Socialism Experiment Proving a Bitter Pill for French Economy

February 6, 2015Franceby EW News Desk Team

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Thomas Piketty is a known name to anybody who finds the ideas of socialism palatable. In his work titled 'Capital in the 21st century', the proponent of Marxist ideas claimed to have worked out an effective wealth generation model. In essence, the book talked about the imposition of 70% wealth tax upon people in 'rich' bracket of a country, with proceeds going towards funding opportunity and wealth creation for the poor.

This model has never worked in the history of the world. Why work hard when the government takes your wealth? Would anyone think taking money from the hard workers and giving it to the lazy would produce an outstanding economy?

In 2012, France's incumbent President Francois Hollande hardly minced words when he gave out his 'socialist' agenda of ensuring wealth distribution in France by levying stratospheric 75% tax on the wealthy.

Planting the Socialism Seed

'Liberte, egalite, fraternite' – that was the essence of Hollande's manifesto when he took the reins in 2012. At the core of Hollande's economic plan is a 75% wealth tax for people earning in excess of U.S. $1 million and businesses with highly paid executives. Expectations were that the 'squeeze the rich, please the poor' strategy would close the budget deficit, create employment, and provide impetus to social spending. More than two years of implementation of the adventurous economic reforms have passed, and Hollande seems to be acknowledging failure.

Socialist Economic Reforms So Far

The budget deficit has been widening and the socialist reforms have hardly shown any effectiveness. Economic predictions put the budget deficit at 4.7% of GDP for 2015, indicating that the inexplicable taxation and business regulation policies have badly damaged the country’s core economic footing.

In June of 2014, France’s unemployment rate was more than 10%, almost double of the unemployment rate of Germany, which is clear evidence of how the Hollande government's economic philosophy has backfired. To make matters worse, businesses are moving out of France, thus aggravating the unemployment crisis.

Time for Course Correction?

After two years of damage, those in charge of steering France in the right economic direction are beginning to take notice. Hollande himself has remarked that the nation needs to reconsider its economic plan. A 'business friendly' France is what he envisions now, and has expressed intentions to steer economic policy towards that goal.

In the near future, it is projected that France's economic environment will allow businesses to grow. However, wealth taxes need to fall considerably for that to happen, and the government seems prepared to implement tax cuts.

In addition, business regulations will need to better accommodate entrepreneurs, which is dependent on how the Hollande government can fine tune business incorporation laws and fees. Stealing from the rich and feeding the poor has failed miserably, and the economic future of the country will rely on Hollande’s government to change course.

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