TRIBUNE. Jacques de Larosière, ex-governor of the Banque de France, responds to appalled economists


Jacques de Larosière has just published “40 years of economic error. Some ideas to get out of it ”(Odile Jacob). In this book, he warns against our “addiction to public spending” and especially our downgrading: in 1975, France was number 5 in the world for its per capita income. She is now at 26e rank.

A few remarks following the column of the appalled Economists published on your site: “The“ Covid debt ”is not necessarily a problem”.

I have read the forum carefully and share some of the concerns expressed, but I disagree on several points. Three statements call for the following reactions on my part.

1. “What we are suffering from is the blind budgetary austerity that has prevailed for ten years”

This statement is surprising to me.

  • For twenty years (1998-2019), public spending in France has increased every year without exception: going from 733 billion euros in 1999 to 1,318 billion in 2018, i.e. an increase of 68% in less than twenty years.
  • Over the past thirty years, the workforce in our public service has grown twice as fast as the working population.
  • In total, our public spending represents 54% of GDP, which is a world record (European average: 45%). In twenty years, French public spending has increased in real terms, unlike the situation of our neighbors. We cannot therefore speak of austerity, quite the contrary.
  • Other countries, more attentive to the management of their public finances, have, in fact, reacted better to the Covid crisis. Thus, Germany (whose public debt amounted to 60% of GDP, compared to 100% in France) was able to respond more effectively to the pandemic due, in particular, to the budgetary leeway that it had acquired. constituted.

In fact, fifteen years of budgetary drifts have helped weaken our economy and endow us with administrative overweight, which has become a major problem.

2. “In terms of public investment, we must reverse the downward trend that has continued since the early 1980s”

I agree with this recommendation. That said, it should also be noted that it is the continuous increase in current and operating expenditure that has helped to limit the growth of public investment. More than 90% of French public expenditure was devoted to financing the end of the month and not the investment for the future.

The recommendation therefore requires (the public deficit is not unlimited) a more responsible management of our current expenditure, excessive expenditure according to all international comparisons and which has the result of worsening the weight of our compulsory levies and therefore reducing competitiveness. of our companies and consequently their ability to hire.

This observation also responds to the statement, too simple in my eyes, that: “We are suffering from unemployment, not from public debt. “ In fact, comparative economic studies show that the importance of our unemployment is explained in large part by the low profit margins of our companies, itself linked to the weight of compulsory deductions. However, without sufficient margins, no private investments and no recruitments.

3. “The State is indebted at historically low rates and the interest charge decreases, which allows public expenditure and indebtedness to increase”.

It is of course true that monetary policy today makes public debt painless. But I do not draw from this observation the same lessons as the authors of the tribune.

a) If the public debt is inexpensive due to the massive intervention of central banks, it nevertheless continues to exist. Nothing will ever prevent investors from analyzing the sustainability, or not, of public debts.

In this regard, the recommendation of the tribune of the Terrified Economists aiming to “Prevent markets from judging fiscal policies” seems particularly questionable. It is the markets that drain household savings and ensure the financing of the economy. By what right would they be prevented from assessing the risks and the quality of signatures?

b) Restoring a mandatory “floor” on treasury bills held by banks or allowing central banks to buy government bonds directly in the primary market are not likely “game-changers”. In addition, the current methods of, for issuing institutions, buying almost all new securities issued by governments make them unnecessary.

Ultimately, what seems important to me can be summarized as follows.

  • We suffer from a lack of future investments (research, infrastructure, ecological transition, etc.).
  • The zero-rate monetary policy encourages savers to keep liquid assets (the famous “liquidity trap” so dreaded by Keynes) and to shy away from long-term investments which no longer pay anything (but which we so badly need), and it also has the drawback of promoting the search for yield at all costs (“search for yield”), which pushes speculative bubbles and weakens the financial system.
  • We must therefore stop advocating an indefinite period of zero interest, if we want to revive economic growth. History shows, in fact, that growth always supposes work and the remuneration of risks.

A book to get out of “40 years of economic error”

What I tried to show in my recent book entitled “40 years of economic misguidance”, published by Odile Jacob, can be summarized as follows:

  • Since the end of the Thirty Glorious Years, that is to say since the beginning of the 1980s, France has won and lost its footing in all the international rankings: thus, we were at 5e world rank in 1975 for the standard of living per capita, today we are at 26e rank ; we have deindustrialised, going from a manufacturing industry rate of 15% of our GDP in 1998 to 10% today; our unemployment rate is one of the highest in Europe …
  • But, during this time, we allowed to develop three records which stifle us and undermine our competitiveness: weight of the budget deficit, weight of public expenditure, weight of compulsory levies. It should be noted, for example, that our public administration has grown twice as fast as our working population.
  • Our rate of public spending in relation to GDP is 54%, 10 points more than in Germany …

The book details with precision and objectivity the successive errors that have led to the weakening of our country and to the systematic penalization of young people, which is one of the major flaws in the policies followed for forty years. But it also opens up concrete and realistic perspectives on how to stop this decline and carry out the simple and understandable reforms that our politicians have put off for too long by taking advantage of the illusions offered by the indebtedness and the “financialization” of our time. .



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