theme is that these protests are led by Gen Z people.
It's the younger generation that is hurting because they do not own real estate and stocks so they have not benefited from wealth creation via money printing and ZIRP era.
My guess is that this will happen in the US soon as well. Entry level jobs are threatened by low investments due to tariffs, high interest rates, and the perceived notion that AI is taking their jobs. Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid - not to mention ever increasing real estate tax, home insurance, etc. Now the tariffs will make everything much more expensive for the working class. Tariffs go into paying down national debt while the rich get a tax break via BBB. Tariffs disproportionally affects the poor.
It's hard to be a 22 year old college grad right now. Not as bad as 2008 but definitely harder than in the last 15 years.
PS. Everyone living in the west missed it but the 2019 Hong Kong protests were more about wealth inequality even if the trigger was the China extradition law. This was never mentioned in western media. I was living there during the protest. Young Hong Kongers felt hopeless because real estate prices to income ratio was the highest in the world at the time. By far. They didn't want to live in an apartment the size of an American bedroom with a family of 4 and spend a lifetime trying to pay it off - if they could even muster up the downpayment for it. Unlike Americans who can move to a more affordable city or state, young Hong Kongers had no where else to go. This pent up frustration for young Hong Kongers boiled over into months long riots.
I suspect the big crash is coming within the next few years — and I think we've seen nothing yet.
I've wrestled a bit with how to prepare financially for what could lie ahead but decided that there was really no harbor that is sure to be safe. I'm prepared to basically be poor and die from a thing that could have been prevented with some measure of health care.
I'm usually an optimist by nature, but I've never been so with regard to the economy and the growing wealth inequality. There is no soft landing for either in my mind.
> I've wrestled a bit with how to prepare financially for what could lie ahead but decided that there was really no harbor that is sure to be safe. I'm prepared to basically be poor and die from a thing that could have been prevented with some measure of health care.
Personally I'm preparing for this by aggressively paying off our mortgage, putting less money into the market. Also avoiding lifestyle inflation and even cutting back here and there. It's all about reducing fixed cost so that if shit hits the fan, we can absorb the higher cost or lower income as much as possible.
If you are not diversified, diversification is always safer than "doing nothing" because doing nothing financially means choosing whatever you currently have your wealth tied into unconsciosuly, whether that's just cash sitting in a bank account, stocks or stocks and bonds, etc.
Get some gold (ideally a bit of physical gold but also put some of your investments into gold or broad commodities ETFs) as a hedge against inflation/monetary devaluation, keep some of your wealth in cash or short-term/liquid bonds/treasuries/money market funds if you predict an equities and real estate crash, buy some real estate or real estate ETFs to get a bit of real estate exposure if you have zero, buy stocks if you have none. Shift a bit of your equities into international ETFs if you only have US stocks.
Splitting up into equal buckets of cash, real estate, stocks, bonds, gold/commodities, hell even a bit of crypto, hell buy some goods upfront to hedge inflation like dry, shelf stable food - this is ultimately gonna be a less volatile ride than just sitting around and doing nothing.
"We're fucked but there's nothing we can do" is a defeatist attitude if you sense financial turmoil but can't predict what type, just don't put all your eggs in one basket, and maybe reduce your diversification once you sense things are getting better.
I do diversify (not precious metals or crypto though). Real estate, cash, bonds, stocks. (I could use more international index funds, but see below.)
Still, my sense is that there won't be any safe havens. It will be global, it will be stocks, everyone will be poorer so real estate will be unsellable, inflation destroying cash holdings…
Serious question (I am no scholar on history), where were the safe harbors during the Great Depression?
My ignorant notion is that there were none. But if you held on to your stocks for a couple decades, you did fine … just not during those two decades though.
Serious question (I am no scholar on history), where were the safe harbors during the Great Depression?
Cash. Cash because everything became deflationary including a 90% crash in stocks. But I don't see a crash like that (Knock on wood). People are too aware nowadays to buy the dip. If a crash like that happens, then it'd be end times like nuclear war or alien invasion.
Real estate ETFs are worthless, they contain all the risks of a real estate investment with none of the upside (leveraging with non recourse debt, 1031, potential property tax incentives, etc).
I never quite understood the "wealth inequality" thing. It is to me a rather meaningless slogan. Wealth inequality is opposed to what: wealth equality? Like everyone possesses exactly the same amount of wealth? This sounds nonsensical. "Everybody's poor" fits precisely the definition of wealth equality, obviously not a good outcome. If some inequality is permitted, what's the desired mean and what's the acceptable deviation? Is there a correlation between that and the abilities, work ethics of the person? Are people allowed to be lucky, win lotteries, have hard working parents that saved up?
I understand the goal of reducing poverty. I understand the goal of limiting the unchecked power and influence of certain individuals of groups, caused by them having excessive wealth. But the issue of "wealth inequality" is in the "not even wrong" category for me.
Every single revolution happens because of the inequality.
Not just recently -- always.
Prevention measures are sometimes well accepted, like minimum wage, but sometimes it comes to really stupid regulations like removing Advanced Math classes from Californian schools -- they are all aimed at preventing inequality.
San Francisco public schools -- it was in the national news. Details of the theory associated with it include Stanford.. endless numbers of heavily slanted retellings, few primary sources. lots of obfuscated Board votes
> Wealth inequality is causing many protests recently.
I feel like "wealth inequality" is such a useless frame that it makes me wonder if the politicians harping on it are using it as a dodge to avoid the real issues.
Suppose a middle class lifestyle requires wealth 100 and below 50 is poverty. If the 25th percentile is at 40 and the 99th percentile is at 400, that's very bad, even though it's "only" a factor of 10. If the 25th percentile is at 200 and the 99th percentile is at a million, that's not ideal, but it's certainly better. So the ratio is basically a red herring and what matters is how the people at the bottom are actually doing.
Meanwhile most of the underlying problem with "wealth inequality", both in terms of cause and harm, is actually market consolidation. If you were an early shareholder of a trillion dollar corporation then you're probably a billionaire, but you wouldn't be if trillion dollar corporations didn't exist because there were 100 companies each of 2% the size instead of 2 companies each the size of countries, and moreover the problems come from the existence of a trillion dollar corporation which can then run roughshod over everybody because they don't have enough competition to keep them honest. Which isn't solved in the slightest bit by leaving the corporation the same size but causing it to be owned by mutual funds or foreign investors instead of domestic founders. But people keep proposing taxes as the solution to it, which is exactly the thing that doesn't fix that.
> Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid
Current interest rates are in line with historical norms; ZIRP was an aberration. And in general higher interest rates result in lower housing prices, because you don't have people taking out huge low-interest loans and bidding up the prices.
The problem right now is that the transition from ZIRP to normal interest rates sucks, because it creates short-term gridlock. Somebody who would like to sell their house and move can't do it because the payments on a new, higher-interest mortgage are higher than the ones on their old low-interest mortgage, and then they can't afford it so they don't sell their house, which keeps supply off the market.
The best way to fix that is to solve the gridlock with new supply, but we mostly prohibit that through zoning. But it'll happen either way because eventually those low-interest mortgages age out (i.e. get paid down) and then the gridlock breaks and prices come down, it just takes longer and causes more damage in the interim.
And either way the result is going to be a reduction in housing prices, which people are going to call a "housing crash" and complain about it. But the issue isn't prices going down, it's that ZIRP causes a bubble. That's a sunk cost; we're already in it. Returning to ZIRP is only an attempt to re-inflate the bubble, which is just kicking the can down the road. And, of course, you can't use ZIRP if you're trying to fight inflation, which is why causing the bubble to begin with is bad -- once you have enough inflation to make ZIRP untenable, the bubble ultimately has to pop, and trying to fight it (which is what we did in 2008) only makes it worse.
This is failing to consider that 100 wealth doesn't have the same buying power over time, and continuing wealth inequality necessarily means that someone who's comfortable today will be uncomfortable tomorrow.
If the market cap of Google is a million dollars and a sandwich is $5 and then tomorrow the market cap of Google is a trillion dollars because they wiped out all their competitors and took over the market, the price of a sandwich is still $5 because it's quite unrelated and not affected by the number of search engines or mobile operating systems. Larry Page isn't going to personally eat so many sandwiches that it affects the global price of sandwiches no matter how much money he has. Moreover, necessities generally have elastic supply -- even if demand increased, we could just make more of them rather than raising the price -- unless you cause artificial scarcity (as we do with housing), in which case that's your problem independent of billionaires.
What the consolidated market does affect is that market, e.g. the price and quality of phones and phone apps. But that has nothing to do with what proportion of the company's shares is owned by what number of people. It's just as much of a problem if it's a publicly-traded company whose largest shareholder owns less than 1% of it. And the problem goes away if the market is competitive even if there exists someone who has billions of dollars as a result of owning a fractional percentage of a million different companies -- although that usually isn't what happens anyway because the primary driver of the existence of billionaires is "market consolidates enough to cause one company's market cap to exceed a hundred billion dollars", not "someone invests a thousand dollars each into a thousand separate companies and every one of them beat the market by a huge factor without any of them becoming a megacorp".
