THE LEGATUM PROSPERITY INDEX™ 2016

Bringing Prosperity to Life

France

Ranked 18th of 149

At a glance

Ranks

18 th on the Legatum
Prosperity Index™

17th
18th
23rd
18th
14th
28th
22nd
49th
4th

SUB-INDEX RANKINGS

In the Prosperity Sub-Index rankings, France performs best on Natural Environment and Health and scores lowest on the Social Capital sub-index.

Visit our Rankings table to see how France compares to other countries.

Prosperity Gap

The ‘Prosperity Gap’ takes a country's GDP and uses it as the yardstick to measure a nation's expected Prosperity Index ranking.

France maintains a high ‘prosperity surplus’ which has increased slightly over the past decade. However, this surplus is about 50% smaller than Finland’s, despite a similar GDP per capita.

Note:
In the chart above, each dot represents a country. The curve shows the general tendency with which prosperity increases as GDP per capita increases. If a country falls below the curve, then we can say that compared to all other countries, it is under-delivering prosperity for its citizens. Likewise, if a country rises above the curve, then we can say that it is over-delivering prosperity for its citizens. Learn more about the Prosperity Gap here.

Alternatively, have a look at the Prosperity Gap view on our Rankings table for a full list of countries and to see how each of them are performing on the various sub-indices.

Commentary

France has followed the Western European trend of declining Economic Quality over the past decade. However, this decline was more significant in France than in either Germany or the UK: there was always a gap here, but it has grown wider since the global financial crisis of 2008.

Economic Quality (score) in France, Germany, United Kingdom
France fell further behind Germany and the UK in Economic Quality following the 2008 financial crisis.

This collapse in the level of Economic Quality is France in being driven by two main forces. First, of the so-called European ‘Big Three,” the French are the least satisfied with current incomes and living standards. With unemployment at 10% and sluggish growth - the economy contracted in the second quarter of 2016 and since the 2008 crisis, the French economy has grown just 3%, compared to Germany’s 6% and the UK’s 8% - this is not unsurprising. Second, key measures of market openness, such as anti-monopoly policy and non-tariff trade barriers, have been plummeting in France since 2007. While France possesses a skilled workforce, its economic performance is hindered by inflexible labour laws.

This is also affecting the French business environment, where the country also lags other large developed European economies. France’s performance in Business Environment sub-index has seen a modest rise, (moving up two ranks to 18th), much is still to be done if France is to be competitive. Business growth is hindered by considerable ‘red tape’ and the inflexible labour market. A major concern of the business community is the difficulty and cost of firing employees: indeed, the Prosperity Index sees that France has the fifth least flexible hiring/firing practices of the OECD. A new labour law was passed in 2016 to implement reforms to these strict practices, but not without controversy. Another obstacle is France’s high taxes: it would be beneficial to make the tax system more attractive for business. Again, balance is key for France. While it can protect workers’ rights and welfare, some deregulation and adaptation is necessary to unlock the potential of its business community.

Is your area a good place to start a business (%yes) in France vs Germany.
The French are now more pessimistic about starting a business than ten years ago, while the Germans feel the opposite.
Hiring/firing practices (higher = easier) in France, the OECD and Western Europe
France’s hiring/firing practices are the fifth least flexible of the OECD.

The weakening in France’s market openness is mirrored by decline in core structures of governance. France has fallen in the Governance sub-index to 23rd, performing below the OECD average. Since 2012, the legal system has become less efficient in challenging regulation and government is less transparent. There is also very low confidence in the national government: just 33% of those polled responded positively. Discontent with the ruling ‘elite’ has boosted popularity for France’s far-right populist party, Front National: its leader, Marine Le Pen, is set to make it to the second run-off of next year’s presidential election. French politics suffers from the lack of a viable centre: the pendulum swings from left to right, hampering consensus and the sometimes necessary continuity of policies. This, in turn, can have a negative effect across society, government, and the economy.

Terrorism is also a big challenge to French prosperity. In Safety & Security, France ranks 28th, its score having declined considerably after 2013. It now performs below the OECD average. Several terrorist attacks in 2015 and 2016 have damaged France’s image as a safe destination and led to concerns about whether the state is capable of protecting its citizens from future attacks.

