On the eve of the publication of the first estimate of French growth in the 3rd quarter, which is not expected to bring any good surprises, the political class would do well to remember the thought of the German philosopher Holderlin: "Where danger grows, grows what saves". France is facing a triple crisis: social, economic and financial. Many people denounce this situation and blame it on the head of state, while continuing to defend the principles that inspired his economic policy, summed up by the concept of "supply-side policy". Reflection on the remedies to be provided has therefore not progressed.
The French economy is stagnating. After a slight drop (-0.1%) in GDP in the 2nd quarter, the first estimate by INSEE for the 3rd quarter is not expected to show a real recovery. Meanwhile, social tension is reaching its peak with the feeling of abandonment of the youth and injustice on the part of employees. The country is experiencing a massive public deficit and growing debt. The link between discontent, poor economic performance, the country's financial fragility and the economic policy chosen is however obvious but rarely invoked.
This policy has been based for at least ten years on one reasoning: the improvement of the financial situation of companies through reductions in social security contributions and taxes will lead to an improvement in their competitiveness, to more investments leading to stronger growth and to the resulting job creation. Unfortunately, the results have not been there. In recent years, GDP growth has remained weak with stagnation for the past two years. The unemployment rate has not fallen significantly: it was 8.6% in 2000 and 8% in 2020 and has just risen to 8.3% in September.
No progress has been made in terms of foreign trade in goods, although the expected recovery in competitiveness should have enabled a reduction in the trade deficit. However, the trade deficit, excluding fossil fuels and over the last 12 months, is still close to €50 billion, whereas it was in surplus until 2002.
Finally, France has experienced a heavy deterioration in its public finances with a debt ratio of more than 119% of GDP, whereas it was only 90% in 2017. Its first cause was precisely the reductions granted to companies. The tax rate on profits, which was 33.3% in 2016, has since been reduced to 25%, with a reduced rate of 15% for SMEs on the share below €42,500. In addition, there has been the multiplication of tax loopholes, the cost of which will exceed €30 billion in 2026, led by the Research Tax Credit for more than €7 billion, and the reductions in the VAT rate and exemptions for electric vehicles and repair work.
But the main reduction in charges was the reduction in levies on low wages, which cost 39 billion euros in 2025. In total, according to the estimates of the Social Security Accounts Commission, all contribution exemptions for all schemes reached 86.8 billion euros last year and were therefore the major cause of the increase in deficits and therefore in public debt.
The supply-side policy is not necessarily ineffective. But it still needs to be targeted. This is what was undertaken during the 1980s, when significant public funding was granted to restructure the steel industry, which was then almost bankrupt, to modernise the car industry or, for example, to build an aluminium plant in Dunkirk, which is still the largest in Europe today. On the contrary, the measures put in place over the past ten years have concerned all companies, and in particular the financial sector, mass distribution and service activities that were not subject to international competition.
The concentration of this aid on wages below a ceiling has also discouraged employers from resorting to increasingly qualified jobs and, above all, from making increases. This is what has rightly been called the "low-wage trap". It is therefore not surprising that this has not encouraged investment and job creation in the sectors of the future and that no results have been achieved on the recovery of foreign trade.
On the other hand, this policy has been a powerful factor in increasing inequality and has contributed to the general social unrest that is now reflected in sometimes violent protest movements. The profits of large companies have increased sharply. But as domestic demand stagnated due to the slight increase in purchasing power, profits were used to make acquisitions, sometimes of considerable amounts, and most often outside France, and to remunerate senior executives and shareholders.
In addition to share buybacks, which have exceeded €10 billion since the beginning of the year, French companies rank second in the world for dividends distributed with €61 billion in the 2nd quarter, behind the United States (€156 billion) but ahead of Germany (€44 billion). These dividends go mainly to households that already have the highest incomes. The introduction of the "flat tax" in 2018 abolished the progressivity of the tax on financial income and was another factor in aggravating inequality.
The Ministry of Finance has published a study on the evolution of incomes by bracket between 2003 and 2022. For the top 10%, the increase was 65%, and even 80% for the top 1%, while it was only 39% for the remaining 90%. The gap between assets is even more marked since the highest have benefited from both the increase in financial assets resulting from increased profits and the trend increase in property prices.
In parallel with these transfers, which benefit a very small part of the population, the slight increase in the purchasing power of employees has caused deep resentment, which is reflected in the polls by a rise in intentions in favour of extremist parties. However, those with a high income consume a smaller share of it and the balance goes towards financial savings. Its ratio to gross disposable income has risen in recent years from 6% to 9%, mainly due to the growing share of high incomes. This financial savings does not only benefit French companies but is largely invested in international markets. Conversely, the rest of the population is restricting its spending, which weighs on growth.
The tax cuts and tax measures in recent years have contributed to the increase in public debt and therefore to the burden of public debt, but they have not supported investment, employment or consumption. On the other hand, they have encouraged financial savings and increased inequality.
Contrary to popular belief, the supply-side policy has therefore had no positive impact on activity but has created both deep social unrest and concern in the financial markets due to the rise in debt.
It is therefore time for political leaders and those who aspire to such positions to have become aware of this so that France becomes less unequal and emerges from stagnation.