I should print this out and frame it. This is basically my exact thinking on the issue. We really need to think about the tangible goods and services that make for a quality life for the bottom to middle quintiles and figure out how to produce way more of that stuff.
Companies are mostly doing layoffs because interest rates went up and using AI hype as cover. The anti-inflationary force is the higher interest rates. And if AI was actually lowering the cost of that sort of thing then you still have to contend with the Jevons paradox.
Meanwhile the hype is causing things to be converted to "AI" even when it isn't any more efficient, which lowers labor demand (suppresses wages / increases unemployment, bad) and increases power demand (higher electricity prices, bad) and to the extent that hype causes adoption of inferior solutions, lowers efficiency (worthless AI customer service, bad). Some of the AI stuff is useful but the hype is causing folly.
Migration isn't particularly deflationary, especially with respect to housing prices since the new residents then increase housing demand, which is fine when construction isn't constrained by zoning but bad when it is, and right now, it is.
Most of the outsourcing that can reasonably happen already has, in large part because the US housing market (and therefore cost of living) has been out of whack for a long time, which makes US workers less competitive despite what would otherwise be various countervailing advantages. Things are made in China because they fit on a container ship, but that happened decades ago. Nurses and landscapers and firefighters and plumbers are still domestic and that isn't likely to change.
> My guess is that this will happen in the US soon as well.
As it should. The younger generations have been and are actively being fleeced by the older generations. The scary part is that it's all but flaunted at this point, with the tactic of choice being to gaslight younger people into thinking it's all their fault. That's the stuff of revolution and frankly, I think it will do the U.S. a world of good to see that level of rebellion.
I found the following article interesting the other day. A retired couple with a four-bedroom home concerned that they couldn’t sell their home at 1.3 million, so they lowered it to 1.28 and were surprised it still didn’t sell. The owner then considers renting it out instead.
You don't get to live in the S&P500. Also don't really get the point of this response. Both just prove assets are wildly out of reach for young people now compared to then.
Well, I suppose this is why communism was popular in early 20th century. People wanted communism so they could reset wealth equality even if the economics didn't make the much sense. Society is just a big cycle it seems.
I often think about why this is happening now without invoking the default "evil rich people" hypothesis. I think it's because world population increased so fast in the last decades that there is simply not enough resources, land, high paying jobs for everyone to achieve a comfortable life. And because the population is so high and the world so connected, it's easier for a single person to accumulate wealth because talent or sheer luck. IE. build the right app at the right time and get rich almost instantly. Society seems to be self correction mode by not having nearly as many babies recent years.
> there is simply not enough resources, land, high paying jobs for everyone to achieve a comfortable life
On the contrary, (in the US) I think there is at least enough land and resources (including food) that a modest haircut on the ultra-rich would go a long way for the lower-middle classes.
On the contrary, (in the US) I think there is at least enough land and resources (including food) that a modest haircut on the ultra-rich would go a long way for the lower-middle classes.
Yes but no high paying jobs in the middle of no where.
> Society seems to be self correction mode by not having nearly as many babies recent years.
An interesting factoid from the Roman Empire is that in their later years there was a major fertility collapse to the point that various laws were passed in order to try to motivate fertility in various ways, and they ultimately failed.
I don't know what to take from that yet, if anything, but I think it's obvious that we've similarly entered well into an 'end of empire' type era, and fertility rates have also again collapsed. So again, I think it's simply interesting to ponder.
> I often think about why this is happening now without invoking the default "evil rich people" hypothesis.
What do you mean? In the French protests, the "evil rich people" hypothesis is very present. Every other protester was brandishing "tax the rich" placards.
I do wonder what the French population actually want as a solution to the unsustainable debt and huge proportion of tax revenue(second highest in the EU) spent on social benefits.
Clearly they recognise a need for reform because they vote for politicians who run on a reform platform. Yet as soon as said reformer tries to change anything at all, it's back to the barricades.
From an Anglo-Saxon perspective that's what it looks like, but I think you are missing a cultural difference. In France, the state does not have the legitimacy that it does in the UK and US. In the UK parliament, not the people, is sovereign; this is more or less the practical situation in the US as well, despite lip-service to popular sovereignty.
In France, the people maintain the right to distruptively object to government actions and laws. What seems to us to be a criminal act may have (depending on circumstances) more popular legitimacy than the laws themselves. Or it may not, depending.
France is in trouble because people don't want to face the math. It's going to take a leader to push through changes nobody wants and somehow make them feel good about it. Hard bit.
Also, the USA is in the same spot. Although better as their tax burden is so low, so raising it higher is easier when it comes to the math side of things.
> France is in trouble because people don't want to face the math.
I disagree, a lot of people here are quite aware that we are in very difficult financial situation, from all side of the political spectrum. The main issue is that there is a very big disagreement on how to solve it (i.e how/who to tax more, and where to cut spending). And with a fragmented national assembly, everything is at a deadlock right now.
We don't have issue with the math, we just disagree on what to fund to balance things out.
An example, 200+ billion euros are given yearly to large companies as tax breaks and the like, without the government asking anything in return. The senate had a report about it recently [https://www.publicsenat.fr/actualites/economie/un-cout-annue...].
>An example, 200+ billion euros are given yearly to large companies as tax breaks and the like, without the government asking anything in return.
Man, that must feel like the rug pull of the century for French taxpayers, given that despite these tax breaks, French companies like Airbus and ST are incorporated in the Netherlands and paying(more like, NOT) taxes there instead of France.
I'd be pissed too, and I'd want my money back.
Unless of course the purpose of those tax breaks was actually to keep some jobs in France and not see more of them move to cost efficient places like eastern Europe or north Africa.
Sounds like eliminating the NL's ability to give secret sweetheart deals to major billion dollar corporations that also benefit from tax breaks in other countries, would fix some of these problems.
If you build/design your products here then you use EU's trained labor, EU's infrastructure, EU's legal system, EU's defense, etc. then you should pay your fair share to support these facilities that help you be a billion dollar corporation.
I'm usually against "big governement", and generally against the EU, and more on the side of "laissez-faire".
But I have a hard time understanding how politicians figured that countries with widely varying tax regimes inside an economic union would work out for the countries with a taste for high taxes.
It makes no sense to me. Of course companies are going to choose the most favorable location to incorporate. Counting on companies to be "fair-play" or whatever the politician word-of-the-day is seems completely braindead to me. Unless there were some kind of backroom deals going on, which wouldn't surprise me one bit coming from the EU nomeklatura, and now they're trying to conceal it by blaming "the rich" / "corporate greed".
I have not seen any solutions by either the left or the right that mathematically solve it. In fact, the last time I checked, the far right was advocating for a lower retirement age and increased spending.
The left seems to want things we all want, but we're unsure how to afford them. They never seem to have math to back it up as taxes can only go up so much, and they are already some of the highest as a percentage of GDP in the world.
Can you point me to a real proposed solution by either side?
>[Taxes] are already some of the highest as a percentage of GDP in the world.
Is this the right metric: "Tax revenue (% of GDP)"?[0]
If so, France ranks 28 at 23.1% of GDP. The highest non-island developed country is Denmark at 31.4%. Denmark's GDP per capita is 1.5x France. New Zeland's GDP per capita is similar to France and their GDP to tax rate is 29.6% which is the fifth highest. Does New Zeland face similar problems as France? I think I agree with your implication that simply increasing the tax to GDP ratio is not a magic bullet.
In general, the data here is really interesting. Germany and the US have a pretty similar value, both averaging at about 11% in recent years. I would have assumed that Germany would have a higher rate. I wonder if this data is misleading somehow or if my assumptions were just wrong here. I guess one variable missing here is government debt, which is not a tax but is still used to pay for government expenses.
I'm not familiar with the situation of New Zealand with respect to Australia (its neighbours). But the problem in the EU, is that there are a few countries (Ireland and the Netherlands inside the Union, and Switzerland which is right next door and enjoys many advantages and no constraints) which charge way less tax than the "central" EU countries. So companies have a tendency to set up their HQs in those countries.
I'm not one to cheer for absurd taxation (which is a French specialty), but I understand why this setup does ruffle some feathers in France.
The 11% number for Germany (and probably the whole table) is completely wrong. I guess it only shows federal taxes which are about 40% of all taxes including state and municipal taxes. So total taxes are roughly 24% of German GDP.
There are plenty of people on every side of the problem. But it takes very few people to paralyze the country. (Even that is relative, it's not like nothing can run during these episodes. But the elected government certainly feels like they can't go forward.)
Just redistribute the resources, cap prices and let the economy prop up itself. The rich have to give it up for sake of stability and greater good. I'm sure they will understand lol
> I do wonder what the French population actually want as a solution to the unsustainable debt and huge proportion of tax revenue(second highest in the EU) spent on social benefits.
