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Home Publications Blogs Beat the Press The Fruits of Deficit Reduction in France

The Fruits of Deficit Reduction in France

Friday, 12 July 2013 04:44

The NYT had an article about how French consumers are cutting back on their spending, hurting retailers and the economy. The piece notes that unemployment is rising and that the French economy is struggling to recover from its second recession since the 2008 collapse.

It would have been worth mentioning that this is a direct and predictable outcome of the government's austerity policies. The government has cut spending and raised taxes. This directly reduces demand in the economy. Unless the government's cutbacks somehow inspire consumers to spend more, businesses to invest more or foreigners to buy more French goods, they will lead to slower growth and higher unemployment.

As this article implies and research from the I.M.F. and others demonstrate, government austerity has not helped to boost the private sector. The article should have explained the role of government policy in the situation it describes. Presumably if there had been a surge in inflation following a big government spending spree the NYT would have made the connection rather than just noting higher prices in stores.

Comments (4)Add Comment
written by Jennifer, July 12, 2013 6:48
"It makes you think they don’t know what they’re doing.”

Pretty much sums it up. While it's true that the article didn't explain much about the government's role it did article pretty clearly what the plan was-the confidence fairy.

"Mr. Hollande is also urging the French to be optimistic by citing forecasts that France and the euro zone will begin to emerge from their slump by next year, if all goes well."

How often have the Irish heard that one?

written by fuller schmidt, July 12, 2013 2:57
The French Confidence Fairy is going to show up any day now, just watch. Plus France would be better off by now if Romney had won. Can I write for the paranoid party or what?
written by A Sinclair, July 13, 2013 8:06
Tax increases are the problem; spending cuts are the solution. The problem is government is too big of a burden on the private sector in most of Europe but especially France. Government is 56% of GDP. There is no way out of this hole by shrinking the private sector (tax increases). You must enhance the business environment or face the fact that the government is killing the golden goose. There is a huge difference in cutting deficits with more burden or cutting government. Both are called austerity but only the second approach solves a seriously out of balance problem. In fact we should be measuring private sector GDP instead of including government spending in GDP. Politicians can borrow and spend to print the GDP they want. That is the mistake of the current system.
written by Ellis, July 13, 2013 11:01
Austerity policies don't come out of nowhere. They serve the interests of the bourgeoisie, the banks, big companies, the wealthy. In other words, it is about class interests. In France, the government is cutting social programs. But at the same time, it is handing ever more money to the biggest companies. The article in the NY Times even cites some examples of that.

Amazingly, Dean Baker and other economists refuse to acknowledge this. They pretend that austerity is just for "the confidence fairy" or other idiotic characterizations.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.