Nobel laureates pass harsh judgment on French economy

13th March 2007, Comments 0 comments

PARIS, March 13, 2007 (AFP) - Just over a month ahead of France's presidential elections, five winners of the Nobel prize for economics on Tuesday passed critical judgment on the French economy, urging the government to reduce taxation and restore incentives to work.

PARIS, March 13, 2007 (AFP) - Just over a month ahead of France's presidential elections, five winners of the Nobel prize for economics on Tuesday passed critical judgment on the French economy, urging the government to reduce taxation and restore incentives to work.

In a series of interviews with Les Echos financial daily, the laureates -- who represent different schools of thought -- agreed that while France enjoys many advantages in the face of globalisation it needs to free up its economy in order to maximise its potential.

"I note that the French are the inhabitants of the G7 group of industrialised nations who are the least motivated for work. It is incredible," said Edmund Phelps, the 2006 prize winner.

"When young people are leaving to set up in London, Dublin or Silicon Valley, there is something to worry about," said Phelps, 73, who is professor at Columbia University in New York.

For Robert Solow, who was decorated in 1987 for his work on the effect of technical progress on growth, France scores high marks for productivity, but he said the 35 hour working week -- introduced by the last socialist government -- has been a failure.

"The average number of hours worked has barely shifted, so the impact of the 35 hour week has been minimal," he said. For Shaw, France "has probably more to gain from globalisation than to lose," and he called for progressive reforms rather than shock therapy.

For 1992 laurate Gary Becker, France's level of growth remains low because the country "has not sufficiently reformed" and is handicapped by "an insufficiently flexible labour market."

A liberal economist from the Chicago school, Becker said that "businesses should have greater freedom to fire emnployees when they do not need them ... And the minimum wage, which some candidates want to increase, is actually too high."

He said France's principal asset was its "human capital."

Edward Prescott, who won the Nobel in 2004 for his work on economic cycles, said the French economy was "in good health" but that it was necessary to reduce "the strong fiscal pressure."

"If France brought its tax rates down to the American level, the income from taxation would be roughly the same as it is today, because after a period of transition production would be 40 percent higher," he said.

The 1970 laureate Paul Samuelson agreed that "France is one of those European countries with the least efficient economic model because it has not been able to adapt to the realities of the world economy."

"The French need to start questioning certain entrenched privileges and accept the fact that society may be more unequal .... France needs to find its Ronald Reagan or its Tony Blair," he said.

Copyright AFP

Subject: French news

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