France: Encyclopedia II - France - Economy

France - Economy

France's economy combines extensive private enterprise (nearly 2.5 million companies registered) with substantial (though declining) government intervention (see dirigisme). The government retains considerable influence over key segments of infrastructure sectors, with majority ownership of railway, electricity, aircraft, and telecommunication firms. It has been gradually relaxing its control over these sectors since the early 1990s. The government is slowly selling off holdings in France Télécom, Air France, as well as the insurance, banking, and defence industries.

A member of the G8 group of leading industrialised countries, it ranked as the fifth-largest economy in the world in 2004, behind the United States, Japan, Germany, and the United Kingdom. France joined 10 other EU members to launch the Euro on January 1, 1999, with euro coins and banknotes completely replacing the French franc in early 2002.

According to the OECD, in 2004 France was the world's fifth-largest exporter of manufactured goods, behind the United States, Germany, Japan, and China, (but ahead of the United Kingdom). It was also the fourth-largest importer of manufactured goods (behind the United States, Germany, and China, but ahead of the United Kingdom and Japan).

Yet according to the OECD, in 2003 France was the OECD country that received the most foreign direct investment (Luxembourg excepted, where foreign direct investment was mostly monetary transfers to banks located in that country). With 47 billion USD of foreign direct investments, France ranked above the United States (39.9 billion USD of FDI received), the United Kingdom (14.6 billion USD of FDI received), Germany (12.9 billion USD of FDI received), or Japan (6.3 billion USD of FDI received).

At the same time, French companies invested 57.3 billion USD outside of France, ranking France as the second most important outward direct investor in the OECD, behind the United States (173.8 billion USD of outward FDI), but ahead of the United Kingdom (55.3 billion USD of outward FDI), Japan (28.8 billion USD of outward FDI), or Germany (2.6 billion USD of outward FDI).

France is also the second most productive country in the OECD (excluding Norway and Luxembourg where productivity data are inflated by oil revenues in Norway, and by investments in off-shore banks in Luxembourg). In 2003, the GDP per hour worked in France was 47.2 USD, ranking France behind Belgium (48 USD per hour worked), but above the United States (43.5 USD per hour worked), Germany (40.6 USD per hour worked), the United Kingdom (37.7 USD per hour worked), or Japan (30.9 USD per hour worked).

Despite a higher productivity than in the US, France's GDP per capita is significantly lower than the US GDP per capita, being in fact comparable to the GDP per capita of the other European countries, which is on average 30% below US level. The reason for this is because a much smaller percentage of the French population is working compared to the US, which sinks the GDP per capita of France, despite its high productivity. In fact, France has one of the lowest percentage of its population at work among the OECD countries. In 2003, 41.5% of the French population was working, compared to 50.7% in the US, and 47.3% in the UK. This phenomenon is the result of almost thirty years of massive unemployment in France, which has led to three consequences reducing the size of the working population: about 10% of the active population is without a job; students delay as long as possible their entry into labour market; and finally the French government gives various incentives to workers to retire in their early 50s, though these are now receding.

As many economists have stressed repeatedly over the years, the main issue with the French economy is not an issue of productivity. In their opinion, it is an issue of structural reforms, in order to increase the size of the working population in the overall population. Liberal and Keynesian economists have different answers to that issue.

With over 75 million foreign tourists in 2003, France is ranked as the first tourist destination in the world, ahead of Spain (52.5 million) and the United States (40.4 million). It features cities of high cultural interest (Paris being the foremost), beaches and seaside resorts, ski resorts, and rural regions that many enjoy for their beauty and tranquillity (green tourism).

France has an important aerospace industry led by Airbus and is the only European power to have its own national spaceport (Centre Spatial Guyanais). France is also the most energy independent Western country due to heavy investment in nuclear power, which also makes France the smallest producer of carbon dioxide among the seven most industrialised countries in the world. Large tracts of fertile land, the application of modern technology, and EU subsidies have combined to make France the leading agricultural producer in Europe.

Since the end of the Second World War the government made efforts to integrate more and more with Germany, both economically and politically. Today the two countries form what is often referred to as the "core" countries in favour of greater integration of the European Union.

Adapted from the Wikipedia article "Economy", under the G.N U Free Docmentation License. Please also see http://en.wikipedia.org/wiki