France’s current economic crisis is the crisis of neo-liberalism

Michael Roberts is an Economist in the City of London and a prolific blogger .

Cross-posted from Michael Roberts’ blog

The recent high school and student protests in France have a simple objective: to get more resources for education. France’s education crisis is defined by severe teacher shortages, deteriorating student outcomes, and massive funding deficits spanning primary schools to public universities. State education in France is among the most unequal in the developed world: schools in poorer areas are so under-resourced that the education system is cementing inequality. Students from the poorest neighbourhoods are disproportionately hard hit by staff shortages

French students have experienced a catastrophic and unprecedented 20% drop in the education budget per student since 2017. As French leftist economist Thoman Piketty put it: “ The government, in bad faith, sometimes boasts that the nominal budget for higher education rose from €13.3 billion to €15.5 billion between 2017 and 2026 (+17%). That is true, except that inflation over the same period was 22%, meaning the budget actually fell by 5% in real terms. Add to this that the number of students rose from 2.6 million to over 3 million, an increase of 15%. The result is that the budget per student dropped by about 20%”. https://lucaschancel.com/etudiants/ .

As Piketty comments: “In practice, this means that hundreds of thousands of young people work hard to earn their high school diplomas, but there is nothing planned to welcome them into higher education. The number of high school graduates in technical and vocational tracks increased sharply, but places in tertiary programs for them – IUTs and BTSs – did not keep pace. As a result, many are assigned to overcrowded and less expensive university programs that are often entirely ill-suited to their needs and aspirations. To make matters worse, the shortage of places in higher education has been managed with the utmost opacity and with an incomprehensible algorithm (Parcoursup), despite repeated calls from students, families, teachers and researchers to change the system.”

Research by the economist Asma Benhenda , based on payroll data from the French national education system, shows that the proportion of contract or beginning teachers in privileged areas like Paris or Hauts-de-Seine is just 10%. That figure rises to 50% in poorer departments, like Seine-Saint-Denis and Val-de-Marne, around the capital. The average salary per secondary school teacher is about 20% lower in the poorest areas than in the wealthiest, even after taking into account the (meager) bonuses awarded for priority education.

French teachers’ salaries consistently fall below the average for advanced economies (OECD). A French teacher with 15 years’ experience earns less than €40,000, 20% below average. Early-career teachers in Germany earn twice as much as their French counterparts. Yet French teachers have to cope with longer hours of teaching and some of the worst pupil-teacher ratios in Europe. As a result, record numbers are leaving the profession.

To plug staffing gaps, the government launched a scheme in 2022 to recruit “contract” teachers (as opposed to the standard tenure system, under which they count as fonctionnaires or civil servants). They were given four days’ training, despite often having no previous teaching experience. Predictably many quit within six months , owing to lack of adequate training or supervision.

It is not just teachers who are leaving. With a dearth of supervisors, careers advisers, school doctors and nurses, among others, it is virtually impossible to deliver the school support services pupils need. The independent defender of rights for France, Claire Hédon, warned last year that the shortage of qualified staff and suitable facilities meant that almost a quarter of all disabled children never go to school at all.

No wonder then that, as state schools slowly disintegrate, more prosperous families are turning to private education. Few government ministers have any direct experience of the state school system as many go to posh private schools. Yet these fee-paying schools also receive public funding . Meanwhile French public universities are grappling with with an estimated €8 billion shortfall, which has pushed nearly all 75 public institutions into deficit budgets.

Christine Renon, the head of an infant school in Seine-Saint-Denis, died by suicide at her workplace in 2019. According to a letter she had sent to the school management board, she was “exhausted”. She went on to detail the deficiencies and inadequate resources of an organisation that had been left to rot. This tragedy should have shocked the authorities into a profound reappraisal. Macron pledged to make education a priority for his second presidential term. But nothing has changed for the better, only for the worse.

It’s education that primarily worries students and teachers (and parents) in France, But education is just one aspect of the deterioration of basic public services in France. France used to have a healthcare system that was the envy of the world, let alone Europe. Spending was high at 11.5% of annual GDP. As a result, life expectancy was much higher than the EU average. But over the last few decades, government healthcare spedning has been cut back well below the increased demand for health service as French people get older and subsuequently need health support. Before 2008, health spending was rising at 0.3% of GDP a year. Since 2009, the rate of health spending growth has halved to just 0.17% of GDP a year. And yet the share of over 65s in France has risen 40% over the same period, or more than ten times the rise in health spending. As a result, life expectancy has virtually stopped rising. (at the bottom in figure below).