I would genuinely love to hear more of an explanation from French people about why the French Revolution was considered a success. As best I understand it, the French Revolution of 1789 did succeed in removing the monarchy but devolved into le règne de la terreur where the leaders were guillotining each other and various political enemies for about ten years(?) before Napoleon became the new monarch. Perhaps it can be viewed as a stepping stone in the decades long process to modern France but the short term outcome of the French Revolution seems pretty objectively terrible to me.
I stated this as a matter of course (as in, we'd see broad support for absolute monarchy in France if that wasn't the case), I have no insider information, I'm not even French. It seems I need to clarify "good move".
If your question is "was the Terror awful?", I'm sure you'll have a near totality of french people agreeing with you. If you ask "in retrospect, was the Terror awful enough so that the French nation would have been better off without its Revolution?", then I don't think you'll get many agreement.
The deaths associated with the Terror were plentiful, that's true, but this period was also carefully framed by the bourgeois class who took power afterwards. In terms of deaths, it's around 40k people. The american civil war was 700k deaths. Before Trumpism, would any american say out loud that abolishing slavery wasn't worth it?
Do you know of a french person who wants to return to the Bourbon rule? me neither. They like that they live within a republic. A revolution was necessary to achieve this. Hence my parent comment.
The thing is people don't care about how many rich people there are out there, as long as they can get a good life out of their labor (good job, good house, etc) but since capitalism has optimized these out of the reach for most people nowadays, then they start to blame rich people for everything, with the definition of the word 'rich' here being very fluid, ending up to mean just about everyone who has more than they do, and not just your Bezos, Musk and Saudi kings, so any taxes on the "rich" ends up only on the hard working middle class again.
Total French private wealth is around $15 trillion (https://en.wikipedia.org/wiki/List_of_countries_by_total_pri... ), French government spending is around $1.8 trillion/year. Even if the French government were to tax 100% of that wealth, it wouldn't be enough to cover 10 years of spending. Fundamentally the French economy isn't producing enough to support the current level of pension spending, due to a continuously falling ratio of workers to retirees. No amount of taxing anyone could produce enough money to plug that hole.
Fundamentally the French economy isn't producing enough to support the current level of pension spending, due to a continuously falling ratio of workers to retirees.
Do we think this is why French government added so many immigrants in recent times?
Of course an influx of immigrants will cause other issues. But if wealthy people need more population to keep their wealth up, I don't think they care.
It's not about wealthy people alone. You need staff to clean retirees sh!t (literally) in a country where the median age is 42.3 and rising.
France overspent in the 2000s and 2010s due to populist politics, and now the chickens have come to roost. Something needs to give in France, otherwise it'll become an Italy 2.0.
10 years of covering 100% of spending? That sounds like a really sweet deal to me, and more than enough to invest into the nation enough to go back to a balanced budget in that time frame.
I mean, try it with yourself. Imagine that you take your current salary, keep it for 10 years, and have 100% of your spending covered? How life changing would that be to you? Probably a lot.
...for 10 years. After that, you're back in the hole that you were in before, but without anything to draw on. They're currently taking in the equivalent of $500 billion but spending $1.8 trillion, with a GDP of $3 trillion.
Understand that the non-wealthy wouldn't get anything new, it would just be a continuance of their current services and benefits. They've have 10 years to increase their GDP by 50% to get the tax revenue to get to a balanced budget. That's simply not happening without obscene inflation, with the corresponding increase in government spending on goods and services, keeping them out of whack.
Many french people, like in most other places, don't give a shit who gets cut or increased as long as it's not them. These people will try and paralyze the country because it's effective and the elected government will reliably back off from whatever was objectionable. Sarkozy, a long time ago, ran for president specifically against that, proposing that the country run that gauntlet once and for all. To solve that problem. He was elected on that platform - so it's not like there isn't support for it. Then he backed off like everyone else.
Well, you will never make 65 million people agree with each other.
> Clearly they recognise a need for reform because they vote for politicians who run on a reform platform.
Meh. Macron, and his party, was not really running on a reform platform. He was the typical, business centrist candidate.
And the national assembly is very divided right now, and the government is systematically from a minority party (so neither from the left union, or the extreme right RN), which are not running on a reform platform (quite the opposite).
There is proposition about reforming taxes to taxes the wealthiest, something with some popular support, but no party that support this kind of reform as the power to make it happen right now.
We are in a deadlock since the dissolution of the national assembly by Macron, and we probably will be until the next presidential election, or a new dissolution that would give a big majority to one party which would pretty much ensure them control of the government.
The french system is really not made for a fragmented assembly. This is not what you can find in more parliamentary system where coalition form the government. A fragmented national assembly is basically a deadlock in France's fifth republic system.
Why? What exactly makes it possible or impossible to have a coalition government, in your opinion?
A naive look tells me if a majority can agree to support a government then it can work, and it not not. What "system setup" helps or hinders a majority made up of different parties? To me it seems the important part is the willingness of parties to compromise. Which may or may not be there regardless of the "system setup".
> Why? What exactly makes it possible or impossible to have a coalition government, in your opinion?
Mostly because it is a different system. The parlement in France doesn't elect the government. The president choose the prime minister, and the prime minister form the government.
The parlement can, at basically any point, vote to "censor" the government, effectively terminating it if a majority is reached (they do stay in position until a new government is formed, but can only take care of the "affaire courante", i.e simple daily affairs, no big laws, reforms, policy changes, ...).
Indirectly, this means that the parlement can have a lot of power over who will be in the government. If one party has an absolute, or almost absolute, majority in the parlement, it more or less mean that they can decide who shall be in the government.
Due to the way our election works, the party of the president usually has the majority in the parlement. This is even more true since Chirac changed the duration of the presidential mandate to match the duration of the parlement mandate (and their elections are very close).
This usually give a lot of power to the president, effectively making him the sole judge of who shall be in the government (since he choose the prime minister and the parlement member of his party follow his lead).
But what we have right now is a very unique situation. Nobody has even close to an absolute majority in the parlement. The left "union" (which is not really united, but that's another story) control roughly ~33% of the seat, the extreme right party control ~21% of the seats, the presidential party control ~15%, and the rest are various centrist and right wing party.
The issue is that there is no way to get a solid absolute majority with this assembly. For the left, even if they were to compromise heavily and add as much center-right as possible in their coalition, it would barely give them a majority, and the government would have to compromise so much, it would piss off all their voters, which would be a political suicide for the next presidential election. Nobody want to ally with the extreme right except a few members of some right party, which would never give a majority (and the RN would only go to the government if they don't have to make any important compromise, for the same reason). So, you have to remove the two biggest block. And so, even if all the other party would somehow make a coalition (which is more or less the government we had since the assembly dissolution), it would still give less than ~45% of seats in the parlement, not enough to ensure that your governement would not be censored (which is what is happening, we've had like 3 or 5 government since the dissolution, i can't even remember all of them).
This is an unprecedented situation in France and basically the achilles heel of the fifth republic. Our system cannot function without a clear majority in the national assembly, and the way the assembly is divided right now makes any majority coalition impossible (or a political suicide).
The alternative is going bankrupt, thus leading to forced and callous austerity by the IMF and ECB - just like what Greece faced. That would solve the problem as well, but French voters would have no say or autonomy.
French voters need to get it in their head that they need to accept their government tightening belts, otherwise they will have no say on what gets cut.
The population isn't homogeneous. The fundamental problem is that the average age of the population keeps increasing, meaning fewer and fewer working people per retiree. This means young people's quality of living gets worse and worse as they have to support more and more non-working people via pensions. Given the opposition to mass immigration, there doesn't seem to be any feasible solution in the near future.
Somewhat agree, but the problem is that debt is at 110% and taxes are about maxed out. At some point, you go outside the Laffer curve, and then your economic engine is stunted (which maybe France already has?).
How can you tell when taxes are about maxed out? What's stopping France from increasing its marginal tax rate or creating a new tax bracket? Is the idea that people will move elsewhere in the EU with lower tax rates?
There are actually several French people and if one of them votes for austerity while the other protests it that doesn't actually make both of them hypocrites.
Unlike in the US, French top 1% are usually families that span dozens of households that run unrelated businesses. The staple of the French top 1% is the Mulliez family that counts >1000 members. The most prominent family members run Decathlon, Auchan and Leroy-Merlin, others handle equally important land and B2B businesses, the offspring get juicy jobs at McKinsey or spawn startups in what's the hot thing of the moment. I am sure there are a few you Mulliez running AI startups right now.
It's really impossible to say what's the effective tax rate of these people. Their real wealth is not in the money, of with they have plenty, but rather in endless opportunities.
The effective tax rates on high income individuals is likely much less. There is a large correlation between income and wealth, and wealth increase through asset appreciation is largely not taxed, or at best taxed at much more favorable rates than general income tax.
Tax on income is not the problem, it's tax on wealth gained through asset value increase.
