Economic Velocity – How to sustain growth through economic flexibility and adaptability: the French model of state interventionism
By Catherine Shakdam
Given the very nature of our global economy and the unescaping reality of our ‘entanglements’ – 2008 stock market crash demonstrated, if anything else, how deeply interconnected national economies are to each other, thus putting the concept of national growth under a more ‘globalist’ light.
While evidently nations have control over their sovereign economy, policies – whichever they may be, will carry an impact onto the global market, yet another variable experts will have to input within their calculations.
Put simply, economic growth means an increase in real GDP – an increase in the value of national output/national expenditure, which in turns translate into an increase of living standards, improves tax revenues and helps towards the creation of new jobs.
For economic growth to be sustained, productivity and demand must be maintained – a feat, which if logical, is not always so easy to achieve due to the litany of factors that must align in order to support such growth. France’s exceptional economic boom post-WW2 most certainly serves as an interesting example of a nation achieving economic velocity, but failing to master socio-economic flexibility.
For three decades the France of the ‘Trente Glorieuses’ saw its economy grow by a rate of 7% per annum – over a decade such growth equates to a doubling of the national wealth. Such velocity was by definition unsustainable since ultimately it leads to market saturation; notwithstanding the weight of unemployment and social mobility/creativity in the workplace.
The following chart (chart 1) draws a clear link: cause & effect in between productivity (blue) and unemployment (red) during and after the Trente Glorieuses. As long as France Gross National Product (PNB) enjoyed a steady increase unemployment remained low. The oil crisis came to violently upset that economic ecosystem, throwing France and most industrial countries off the deep-end.
As it were, any sudden change of variable stand to offset growth and prompt a domino effect, unless measures such as economic stress tests are set in place ahead of time to identify weak points and ultimately implement measures to placate any downturn.