French living standards have been under pressure for some time as the government there keeps putting everything on the ‘credit card’. Even this isn’t working as people keep demanding more and I started to wonder about the connection between falling living standards and civil unrest. This is an interesting summary from an article in a journal published by the LSE:
This article revisits the relationship between income per capita and civil conflict. We begin by documenting that the empirical literature identifies two different patterns. First, poor countries have a higher propensity to suffer from civil war. Second, civil war occurs when countries suffer negative income shocks. In a formal model we examine an explanation often suggested in the informal literature: civil wars occur in poor countries because the opportunity cost of fighting is small. We show that while this explanation fails to make sense of the first empirical pattern, it provides a coherent theoretical basis for the second. We then enrich the model to allow for private imperfect information about the state of the economy and show that mutual fears exacerbate the problem caused by negative income shocks.
Given the way of many European countries I’m not surprised that the unrest is spreading!
This concept was born in the United States and is starting to appear in Europe
In the letter K, one branch is facing upwards and the other facing downwards. In the K-economy, part of the population sees its income and wealth increase while those of the rest of the population decrease continuously, hence a structural increase in inequality.
The question that is then asked is simple: faced with a rise in inequality and persistent obstacles to access a higher standard of living, the need for redistribution will increase. But as the level of taxes has already reached a ceiling everywhere and public debt is breaking records, this model will very quickly find its limits, especially in France.
private wealth has grown much more dramatically: It has gone from 300% to 600% of GDP, with extreme concentration among the wealthiest financial fortunes.In other words, France’s national wealth – the sum of private and public assets minus private and public debts – has never been so high, not only in absolute terms but also as a percentage of GDP (which itself has never been higher).
The French people likely have noticed and are violently disturbed by the inequality.
The problem this time is it is of their own making. They have voted themselves largess and given into ideas that have impacted the economic engine that makes it all work. There is no aristocracy to blame only intellectuals/politicians thinking they can reorganize society and citizens willing to go along with it.
The bond market may be the real executioner. France’s debt may be taken to a borrowing level where there is nothing to do but accept austerity and a reset. The question then becomes is that done peacefully or by force. The real sinister part of socialism is it begins to accept violence where there are perceived inequities. Some of what is not being widely publicized are the attacks on chinese business owners that have become successful. Viral street interviews and social media discussions highlighted claims that Chinese immigrants or business owners were targeted due to stereotypes or perceptions of wealth (such as dressing nicely or driving expensive cars), fueling long-standing community concerns about being singled out during civil disturbances. In the end, socialism is just as likely to dispense equal misery as it is anything else.
“The wealthy” existed in France for 1,000 years before the revolution finally finished them off (and there were multiple revolutionary movements: “Les Miserables” is famously about one of the unsuccessful ones, not the one that finally capped it.)
“The wealthy” at the time lived in silos, just as the rest of us do now, theirs being even more silo-y than most, interacting with other wealthy persons of nobility and completely ignoring the peasants.
They take the chance that the pitchforks won’t come out during their lifetimes, if they even consider the possibility of pitchforks at all. The list of violent revolutions is longer than that of peaceful revolutions, although the latter have happened.
What’s happening in France? It’s economics….all the way down.
Oh, nothing really ever does, but the French Revolution really did bring out the pitchforks (and guillotines) didn’t it?
Right. Brainfart. It was one of the many other revolutions in France which were unsuccessful. (It’s always been interesting to me that the rest of the world saw the revolution in America as inconsequential during its time, but the one in France was ground-shattering. Ironic too that France helped us win, without that the lesson might have been different for its own population.)
In Communist countries wealth often gets nationalized. In the French revolution the heirs inherited. Wealth was not dissipated but the people did change. And the heirs got the message.
I worked for a French company. Keeping jobs in France is very important. And much capital is available to fund that. That sometimes means profits and margins are not a priority. Another way of slowing economic growth.