Annual growth in health expenditure per capita (real terms), 2014‑2019 and 2019‑2024 – source OECD

Just as in all the major capitalist economies, The cost of living for the average French household has risen sharply, especially since the end of the pandemic slump that saw a significant inflation spike, and now more recently compounded by the energy shortages from the ongoing Iran war. Price levels for average French households are now some 18-20% higher than just four years ago and are beginning to rise again from the Iran war. Real wages (after inflation) are up only 2.4% from five years ago and wage levels are still below where they were after the pandemic. Pouvoir d’achat is continually falling.

After taking into account tax and benefits, the growth in average disposable income (GDI) for French households has been on downward trend in the first three decades of this century, slowing to under 1% a year under the Macron presidency.

In 2024, 9.8 million people living in ordinary housing in metropolitan France were living below the monetary poverty threshold (1,337 euros per month). The poverty rate is at its highest level (15.4%) since 1996, the year the series began. The unemployed and single-parent families remained the groups most affected by poverty.

Although inequalities of income and wealth in France are not nearly so extreme as in the United States, they are still grotesque. Indeed, inequality has worsened in the last 40 years. In 1983, the top 1% of income earners took 7.5% of all personal income, 10% took 30%, and the bottom 50% received just 21.4%. By 2022, the top 1% took 12.7% (an over 60% increase), while the top 10% share rose to 34.8% and the bottom 50% share fell to 20.3%. Inequality of wealth (net personal wealth) is, as usual in all major economies, much worse. In 1983, the top 1% of wealth holders owned 15.9% of all personal wealth in France, the top 10% had 50%, and the bottom 50% held just 8.9%. By 2022, those inequalities got even worse. The top 1% of wealth holders now had 24% (over a 60% increase), the top 10% now owned 57.7%, and the bottom 50% saw their share of personal wealth fall to just 5.1% (a 48% decline).

Retirement and pensions are key issues for working people. Pensions are not ‘welfare’ benefits, but ‘deferred’ wages deducted in contributions from current wages in order to provide a decent life in old age. French workers have fought over many decades to achieve pensions at a reasonable retirement age. France allocates around 14% of its GDP to pensions, one of the highest rates in Europe and significantly higher than countries like the UK, which spends around 5% of its GDP and so delivers the lowest state pension in the advanced capital world. But contribution rates (deferred wages), from workers and their employers, are correspondingly high at 28 per cent.

French businesses and successive governments have spent much energy over the last few decades trying to reverse these pension rights by a combination of increased contributions, reduced pensions in real terms and by extending the retirement age. The argument of governments including the Macron administration is that an ageing society can no longer afford these ‘generous’ pensions. They argue that the pension system faces ‘structural deficits’ ie the payouts are now regularly exceeding the contributions.

When Emmanuel Macron ran for re-election in 2022, he told voters that the retirement age would have to rise to ensure the continued viability of the country’s pensions system. He forced through a change in the retirement age from 62 to 64 years. But raising the retirement age and cutting pensions in real terms will significantly hit French people’s living standards when they retire.

Again, as in many other countries in Europe, France is experiencing a deepening housing crisis. There are 2 million requests for social housing pending; they will never see their needs met. Rising rent prices, inflation, and economic pressure are pushing families to the edge like never before. From overcrowded cities to skyrocketing living costs, the situation is becoming impossible for millions. Millions of French citizens are now being forced to live in their cars as the housing crisis across France continues to spiral out of control.

In sum, France’s public services: social care, roads, transport, youth facilities, garbage collections, sewage and water supply etc have been deterorating for decades. Government after government responds by saying that these services are no longer ‘affordable’. And their mainstream economist apologists argue that the huge rise in public sector debt and continual annual budget deficits must be ended. Over the past 15 years, the public debt ratio (debt to GDP) has risen significantly. French public debt reached 119% of GDP in mid-2026 and is expected to increase to 121.7% in 2027.

Austerity is the message of the Macron government: there is no alternative, the public is told. The draft budget aims to reduce the public deficit to 5% of GDP in 2027, after 5.4% in 2026 and 5.1% in 2025. This requires €43bn of new measures. Without them, the government estimates that the deficit would reach around 6.5% next year. The ‘new measures’ would be the elimination of 3,000 civil service jobs by 2027 without replacement; abolition of 1,500 civil service jobs; a cap on government healthcare spending at €5 billion; reductions in unemployment insurance and pension schemes; the elimination of two national holidays (Victory Day and Easter Monday) to increase productivity; and yet again further reductions in regional and local expenditures.