That is why you have capital gains, which is ~30% in France.
Investment income is flat taxed.
And inheritance taxes, which are very high in France.
If you want to increase taxes, consider taxing income more and capital gains at a progressive rate. Although I haven't seen good data on effects of say a 70% capital gain tax, might hurt th,e economy. I did some reading on this subject last month and the sweetspot was around 20% to 35% on that classification of income.
Do you want to take people's wealth and cap it? IE, nobody is allowed more than $5 million? What are you advocating for instead?
Total French private wealth is around $15 trillion (https://en.wikipedia.org/wiki/List_of_countries_by_total_pri... ), French government spending is around $1.8 trillion/year. Even if the French government were to expropriate the entirety of private wealth, it wouldn't even be enough to cover 10 years of spending. Fundamentally the French economy isn't producing enough to support the current level of spending, due to a continuously falling ratio of workers to retirees.
> Even if the French government were to expropriate the entirety of private wealth, it wouldn't even be enough to cover 10 years of spending
America's $6.75tn budget [1] would blow through our $140tn private wealth in 21 years. Even Norways $0.11tn budget [2] blows through its $1.6tn of private wealth in 14 years.
Perhaps the better metric is deficit as a fraction of private wealth? If that looks unsustainable, the problem is in publicly-held assets and services.
Does it lead to obviously better results in quality of life compared to people who don't riot quite so frequently?
Is the average londoner worse off than the average Parisian? What about the average British person vs the average French person? I just pick the UK because it is nearby, approximately the same population and same GDP
I feel they can make a change through protest and it feels like an inherent part of their life that they get to protest when the government or officials have made a change that isn't what the people want. Whether it makes a significant difference is hard to judge without living there. Likewise who knows what life would be like if they hadn't protested. They have great working rights though, and a less stressful life in that respect so that is a positive.
Perhaps France's ruling classes are especially inclined to ignore the concerns of the poor and working classes, and the latter often feel that forceful resistance is their only option?
France aggressively centralised its bureaucracy in the '89 Revolution. That may help disconnect Paris from its constituents more than in other systems.
As Tocqueville writes in "De l'ancien régime et la révolution", centralization was already underway since Louis XIV, and heavily. Napoleon just picked up on it and continued the process.
All I know is this. People keep on saying the economic model of what the French people want isn't sustainable. Is the US model sustainable? From all accounts, nope. So what do we do? Go back to communism?
The funny part is, regardless of which social, cultural or economic model you want, the one that everyone hate is the inequality.
It could be stable in the US. The basic idea behind Keynesian economics is: during contractions, decrease taxes and increase spending; during expansions, increase taxes and decrease spending. Doing this helps smooth out business cycles, promotes steady growth, and collects revenue for the government.
The problem is, as we've seen, our government is cutting taxes and raising spending no matter where we are in the business cycle. That's a very easy problem to solve, if there is the political will, but right now, there isn't.
This offers nothing insightful or useful, and doesn't even address a fundamental problem. It's the sort of thing someone says when they don't understand a topic well enough to weigh in, but they still feel impelled to weigh in.
That's the issue with your post because you don't even understand the issue isn't an economical but a social. Again, don't pretend you know what you are talking about because of tiktok.
They already have a 45% income tax above €177k, a 30% capital gains tax, a 36.2% real estate gains tax, and a corporate tax rate of 25% - much higher than their peers in the rest of the EU.
The reality is France can't afford the status quo (in reality, only the expansion from 2005-25 was prolifigate) much longer.
Under IMF or ECB receivership, taxes would rise AND social services would be cut. By cutting stuff today, they can at least minimize the pain from cuts.
France has the lowest retirement age of any EU country, the second highest expenditure on social benefits, and a large debt burden.
Raising the retirement age by a couple of years is obviously unpopular, yet arguably sensible - but trying to do that was what caused the last set of violent protests.
If France wants to support Ukraine and rebuild it's army, it will be required to borrow heavily to purchase arms.
If France wants to rebuild manufacturing supply chains domestically, it will be required to borrow heavily to invest in infra.
The above two will be in the tens to hundreds of billions of Euros range.
France ALSO spends tens to hundreds of billions of Euros on social services.
France ALSO needs to pay it's existing interest on debt, which is in the tens of billions of Euros a year and rising.
France needs to cut 2 of the first 3 choices - they cannot cut the 4th one due to EU regulations and if France does not want to become the next Argentina.
Of course it doesn't sound bad but what do you do when you run out of money to pay for it?
Do we decide policies based on what sounds good or what we can actually afford? Because getting paid to do nothing but our hobbies would sound even better.
But hey, if you wanna give boomers luxury retirement while immolating the economic prospects of future generations of workers in order to pay for it, go for it.
> Love it. the previous two parent comments place the cognitive dissonance of Anglo-Saxon economic narratives in stark relief.
For sure, the cognitive dissonance between those who understand basic economics and those who don't. Those who do understand that some of these facts are indicators of a coming crash, and the ones who don't think they're good because they like "free" stuff and don't understand how anything works or gets paid for. We can see where this goes, whether we want to or not, by watching France over the next two decades as it drives the leading edge of the upcoming long-term recession across all large Western economies.
Mm, the constant strikes are not a positive. I was not able to attend a funeral of a close friend because of a strike, for example. And other strikes, though not all, are very hard to explain why they are happening. Plus, the damage from the last time the burned the centre of city I live in now still hasn't been fixed. I just hope they don't burn it again in the next few weeks.
You'll see a lot more of the "dirt poor" class in american cities than in french ones. On that aspect, America is closer to third world countries than France.
Wealth inequality is causing many protests recently. Indonesia's protest was about wealth inequality where nepo babies flaunt wealth on social media while the poor are suffering. Exact same situation in Nepal. Seems to be the same generally in France even if the trigger for protests is not the same. The main theme is that these protests are led by Gen Z people.
It's the younger generation that is hurting because they do not own real estate and stocks so they have not benefited from wealth creation via money printing and ZIRP era.
My guess is that this will happen in the US soon as well. Entry level jobs are threatened by low investments due to tariffs, high interest rates, and the perceived notion that AI is taking their jobs. Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid - not to mention ever increasing real estate tax, home insurance, etc. Now the tariffs will make everything much more expensive for the working class. Tariffs go into paying down national debt while the rich get a tax break via BBB. Tariffs disproportionally affects the poor.
It's hard to be a 22 year old college grad right now. Not as bad as 2008 but definitely harder than in the last 15 years.
PS. Everyone living in the west missed it but the 2019 Hong Kong protests were more about wealth inequality even if the trigger was the China extradition law. This was never mentioned in western media. I was living there during the protest. Young Hong Kongers felt hopeless because real estate prices to income ratio was the highest in the world at the time. By far. They didn't want to live in an apartment the size of an American bedroom with a family of 4 and spend a lifetime trying to pay it off - if they could even muster up the downpayment for it. Unlike Americans who can move to a more affordable city or state, young Hong Kongers had no where else to go. This pent up frustration for young Hong Kongers boiled over into months long riots.
I suspect the big crash is coming within the next few years — and I think we've seen nothing yet.
I've wrestled a bit with how to prepare financially for what could lie ahead but decided that there was really no harbor that is sure to be safe. I'm prepared to basically be poor and die from a thing that could have been prevented with some measure of health care.
I'm usually an optimist by nature, but I've never been so with regard to the economy and the growing wealth inequality. There is no soft landing for either in my mind.
> I've wrestled a bit with how to prepare financially for what could lie ahead but decided that there was really no harbor that is sure to be safe. I'm prepared to basically be poor and die from a thing that could have been prevented with some measure of health care.
Personally I'm preparing for this by aggressively paying off our mortgage, putting less money into the market. Also avoiding lifestyle inflation and even cutting back here and there. It's all about reducing fixed cost so that if shit hits the fan, we can absorb the higher cost or lower income as much as possible.
Consider immigrating to a country with socialised health care, if possible
If you are not diversified, diversification is always safer than "doing nothing" because doing nothing financially means choosing whatever you currently have your wealth tied into unconsciosuly, whether that's just cash sitting in a bank account, stocks or stocks and bonds, etc.
Get some gold (ideally a bit of physical gold but also put some of your investments into gold or broad commodities ETFs) as a hedge against inflation/monetary devaluation, keep some of your wealth in cash or short-term/liquid bonds/treasuries/money market funds if you predict an equities and real estate crash, buy some real estate or real estate ETFs to get a bit of real estate exposure if you have zero, buy stocks if you have none. Shift a bit of your equities into international ETFs if you only have US stocks.
Splitting up into equal buckets of cash, real estate, stocks, bonds, gold/commodities, hell even a bit of crypto, hell buy some goods upfront to hedge inflation like dry, shelf stable food - this is ultimately gonna be a less volatile ride than just sitting around and doing nothing.
