Jean-Jacques Pluchart
The French were recently surprised by the publication of the latest report from the OECD on the consumption levels of its 38 member states. The survey revealed that, on the basis of Actual Individual Consumption (AIC) per capita, France ranks 13th among Western countries, notably after the United States, Luxembourg, Norway, Switzerland and the United Kingdom, but also after Mississippi, considered the poorest poorest US state. Although modest, this ranking was nevertheless better than France’s 25th place on the basis of its GDP at purchasing power parity.
This sad observation gave rise to debates among economists in the United States States and in France, in which Nobel Prize winner Paul Krugman took part. The controversy mainly focused on the most appropriate indicator to measure household consumption, to compare it between countries and to monitor its changes over time. The simplest and the oldest is the Gross Domestic Product (GDP) per capita, which measures the creation of value generated within a territory over the course of a year (expressed in current value or purchasing power parity or PPP). Another common indicator is Gross National Income (GNI), which covers the income of national agents net of capital depreciation, and above all the Gross Disposable Income (GDI), which includes income from work (wages, income from self-employment, etc.), income from assets (rents, dividends, interest), social benefits received (family allowances, pensions, unemployment benefits, etc.) and direct taxes (income tax, CSG, CRDS). GDI is generally calculated by Consumption Units (equivalents within a household).
However, the ratio now considered to be the most relevant in international comparisons is the indicator of Actual Individual Consumption (AIC) per per capita, which combines three components: the final consumption expenditure of households (on food, housing, transport, leisure, etc.); the final consumption expenditure of final consumption expenditure of NPISHs or Non-Profit Institutions Serving Households (charitable associations, trade unions, religious organisations, etc.); the share of Individualised Public Expenditure Public Expenditure or DPI (attributable to a specific household, unlike collective expenditure such as defence or justice). IPE includes health, education, social action and social housing, culture and sport (subsidised). Collective expenditure (national defence, police, general administration, basic research, etc.) serving the community as a whole, are excluded.
The comparative developments over the last ten years of GDP in PPP and the CIE are particularly illuminating. They show that France is steadily falling in the ranking on the basis of the first indicator, but that it remains stable on the basis of the second, which reflects the relative decline (compared to other countries) in the production and gross income of the French, but that this decline is offset by an increase in social transfers in all their forms. This observation confirms the policy of the successive French governments over the past decade. Their policy, more than in most other OECD countries, has remained more focused on consumption than on production. This “French exception” – like all exceptions – risks, however, no longer being sustainable.