Of course, there is one part of public spending that will not be cut: defence. At Bastille Day 2025, Macron announced that France’s military budget will reach €64 billion by 2027, three years ahead of schedule. Specifically, €3.5 billion will be added this year, and another €3 billion in 2027; all to meet the NATO pledge to increase national member defence spending to 5% of GDP by 2035 (3.5% for military expenses and 1.5% for infrastructure). As a key NATO member perceiving the ‘Russian threat’ as acute, Macron has committed to meeting this target.

Le Monde, the French mainstream news source, reckons that France’s “top priority must be to reassure investors of its ability to repair its finances.” So the financial markets rule. But all this talk of profilgate public spending and debt is a false flag by French governments and the ‘bond vigilantes’ in financial markets who are selling French government bonds and increasing the cost of borrowing for governments and households alike.

What is always ignored is that France’s non-financial private-sector debt is actually much larger than public sector debt. The former reached 134.2% of GDP in 2026, more than 30% higher than the average in the euro area It is the private sector (with real estate and financail speculative borrowing) that is most vulnerable, And when a financial crash occurs in the capitalist system, it is the public sector that must bail out the private banks or major lenders. And in capitalist slumps, the government must spend more on unemployment benefits and take in less in taxes, so government deficits spiral.

The history of France’s public debt shows that it is in periods of capitalist slumps and financial crises, that public debt rises the most and then afterwards bond holders demand that the rest of us reduce this debt by cutting services and pensions and raising taxes. After the 1980-82 slump, faster economic growth and austerity measures stopped the debt ratio rising by 1987. Then the next slump of 1991-3 accelerated the rise in debt again before economic recovery (and more austrity measures) eventuallly led to a fall in the debt ratio. Then the global financial crash and the ensuing Great Recession led to a 20% rise in the debt ratio. Severe austerity measures during the slow growth Long Depression of the 2010s eventually stopped any further rise in the debt ratio before the pandemic slump drove it up again. What this shows is that without the impact of several crises in capitalism, the government debt to GDP ratio would have hardly risen. Each batch of austerity measures aims to reduce the public debt ratio originally caused by busts in the private sector, where the debt goes on rising.

Source: IMF, author

The real cause of France’s affordability crisis is its signficant economic slowdown. In the 21 st century, France has experienced low real GDP growth: steadily falling over the last forty years. And now in the 2020s, it has virtually ground to a halt.

France: average annual real GDP growth (percent). Source: IMF

Take pensions, If France’s economic growth was only 1% pt a year higher than the current average of 1.5%, that would raise E30bn a year in government revenues, rising to E40bn by 2035. At current contribution rates, that would raise an extra €10bn a year from pension contributions, easily reversing the projected deficits. “The basic problem is that the economy hasn’t grown fast enough,” says Rupert Watson, global head of economics at Mercer. “It’s not what pensioners get that is causing the problem — it’s the lack of economic growth.”

As in the other G7 economies, this slowdown arises from weak investment growth. Falling productive investment growth generally leads to stagnating labour productivity, and France is no exception. Indeed, total factor productivity (a measure of the impact of “innovation”) is now falling absolutely.

France: average annual growth in fixed investment (percent). Source: AMECO; author’s calculations

Behind any relative stagnation in investment and productivity growth lies falling profitability of French capital. French capital’s profitability started to decline sharply at the beginning of the 21st century (on the advent of the euro) and gathered pace after the Great Recession. Average profitability is now near at an all-time low after a fall during the pandemic slump.

France: rate of profit on net fixed assets (percent). Source: EPWT 7.0 series, AMECO; author’s calculations

What is to be done? In April-May 2027 France holds elections for the presidency and parliament. Current opinion polls suggest that the anti-immigrant, racist National Rally led by the veteran Marine Le Pen is well ahead and will win the first round for the presidency. But what is the main plank of Marine Le Pen’s economic programme if she wins the presidency next April? Fiscal austerity! She is promising €136bn cuts in public spending as well as the privatisation and closure of various state assets in order to bring government expenditure below 50% of GDP by 2032. National Rally claims that reducing immigration and stopping payments to the European Union will solve the debt crisis.

The leftist La France Insoumise (LFI) party and its candidate, Jean-Luc Mélenchon, could well finish second In the first round of the presidential election and thus enter a straight fight with Le Pen. Melenchon’s answer to the so-called government debt crisis is to cancel that part of the debt held by the central bank ( as the central bank is part of the government) to allow for more public spending. But that would still leave the bulk of the government debt (82%) at the mercy of the bond vigilantes and they would sell French government paper at the first opportunity if Melenchon were to win. Melenchon proposes to increase taxes on capital and on the wealthiest households so that spending on public services can rise. Naturally, this is anathema to big business, the bond vigilantes and the European Central Bank.

In a future post closer to next year’s election I shall discuss what the socialist alternative to France’s affordability crisis should be.

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