"We're fucked but there's nothing we can do" is a defeatist attitude if you sense financial turmoil but can't predict what type, just don't put all your eggs in one basket, and maybe reduce your diversification once you sense things are getting better.
I do diversify (not precious metals or crypto though). Real estate, cash, bonds, stocks. (I could use more international index funds, but see below.)
Still, my sense is that there won't be any safe havens. It will be global, it will be stocks, everyone will be poorer so real estate will be unsellable, inflation destroying cash holdings…
Serious question (I am no scholar on history), where were the safe harbors during the Great Depression?
My ignorant notion is that there were none. But if you held on to your stocks for a couple decades, you did fine … just not during those two decades though.
Real estate ETFs are worthless, they contain all the risks of a real estate investment with none of the upside (leveraging with non recourse debt, 1031, potential property tax incentives, etc).
I never quite understood the "wealth inequality" thing. It is to me a rather meaningless slogan. Wealth inequality is opposed to what: wealth equality? Like everyone possesses exactly the same amount of wealth? This sounds nonsensical. "Everybody's poor" fits precisely the definition of wealth equality, obviously not a good outcome. If some inequality is permitted, what's the desired mean and what's the acceptable deviation? Is there a correlation between that and the abilities, work ethics of the person? Are people allowed to be lucky, win lotteries, have hard working parents that saved up?
I understand the goal of reducing poverty. I understand the goal of limiting the unchecked power and influence of certain individuals of groups, caused by them having excessive wealth. But the issue of "wealth inequality" is in the "not even wrong" category for me.
Maybe think of it in terms of 'power inequality' and maybe it will make more sense to you.
Substitute "wealth inequality" with "extreme wealth inequality" or "rising wealth inequality" to see the problem.
Both are true. The difference between a billionaire and a person living paycheck-to-paycheck is extreme and billionaires are getting richer.
Every single revolution happens because of the inequality.
Not just recently -- always.
Prevention measures are sometimes well accepted, like minimum wage, but sometimes it comes to really stupid regulations like removing Advanced Math classes from Californian schools -- they are all aimed at preventing inequality.
where are they removing advanced math classes to "help people". Can you provide some more ifno?
San Francisco public schools -- it was in the national news. Details of the theory associated with it include Stanford.. endless numbers of heavily slanted retellings, few primary sources. lots of obfuscated Board votes
france needs to cut its budgets big time
> Wealth inequality is causing many protests recently.
I feel like "wealth inequality" is such a useless frame that it makes me wonder if the politicians harping on it are using it as a dodge to avoid the real issues.
Suppose a middle class lifestyle requires wealth 100 and below 50 is poverty. If the 25th percentile is at 40 and the 99th percentile is at 400, that's very bad, even though it's "only" a factor of 10. If the 25th percentile is at 200 and the 99th percentile is at a million, that's not ideal, but it's certainly better. So the ratio is basically a red herring and what matters is how the people at the bottom are actually doing.
Meanwhile most of the underlying problem with "wealth inequality", both in terms of cause and harm, is actually market consolidation. If you were an early shareholder of a trillion dollar corporation then you're probably a billionaire, but you wouldn't be if trillion dollar corporations didn't exist because there were 100 companies each of 2% the size instead of 2 companies each the size of countries, and moreover the problems come from the existence of a trillion dollar corporation which can then run roughshod over everybody because they don't have enough competition to keep them honest. Which isn't solved in the slightest bit by leaving the corporation the same size but causing it to be owned by mutual funds or foreign investors instead of domestic founders. But people keep proposing taxes as the solution to it, which is exactly the thing that doesn't fix that.
> Young couples can't afford to buy a home to start a family because interest rates are 3x higher than a few years ago while home prices went way up since covid
Current interest rates are in line with historical norms; ZIRP was an aberration. And in general higher interest rates result in lower housing prices, because you don't have people taking out huge low-interest loans and bidding up the prices.
The problem right now is that the transition from ZIRP to normal interest rates sucks, because it creates short-term gridlock. Somebody who would like to sell their house and move can't do it because the payments on a new, higher-interest mortgage are higher than the ones on their old low-interest mortgage, and then they can't afford it so they don't sell their house, which keeps supply off the market.
The best way to fix that is to solve the gridlock with new supply, but we mostly prohibit that through zoning. But it'll happen either way because eventually those low-interest mortgages age out (i.e. get paid down) and then the gridlock breaks and prices come down, it just takes longer and causes more damage in the interim.
And either way the result is going to be a reduction in housing prices, which people are going to call a "housing crash" and complain about it. But the issue isn't prices going down, it's that ZIRP causes a bubble. That's a sunk cost; we're already in it. Returning to ZIRP is only an attempt to re-inflate the bubble, which is just kicking the can down the road. And, of course, you can't use ZIRP if you're trying to fight inflation, which is why causing the bubble to begin with is bad -- once you have enough inflation to make ZIRP untenable, the bubble ultimately has to pop, and trying to fight it (which is what we did in 2008) only makes it worse.
Content warning, this graph is distressing:
https://fred.stlouisfed.org/graph/?g=1Mdsa
The peak in 2007 was the massive housing bubble that crashed the economy.
This is failing to consider that 100 wealth doesn't have the same buying power over time, and continuing wealth inequality necessarily means that someone who's comfortable today will be uncomfortable tomorrow.
None of that is correct.
If the market cap of Google is a million dollars and a sandwich is $5 and then tomorrow the market cap of Google is a trillion dollars because they wiped out all their competitors and took over the market, the price of a sandwich is still $5 because it's quite unrelated and not affected by the number of search engines or mobile operating systems. Larry Page isn't going to personally eat so many sandwiches that it affects the global price of sandwiches no matter how much money he has. Moreover, necessities generally have elastic supply -- even if demand increased, we could just make more of them rather than raising the price -- unless you cause artificial scarcity (as we do with housing), in which case that's your problem independent of billionaires.
What the consolidated market does affect is that market, e.g. the price and quality of phones and phone apps. But that has nothing to do with what proportion of the company's shares is owned by what number of people. It's just as much of a problem if it's a publicly-traded company whose largest shareholder owns less than 1% of it. And the problem goes away if the market is competitive even if there exists someone who has billions of dollars as a result of owning a fractional percentage of a million different companies -- although that usually isn't what happens anyway because the primary driver of the existence of billionaires is "market consolidates enough to cause one company's market cap to exceed a hundred billion dollars", not "someone invests a thousand dollars each into a thousand separate companies and every one of them beat the market by a huge factor without any of them becoming a megacorp".
I should print this out and frame it. This is basically my exact thinking on the issue. We really need to think about the tangible goods and services that make for a quality life for the bottom to middle quintiles and figure out how to produce way more of that stuff.
Isn’t AI a deflationary force? Like, a unit of intelligence is getting cheaper over time?
Also, migration & outsourcing…
Companies are mostly doing layoffs because interest rates went up and using AI hype as cover. The anti-inflationary force is the higher interest rates. And if AI was actually lowering the cost of that sort of thing then you still have to contend with the Jevons paradox.
Meanwhile the hype is causing things to be converted to "AI" even when it isn't any more efficient, which lowers labor demand (suppresses wages / increases unemployment, bad) and increases power demand (higher electricity prices, bad) and to the extent that hype causes adoption of inferior solutions, lowers efficiency (worthless AI customer service, bad). Some of the AI stuff is useful but the hype is causing folly.
Migration isn't particularly deflationary, especially with respect to housing prices since the new residents then increase housing demand, which is fine when construction isn't constrained by zoning but bad when it is, and right now, it is.
Most of the outsourcing that can reasonably happen already has, in large part because the US housing market (and therefore cost of living) has been out of whack for a long time, which makes US workers less competitive despite what would otherwise be various countervailing advantages. Things are made in China because they fit on a container ship, but that happened decades ago. Nurses and landscapers and firefighters and plumbers are still domestic and that isn't likely to change.
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> My guess is that this will happen in the US soon as well.
As it should. The younger generations have been and are actively being fleeced by the older generations. The scary part is that it's all but flaunted at this point, with the tactic of choice being to gaslight younger people into thinking it's all their fault. That's the stuff of revolution and frankly, I think it will do the U.S. a world of good to see that level of rebellion.
I found the following article interesting the other day. A retired couple with a four-bedroom home concerned that they couldn’t sell their home at 1.3 million, so they lowered it to 1.28 and were surprised it still didn’t sell. The owner then considers renting it out instead.
https://apnews.com/article/real-estate-housing-market-home-p...
Out of curiosity I looked for the house that couple is selling. Believe it's this: https://www.zillow.com/homedetails/30206-Telluride-Ln-Evergr... Notice the price history. 83k in '97, which is about 170k now. Being sold for a 10x profit. Sigh.
If you had invested the 83k in the S&P500, you'd be slightly ahead I think if you include maintenance and property taxes.
https://www.in2013dollars.com/us/stocks/s-p-500/1997?amount=...
If you count the S&P 500, you should also count 20+ years of rent, right?
