World-System (1950-2010) Has Austerity Helped or Hurt the French Economy?

 

The French have gone to the streets protest the Austerity measures of Emanuel Lacron's government (here). What's going on and what does it mean for the French Economy

The history of Austerity in France is captured by the FR_AUST index (see the Notes below). There are three components: (1) Education and Military expenditure compared to others (68% of the variation), (2) Health expenditure compared to others (10% of the variation) and (3) Overall Growth (4% of the variation). All the indicators reached a low point between 2010 and 2020 but then began accelerating (Emanuel Macron has been in and out of office since 2012 and has become associated with the return to Austerity .  

I can explore the impacts of Austerity on the FRL20 model using a Shock Decomposition Impulse Repspone (above). Let''s just look at growth (FR1) for the moment. Shocks to Austerity, after a few years, increase growth (the effects are not large) but the effects of Overall Growth in Austerity (column three) are all negative. So, the effects are complicated.

Given that the French Government is about to fall again (here), it might be prudent for politicians to find other ways of conrollingt the economy and leave Austerity at the low levels that were achieved between 2010 and 2020.

Notes

The AUST -> FR Systems Model:

The Austerity Indicators and Index (see Shefner et. al. , 2005):

The data for the AUST index is taken from the World Development Indicators (WDI). The indicators and definitions are listed in the table above. NOTE: AUST is entirely measured by budgetary categories as percentages; the cyclical nature of the index is a result of percentages hitting up against limits [0%,100%].

The AUST index contains three components that explain 94% of the variation in the indicators. 

AUST1 = (0.433 GED + 0.4571 MIL - 0.4477 G - 0.393 GE - 0.4701 GH)  

AUST2 = (0.822 GHE - 0.357 GED - 0.377 GE) 

AUST3 = (Overall Growth) 

AUST1 and AUST2 are historical feedback controllers for the budgetary categories defining Austerity. AUST1 focuses on controlling Education, Military expenditure, Overall Government Expenditure and Health Expenditure. AUST2 focuses on controlling Health and Education Expenditure.

In the Economy of France, Austerity, Debt and Globalization (KOF) are closely related. The relationship can be seen from the Measurement Matrix above when DEBT and WorldGlobal (KOF) are added to the model. In future posts, I will investigate all the indicators of Neoliberalism in France.

The state space of the French Economy is dominated by three components explaining 98% of the variation in the underlying indicators: 

FR1=(Overall Growth)

FR2= (CO2+EF-KOF)

FR3=(LU-L-N) 

FR2 and FR3 are Historical Feedback Controllers regulating Environmental Impacts of Globalization and Unemployment, respectively. EF is the Ecological Footprint and KOF is the Index of Globalization.