However, France’s main obstacle to rising prosperity in the future is falling social capital. It has fallen 30 ranks in the Social Capital sub-index in the space of ten years, ranking 49th in 2016. Civil society is on the slide. Only 37% of those polled said they had helped a stranger in the past month, in contrast to 55% in Germany and 61% in the UK. Fewer French people today feel that they can rely on family and friends in times of need and only 25% of those polled said they had donated to a charity in the past month, down 50% from 2007. In Germany and the UK, the percentage of those who donate frequently is at 58% and 69%, respectively. This poor performance in Social Capital hints at the concerns over social cohesion that have long been present in France. It can also explain the allure and popularity of the far-right.

Social Capital (score) in France since 2007
Social Capital has dropped significantly in France over the past decade.

There are areas of improvement. France ranks 22nd in Personal Freedom and like its Western European peers, has seen an increase in levels of Personal Freedom since 2007. There is more tolerance for multi-culturalism and towards the LGBT community. Same-sex marriage was legalised in 2013, but this did spark mass demonstrations on a scale not seen elsewhere in Western Europe. 13% more people (79%) think their area is a good place for ethnic minorities and 11% more (74%) think their area is good for immigrants. Nevertheless, these figures are lower than in the UK and Germany, also large countries with a significant immigrant population. In France, the rise of the far-right highlights current tensions between this increased tolerance and freedom and the desire to uphold liberal, secular values.

However, unless the mainstream parties can do something to address the gradual erosion of the foundations of French prosperity, most notably its economic competitiveness and social strength, then stagnation is likely, possibly even decline. This decline would likely push support for the likes of Front National even higher. Prosperity however, would be on the wane.


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Data

How to read this graph:
When comparing multiple countries on a spider chart, data points that appear
further away from the center represent a better performance to the points that are closer to the center.

Special Analysis

Special Analysis

OVERALL

France continues to be a ‘over-deliverer’ of prosperity, performing particularly well in Personal Freedom and the Natural Environment. It delivers more prosperity than expected given its wealth across all the sub-indices, except for Social Capital. France’s performance in Social Capital has declined to the extent that it now has a ‘prosperity deficit,’ delivering below its potential. Along with Italy, it is the only Western European country to have a Social Capital deficit. France’s prosperity gap is notably smaller than Germany’s and the UK’s – the UK’s prosperity surplus is roughly 65% larger, despite a similar GDP per capita. Both Germany and France considerably outperform France in terms of their Business Environment, an area in which France must improve if it wants to compete with its peers.

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Areas of Success
Areas of Success

France has a high Personal Freedom score which is fitting for a country with its strong democratic traditions. It is promising that tolerance for immigrants and minorities has increased over the past decade despite populist belief. France has improved in this sub-index through this rising tolerance, and the legalisation of same-sex marriage. France’s best performance, however, comes in Natural Environment, where it ranks 4th: the French are generally satisfied with efforts to protect the environment and much of its marine & land areas are protected.

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Areas of Little Change
Areas of Little Change

Health and Education are sub-indices in which France has seen little change. In Health, France is a strong performer, but moved down four ranks to 14th over the past decade, despite little real change. 77% of those polled were satisfied with the quality of healthcare, only slightly more than ten years ago. Neither the prevalence of obesity nor that of diabetes has increased significantly. Life expectancy has gone up by roughly one year to 82.3 years, above the OECD average. In Education, France ranks 18th and has also seen modest improvement. 92% believed children had opportunities to learn and grow on a daily basis, while 71% were satisfied with the education system. The percentage of workers with secondary vocational training has gone down slightly over the past decade, which is something France could improve upon. Recently, government passed a 2 billion stimulus package for improved training schemes and to help small businesses grow.

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Areas of Improvement
Areas of Improvement

Economic Quality and Business Environment are areas for improvement. In France’s case, these are particularly connected: business and economic growth is hindered by inflexible labour laws. Business leaders have voiced their concerns that France’s hiring and firing practices are too strict – they are the fifth least flexible of the OECD. Recent reform has helped, but more needs to be done. Governance is another area of concern – only 33% of those polled had confidence in the national government. There are also issues of transparency and effectiveness, which declined particularly after 2012. Social Capital is particularly low in France and is the only sub-index in which it under-delivers compared to its wealth. Given the social divisions that populists are seeking to exploit in France given recent terrorist attacks, it is important that issues of social cohesion and trust are addressed effectively.