You don't get to live in the S&P500. Also don't really get the point of this response. Both just prove assets are wildly out of reach for young people now compared to then.
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Well, I suppose this is why communism was popular in early 20th century. People wanted communism so they could reset wealth equality even if the economics didn't make the much sense. Society is just a big cycle it seems.
I often think about why this is happening now without invoking the default "evil rich people" hypothesis. I think it's because world population increased so fast in the last decades that there is simply not enough resources, land, high paying jobs for everyone to achieve a comfortable life. And because the population is so high and the world so connected, it's easier for a single person to accumulate wealth because talent or sheer luck. IE. build the right app at the right time and get rich almost instantly. Society seems to be self correction mode by not having nearly as many babies recent years.
> there is simply not enough resources, land, high paying jobs for everyone to achieve a comfortable life
On the contrary, (in the US) I think there is at least enough land and resources (including food) that a modest haircut on the ultra-rich would go a long way for the lower-middle classes.
If companies stop forcing RTO crap, then yes there are and will continue to be such jobs.
Unfortunately, I think rto is here to stay
> Society seems to be self correction mode by not having nearly as many babies recent years.
An interesting factoid from the Roman Empire is that in their later years there was a major fertility collapse to the point that various laws were passed in order to try to motivate fertility in various ways, and they ultimately failed.
I don't know what to take from that yet, if anything, but I think it's obvious that we've similarly entered well into an 'end of empire' type era, and fertility rates have also again collapsed. So again, I think it's simply interesting to ponder.
It seems like population historically can overshoot productivity.
> I often think about why this is happening now without invoking the default "evil rich people" hypothesis.
What do you mean? In the French protests, the "evil rich people" hypothesis is very present. Every other protester was brandishing "tax the rich" placards.
Just thinking at a society/animalistic/human instincts/economics level.
But the French are very "anti-rich people" (including "the rich" themselves: "champagne socialists" were invented here. Patent Pending (tm) (c) (r)).
So I really don't get your original point in this context.
I do wonder what the French population actually want as a solution to the unsustainable debt and huge proportion of tax revenue(second highest in the EU) spent on social benefits.
Clearly they recognise a need for reform because they vote for politicians who run on a reform platform. Yet as soon as said reformer tries to change anything at all, it's back to the barricades.
Reduce benefits? Riot!
Increase tax rates? Riot!
Extend the retirement age? Riot!
Increase immigration? Riot!
From an Anglo-Saxon perspective that's what it looks like, but I think you are missing a cultural difference. In France, the state does not have the legitimacy that it does in the UK and US. In the UK parliament, not the people, is sovereign; this is more or less the practical situation in the US as well, despite lip-service to popular sovereignty.
In France, the people maintain the right to distruptively object to government actions and laws. What seems to us to be a criminal act may have (depending on circumstances) more popular legitimacy than the laws themselves. Or it may not, depending.
France is in trouble because people don't want to face the math. It's going to take a leader to push through changes nobody wants and somehow make them feel good about it. Hard bit.
Also, the USA is in the same spot. Although better as their tax burden is so low, so raising it higher is easier when it comes to the math side of things.
> France is in trouble because people don't want to face the math.
I disagree, a lot of people here are quite aware that we are in very difficult financial situation, from all side of the political spectrum. The main issue is that there is a very big disagreement on how to solve it (i.e how/who to tax more, and where to cut spending). And with a fragmented national assembly, everything is at a deadlock right now.
"The math".
We don't have issue with the math, we just disagree on what to fund to balance things out.
An example, 200+ billion euros are given yearly to large companies as tax breaks and the like, without the government asking anything in return. The senate had a report about it recently [https://www.publicsenat.fr/actualites/economie/un-cout-annue...].
Another example, the military and defense get a huge increase in budget. schools, hospitals, research, nearly every public service get a budget cut instead [ https://www.force-ouvriere.fr/non-aux-44-milliards-d-economi...].
>An example, 200+ billion euros are given yearly to large companies as tax breaks and the like, without the government asking anything in return.
Man, that must feel like the rug pull of the century for French taxpayers, given that despite these tax breaks, French companies like Airbus and ST are incorporated in the Netherlands and paying(more like, NOT) taxes there instead of France.
I'd be pissed too, and I'd want my money back.
Unless of course the purpose of those tax breaks was actually to keep some jobs in France and not see more of them move to cost efficient places like eastern Europe or north Africa.
They probably pay much less tax there. That's the whole point, they wouldn't go through the whole trouble for nothing.
Sounds like eliminating the NL's ability to give secret sweetheart deals to major billion dollar corporations that also benefit from tax breaks in other countries, would fix some of these problems.
If you build/design your products here then you use EU's trained labor, EU's infrastructure, EU's legal system, EU's defense, etc. then you should pay your fair share to support these facilities that help you be a billion dollar corporation.
I'm usually against "big governement", and generally against the EU, and more on the side of "laissez-faire".
But I have a hard time understanding how politicians figured that countries with widely varying tax regimes inside an economic union would work out for the countries with a taste for high taxes.
It makes no sense to me. Of course companies are going to choose the most favorable location to incorporate. Counting on companies to be "fair-play" or whatever the politician word-of-the-day is seems completely braindead to me. Unless there were some kind of backroom deals going on, which wouldn't surprise me one bit coming from the EU nomeklatura, and now they're trying to conceal it by blaming "the rich" / "corporate greed".
I have not seen any solutions by either the left or the right that mathematically solve it. In fact, the last time I checked, the far right was advocating for a lower retirement age and increased spending.
The left seems to want things we all want, but we're unsure how to afford them. They never seem to have math to back it up as taxes can only go up so much, and they are already some of the highest as a percentage of GDP in the world.
Can you point me to a real proposed solution by either side?
>[Taxes] are already some of the highest as a percentage of GDP in the world.
Is this the right metric: "Tax revenue (% of GDP)"?[0]
If so, France ranks 28 at 23.1% of GDP. The highest non-island developed country is Denmark at 31.4%. Denmark's GDP per capita is 1.5x France. New Zeland's GDP per capita is similar to France and their GDP to tax rate is 29.6% which is the fifth highest. Does New Zeland face similar problems as France? I think I agree with your implication that simply increasing the tax to GDP ratio is not a magic bullet.
In general, the data here is really interesting. Germany and the US have a pretty similar value, both averaging at about 11% in recent years. I would have assumed that Germany would have a higher rate. I wonder if this data is misleading somehow or if my assumptions were just wrong here. I guess one variable missing here is government debt, which is not a tax but is still used to pay for government expenses.
[0] Global: https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?most_...
France over time: https://data.worldbank.org/indicator/GC.TAX.TOTL.GD.ZS?most_...
I'm not familiar with the situation of New Zealand with respect to Australia (its neighbours). But the problem in the EU, is that there are a few countries (Ireland and the Netherlands inside the Union, and Switzerland which is right next door and enjoys many advantages and no constraints) which charge way less tax than the "central" EU countries. So companies have a tendency to set up their HQs in those countries.
I'm not one to cheer for absurd taxation (which is a French specialty), but I understand why this setup does ruffle some feathers in France.
The 11% number for Germany (and probably the whole table) is completely wrong. I guess it only shows federal taxes which are about 40% of all taxes including state and municipal taxes. So total taxes are roughly 24% of German GDP.
The correct number is 48%, not 23%. I doubt even the US is that low.
There are plenty of people on every side of the problem. But it takes very few people to paralyze the country. (Even that is relative, it's not like nothing can run during these episodes. But the elected government certainly feels like they can't go forward.)
> a lot of people here are quite aware that we are in very difficult financial situation, from all side of the political spectrum
According to the votes that Le Pen and Melanchon are supposed to get, I would not say "a lot of people".
Just redistribute the resources, cap prices and let the economy prop up itself. The rich have to give it up for sake of stability and greater good. I'm sure they will understand lol
English government: "we have revoked all your rights and outlawed tea"
English people: "oh bother, guess I'll just watch football"
French government: "we are levying a .0053% tax on stinky cheese"
French people: "we are on our way to the capitol with rocket launchers and we will light on fire every speed camera we encounter on our way"
They're like Europe's Portland but without the prevalence of piercings and hair dye. Beautiful really.
The french have really nailed protesting, see the BBQ adapted to be rolled along tram tracks to ensure you can stave off hunger mid protest: https://www.reddit.com/r/nextfuckinglevel/comments/tjmw8s/fr...
Rights whatever, but they'd never get away with outlawing tea.
> I do wonder what the French population actually want as a solution to the unsustainable debt and huge proportion of tax revenue(second highest in the EU) spent on social benefits.
Fewer rich people would be my guess.
When has that ever helped?
The French Revolution is generally regarded as a good move. It did get rid of a lot of rich people.
I would genuinely love to hear more of an explanation from French people about why the French Revolution was considered a success. As best I understand it, the French Revolution of 1789 did succeed in removing the monarchy but devolved into le règne de la terreur where the leaders were guillotining each other and various political enemies for about ten years(?) before Napoleon became the new monarch. Perhaps it can be viewed as a stepping stone in the decades long process to modern France but the short term outcome of the French Revolution seems pretty objectively terrible to me.
I stated this as a matter of course (as in, we'd see broad support for absolute monarchy in France if that wasn't the case), I have no insider information, I'm not even French. It seems I need to clarify "good move".
If your question is "was the Terror awful?", I'm sure you'll have a near totality of french people agreeing with you. If you ask "in retrospect, was the Terror awful enough so that the French nation would have been better off without its Revolution?", then I don't think you'll get many agreement.
The deaths associated with the Terror were plentiful, that's true, but this period was also carefully framed by the bourgeois class who took power afterwards. In terms of deaths, it's around 40k people. The american civil war was 700k deaths. Before Trumpism, would any american say out loud that abolishing slavery wasn't worth it?
And yet there have been 5 French Republics since then.
Wow. What in the world are they teaching kids in school these days?
Do you know of a french person who wants to return to the Bourbon rule? me neither. They like that they live within a republic. A revolution was necessary to achieve this. Hence my parent comment.
And naturally, you expect to come out on the winning side of this "revolution," right?
Seems to be working pretty well in the Scandinavian countries.
They have A LOT of rich people.
The thing is people don't care about how many rich people there are out there, as long as they can get a good life out of their labor (good job, good house, etc) but since capitalism has optimized these out of the reach for most people nowadays, then they start to blame rich people for everything, with the definition of the word 'rich' here being very fluid, ending up to mean just about everyone who has more than they do, and not just your Bezos, Musk and Saudi kings, so any taxes on the "rich" ends up only on the hard working middle class again.
Total French private wealth is around $15 trillion (https://en.wikipedia.org/wiki/List_of_countries_by_total_pri... ), French government spending is around $1.8 trillion/year. Even if the French government were to tax 100% of that wealth, it wouldn't be enough to cover 10 years of spending. Fundamentally the French economy isn't producing enough to support the current level of pension spending, due to a continuously falling ratio of workers to retirees. No amount of taxing anyone could produce enough money to plug that hole.
Of course an influx of immigrants will cause other issues. But if wealthy people need more population to keep their wealth up, I don't think they care.
> Do we think this is why French government added so many immigrants in recent times?
It's part of the official discourse.
It's not about wealthy people alone. You need staff to clean retirees sh!t (literally) in a country where the median age is 42.3 and rising.
France overspent in the 2000s and 2010s due to populist politics, and now the chickens have come to roost. Something needs to give in France, otherwise it'll become an Italy 2.0.
10 years of covering 100% of spending? That sounds like a really sweet deal to me, and more than enough to invest into the nation enough to go back to a balanced budget in that time frame.
I mean, try it with yourself. Imagine that you take your current salary, keep it for 10 years, and have 100% of your spending covered? How life changing would that be to you? Probably a lot.
Who do you propose to sell all that stuff to?
...for 10 years. After that, you're back in the hole that you were in before, but without anything to draw on. They're currently taking in the equivalent of $500 billion but spending $1.8 trillion, with a GDP of $3 trillion.
Understand that the non-wealthy wouldn't get anything new, it would just be a continuance of their current services and benefits. They've have 10 years to increase their GDP by 50% to get the tax revenue to get to a balanced budget. That's simply not happening without obscene inflation, with the corresponding increase in government spending on goods and services, keeping them out of whack.
What happens on year 11?
Many french people, like in most other places, don't give a shit who gets cut or increased as long as it's not them. These people will try and paralyze the country because it's effective and the elected government will reliably back off from whatever was objectionable. Sarkozy, a long time ago, ran for president specifically against that, proposing that the country run that gauntlet once and for all. To solve that problem. He was elected on that platform - so it's not like there isn't support for it. Then he backed off like everyone else.
Well, you will never make 65 million people agree with each other.
> Clearly they recognise a need for reform because they vote for politicians who run on a reform platform.
Meh. Macron, and his party, was not really running on a reform platform. He was the typical, business centrist candidate.
And the national assembly is very divided right now, and the government is systematically from a minority party (so neither from the left union, or the extreme right RN), which are not running on a reform platform (quite the opposite).
There is proposition about reforming taxes to taxes the wealthiest, something with some popular support, but no party that support this kind of reform as the power to make it happen right now.
We are in a deadlock since the dissolution of the national assembly by Macron, and we probably will be until the next presidential election, or a new dissolution that would give a big majority to one party which would pretty much ensure them control of the government.
The french system is really not made for a fragmented assembly. This is not what you can find in more parliamentary system where coalition form the government. A fragmented national assembly is basically a deadlock in France's fifth republic system.
Why? What exactly makes it possible or impossible to have a coalition government, in your opinion?
A naive look tells me if a majority can agree to support a government then it can work, and it not not. What "system setup" helps or hinders a majority made up of different parties? To me it seems the important part is the willingness of parties to compromise. Which may or may not be there regardless of the "system setup".
> Why? What exactly makes it possible or impossible to have a coalition government, in your opinion?
Mostly because it is a different system. The parlement in France doesn't elect the government. The president choose the prime minister, and the prime minister form the government.
The parlement can, at basically any point, vote to "censor" the government, effectively terminating it if a majority is reached (they do stay in position until a new government is formed, but can only take care of the "affaire courante", i.e simple daily affairs, no big laws, reforms, policy changes, ...).
Indirectly, this means that the parlement can have a lot of power over who will be in the government. If one party has an absolute, or almost absolute, majority in the parlement, it more or less mean that they can decide who shall be in the government.
Due to the way our election works, the party of the president usually has the majority in the parlement. This is even more true since Chirac changed the duration of the presidential mandate to match the duration of the parlement mandate (and their elections are very close). This usually give a lot of power to the president, effectively making him the sole judge of who shall be in the government (since he choose the prime minister and the parlement member of his party follow his lead).
But what we have right now is a very unique situation. Nobody has even close to an absolute majority in the parlement. The left "union" (which is not really united, but that's another story) control roughly ~33% of the seat, the extreme right party control ~21% of the seats, the presidential party control ~15%, and the rest are various centrist and right wing party.
The issue is that there is no way to get a solid absolute majority with this assembly. For the left, even if they were to compromise heavily and add as much center-right as possible in their coalition, it would barely give them a majority, and the government would have to compromise so much, it would piss off all their voters, which would be a political suicide for the next presidential election. Nobody want to ally with the extreme right except a few members of some right party, which would never give a majority (and the RN would only go to the government if they don't have to make any important compromise, for the same reason). So, you have to remove the two biggest block. And so, even if all the other party would somehow make a coalition (which is more or less the government we had since the assembly dissolution), it would still give less than ~45% of seats in the parlement, not enough to ensure that your governement would not be censored (which is what is happening, we've had like 3 or 5 government since the dissolution, i can't even remember all of them).
This is an unprecedented situation in France and basically the achilles heel of the fifth republic. Our system cannot function without a clear majority in the national assembly, and the way the assembly is divided right now makes any majority coalition impossible (or a political suicide).
Why should people meekly accept austerity or acculturation?
The alternative is going bankrupt, thus leading to forced and callous austerity by the IMF and ECB - just like what Greece faced. That would solve the problem as well, but French voters would have no say or autonomy.
French voters need to get it in their head that they need to accept their government tightening belts, otherwise they will have no say on what gets cut.
The population isn't homogeneous. The fundamental problem is that the average age of the population keeps increasing, meaning fewer and fewer working people per retiree. This means young people's quality of living gets worse and worse as they have to support more and more non-working people via pensions. Given the opposition to mass immigration, there doesn't seem to be any feasible solution in the near future.
What they want is for the government to write off the debt, but good luck actually getting it.
Chaos agents promote cooperation
> huge proportion of tax revenue(second highest in the EU) spent on social benefits.
This is the goal not the problem.
Somewhat agree, but the problem is that debt is at 110% and taxes are about maxed out. At some point, you go outside the Laffer curve, and then your economic engine is stunted (which maybe France already has?).
How can you tell when taxes are about maxed out? What's stopping France from increasing its marginal tax rate or creating a new tax bracket? Is the idea that people will move elsewhere in the EU with lower tax rates?
That does happen.
There are actually several French people and if one of them votes for austerity while the other protests it that doesn't actually make both of them hypocrites.
> Increase tax rates? Riot!
Somehow the tax rates for top 1% never go up.
> tax rates for top 1% never go up
Genuine question: what is the effective tax rate on France's top 1%?
Unlike in the US, French top 1% are usually families that span dozens of households that run unrelated businesses. The staple of the French top 1% is the Mulliez family that counts >1000 members. The most prominent family members run Decathlon, Auchan and Leroy-Merlin, others handle equally important land and B2B businesses, the offspring get juicy jobs at McKinsey or spawn startups in what's the hot thing of the moment. I am sure there are a few you Mulliez running AI startups right now.
It's really impossible to say what's the effective tax rate of these people. Their real wealth is not in the money, of with they have plenty, but rather in endless opportunities.
> Their real wealth is not in the money, of with they have plenty, but rather in endless opportunities.
That's not solvable with tax policy. The solution to that is DEI, but HN froths at the mouth when those 3 letters are pronounced.
income tax is 45% on all income above 177,106 Euros
The effective tax rates on high income individuals is likely much less. There is a large correlation between income and wealth, and wealth increase through asset appreciation is largely not taxed, or at best taxed at much more favorable rates than general income tax.
Tax on income is not the problem, it's tax on wealth gained through asset value increase.
That is why you have capital gains, which is ~30% in France.
Investment income is flat taxed.
And inheritance taxes, which are very high in France.
If you want to increase taxes, consider taxing income more and capital gains at a progressive rate. Although I haven't seen good data on effects of say a 70% capital gain tax, might hurt th,e economy. I did some reading on this subject last month and the sweetspot was around 20% to 35% on that classification of income.
Do you want to take people's wealth and cap it? IE, nobody is allowed more than $5 million? What are you advocating for instead?
I think the proposal from the left is a 2% wealth tax annually on wealth above €100 million. I suppose that is what they are referring to.
> the proposal from the left is a 2% wealth tax annually on wealth above €100 million
Would this actually cover France's deficit?
Total French private wealth is around $15 trillion (https://en.wikipedia.org/wiki/List_of_countries_by_total_pri... ), French government spending is around $1.8 trillion/year. Even if the French government were to expropriate the entirety of private wealth, it wouldn't even be enough to cover 10 years of spending. Fundamentally the French economy isn't producing enough to support the current level of spending, due to a continuously falling ratio of workers to retirees.
> Even if the French government were to expropriate the entirety of private wealth, it wouldn't even be enough to cover 10 years of spending
America's $6.75tn budget [1] would blow through our $140tn private wealth in 21 years. Even Norways $0.11tn budget [2] blows through its $1.6tn of private wealth in 14 years.
Perhaps the better metric is deficit as a fraction of private wealth? If that looks unsustainable, the problem is in publicly-held assets and services.
[1] https://fiscaldata.treasury.gov/americas-finance-guide/feder...
[2] https://en.wikipedia.org/wiki/State_budget_of_Norway
French private wealth has increased $2,300 billion since 2020 according to that page.
In the last 5 years French public debt has grown $750b [1]
Had that growth in wealth been taxed at the rate income was taxed (45%), that would have seen France's debt decrease - even with the covid mess.
[1] https://www.ceicdata.com/en/indicator/france/national-govern...
You are implying the top 1% of wealthy people in france is related to income tax?
this is called goomba fallacy.
Note that both the deficit and debt levels that are seen as so problematic in France are lower than American levels.
France doesn't control the Euro/ECB, so the situation is structurally different.
https://archive.ph/ms6aS
Looks like numbers for France's deficit and debt are similar to the US.
France do protests and civil disobedience like no one else and I'm here for it.
After a long day out that started early, I can tell you that our riot police has no budget issues!
Does it lead to obviously better results in quality of life compared to people who don't riot quite so frequently?
Is the average londoner worse off than the average Parisian? What about the average British person vs the average French person? I just pick the UK because it is nearby, approximately the same population and same GDP
I feel they can make a change through protest and it feels like an inherent part of their life that they get to protest when the government or officials have made a change that isn't what the people want. Whether it makes a significant difference is hard to judge without living there. Likewise who knows what life would be like if they hadn't protested. They have great working rights though, and a less stressful life in that respect so that is a positive.
Pretty much. I've seen it attributed to the legacy of the WWII French Resistance ( https://en.wikipedia.org/wiki/French_Resistance ) or the Paris Commune ( https://en.wikipedia.org/wiki/Paris_Commune ) or the Flour War ( https://en.wikipedia.org/wiki/Flour_War ). But there's a lot more, and it goes much further back - https://en.wikipedia.org/wiki/List_of_incidents_of_civil_unr...
Perhaps France's ruling classes are especially inclined to ignore the concerns of the poor and working classes, and the latter often feel that forceful resistance is their only option?
France aggressively centralised its bureaucracy in the '89 Revolution. That may help disconnect Paris from its constituents more than in other systems.
As Tocqueville writes in "De l'ancien régime et la révolution", centralization was already underway since Louis XIV, and heavily. Napoleon just picked up on it and continued the process.
All I know is this. People keep on saying the economic model of what the French people want isn't sustainable. Is the US model sustainable? From all accounts, nope. So what do we do? Go back to communism?
The funny part is, regardless of which social, cultural or economic model you want, the one that everyone hate is the inequality.
As long as the US retains the ability to control the supply of USD (Which France does not have over its own currency) the US model is sustainable.
Is the current situation in US sustainable? I don't see it. But again, we said the same for Japan for the last 3 decades and they still seem fine.
It could be stable in the US. The basic idea behind Keynesian economics is: during contractions, decrease taxes and increase spending; during expansions, increase taxes and decrease spending. Doing this helps smooth out business cycles, promotes steady growth, and collects revenue for the government.
The problem is, as we've seen, our government is cutting taxes and raising spending no matter where we are in the business cycle. That's a very easy problem to solve, if there is the political will, but right now, there isn't.
You'll have to pardon my French /s. Economic model only works in theory.
This offers nothing insightful or useful, and doesn't even address a fundamental problem. It's the sort of thing someone says when they don't understand a topic well enough to weigh in, but they still feel impelled to weigh in.
That's the issue with your post because you don't even understand the issue isn't an economical but a social. Again, don't pretend you know what you are talking about because of tiktok.
Are there any economic models that actually work (or have been allowed to work), not just in theory.
The French know how to do a proper protest. The US would do well to learn from them.
When France eventually defaults because of the untenable fiscal situation, no amount of protests will move the IMF or ECB.
Ask Greece.
Then they better tax the rich and corpos.
They already have a 45% income tax above €177k, a 30% capital gains tax, a 36.2% real estate gains tax, and a corporate tax rate of 25% - much higher than their peers in the rest of the EU.
The reality is France can't afford the status quo (in reality, only the expansion from 2005-25 was prolifigate) much longer.
Under IMF or ECB receivership, taxes would rise AND social services would be cut. By cutting stuff today, they can at least minimize the pain from cuts.
If everyone protested like the French the world would be a much better place.
Would it really?
France has the lowest retirement age of any EU country, the second highest expenditure on social benefits, and a large debt burden.
Raising the retirement age by a couple of years is obviously unpopular, yet arguably sensible - but trying to do that was what caused the last set of violent protests.
> France has the lowest retirement age of any EU country, the second highest expenditure on social benefits
That doesn’t sound like a bad thing
> a large debt burden.
Compared to?
> Compared to?
It's EU peers.
If France wants to support Ukraine and rebuild it's army, it will be required to borrow heavily to purchase arms.
If France wants to rebuild manufacturing supply chains domestically, it will be required to borrow heavily to invest in infra.
The above two will be in the tens to hundreds of billions of Euros range.
France ALSO spends tens to hundreds of billions of Euros on social services.
France ALSO needs to pay it's existing interest on debt, which is in the tens of billions of Euros a year and rising.
France needs to cut 2 of the first 3 choices - they cannot cut the 4th one due to EU regulations and if France does not want to become the next Argentina.
>That doesn’t sound like a bad thing
Of course it doesn't sound bad but what do you do when you run out of money to pay for it?
Do we decide policies based on what sounds good or what we can actually afford? Because getting paid to do nothing but our hobbies would sound even better.
But hey, if you wanna give boomers luxury retirement while immolating the economic prospects of future generations of workers in order to pay for it, go for it.
> France has the lowest retirement age of any EU country, the second highest expenditure on social benefits
Right, exactly
Love it. the previous two parent comments place the cognitive dissonance of Anglo-Saxon economic narratives in stark relief.
> Love it. the previous two parent comments place the cognitive dissonance of Anglo-Saxon economic narratives in stark relief.
For sure, the cognitive dissonance between those who understand basic economics and those who don't. Those who do understand that some of these facts are indicators of a coming crash, and the ones who don't think they're good because they like "free" stuff and don't understand how anything works or gets paid for. We can see where this goes, whether we want to or not, by watching France over the next two decades as it drives the leading edge of the upcoming long-term recession across all large Western economies.
Mm, the constant strikes are not a positive. I was not able to attend a funeral of a close friend because of a strike, for example. And other strikes, though not all, are very hard to explain why they are happening. Plus, the damage from the last time the burned the centre of city I live in now still hasn't been fixed. I just hope they don't burn it again in the next few weeks.
It would be a much poorer place, that's for sure.
You'll see a lot more of the "dirt poor" class in american cities than in french ones. On that aspect, America is closer to third world countries than France.
avoir le beurre et l'argent du beurre
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