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Total Government Expenditures |
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Economic Freedom Rating |
As a Percent of GDP |
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 |
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Part 1: The Economic Freedom Ratings for the Components and Various Area and |
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Summary Indexes: 1975, 1980, 1985, 1990 and 1995. |
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(The numbers in parentheses indicate the actual values for the components.) |
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Components of Economic Freedom |
1975 |
1980 |
1985 |
1990 |
1995 |
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I. Money and Inflation |
4.2 |
4.9 |
5.1 |
10.0 |
10.0 |
|||||||||
(a) Annual Money Growth (last 5 yrs.) |
6 |
(12.4) |
5 |
(13.4) |
8 |
(8.0) |
10 |
(3.7) |
10 |
(-0.5) |
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(b) Inflation Variablity (last 5 yrs.) |
7 |
(2.6) |
10 |
(0.8) |
8 |
(2.3) |
10 |
(0.9) |
10 |
(0.5) |
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(c) Ownership of Foreign Currency |
0 |
0 |
0 |
10 |
10 |
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(d) Maint. of Bank Account Abroad |
0 |
0 |
0 |
10 |
10 |
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II. Government Operation |
4.0 |
3.7 |
4.1 |
4.9 |
6.6 |
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(a) Gov't Consump. (% of Total Consump.) |
4 |
(22.0) |
3 |
(23.6) |
2 |
(24.1) |
3 |
(23.1) |
2 |
(24.6) |
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(b) Government Enterprises |
2 |
2 |
4 |
4 |
6 |
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(c) Price Controls |
- |
- |
- |
6 |
8 |
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(d) Entry Into Business |
- |
- |
- |
- |
7.5 |
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(e) Legal System |
- |
- |
- |
- |
7.5 |
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(f) Avoidance of Negative Interest Rates |
8 |
8 |
8 |
8 |
10 |
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III. Takings |
2.7 |
1.4 |
0.5 |
1.4 |
1.9 |
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(a) Transfers and Subsidies (% of GDP) |
1 |
(24.0) |
0 |
(26.1) |
0 |
(26.8) |
0 |
(25.2) |
0 |
(27.9) |
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(b) Marginal Tax Rates (Top Rate) |
5 |
(48) |
3 |
(60) |
1 |
(65) |
3 |
(53) |
4 |
(51) |
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(c) Conscription |
0 |
0 |
0 |
0 |
0 |
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IV. International Sector |
6.9 |
6.0 |
6.3 |
7.9 |
7.9 |
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(a) Taxes on International Trade (Avg.) |
10 |
(0.1) |
10 |
(0.1) |
10 |
(0.0) |
10 |
(0.0) |
10 |
(0.0) |
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(b) Black Market Exchange Rates (Prem.) |
10 |
(0) |
6 |
(3) |
6 |
(4) |
10 |
(0) |
10 |
(0) |
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(c) Size of Trade Sector (% of GDP) |
4 |
(18.5) |
5 |
(22.1) |
7 |
(23.6) |
5 |
(22.6) |
5 |
(22.3) |
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(d) Capital Transactions with Foreigners |
2 |
2 |
2 |
5 |
5 |
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Economic Freedom Rating |
4.4 |
3.8 |
3.6 |
5.5 |
6.1 |
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Ranking of Country |
38 |
57 |
73 |
31 |
36 |
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Part 2: Recent Economic Indicators: |
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Population 1996: |
58.2 |
Real Per Capita GDP |
: |
1996= |
$20,350 |
||||
(in millions) |
(in 1995 U.S. dollars) |
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Annual Rate of Change (1985-96): |
0.5% |
Avg. Growth Rate: |
1980-90= |
1.9% |
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1990-96= |
0.9% |
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Economic Indicators:* |
1988 |
1989 |
1990 |
1991 |
1992 |
1993 |
1994 |
1995 |
1996 |
Change in Real GDP: Aggregate |
4.5 |
4.3 |
2.5 |
0.8 |
1.2 |
-1.3 |
2.8 |
2.2 |
1.4 |
: Per Capita |
4.0 |
3.8 |
2.0 |
0.3 |
0.7 |
-1.8 |
2.3 |
1.7 |
0.9 |
Inflation Rate (CPI) |
2.7 |
3.5 |
3.4 |
3.2 |
2.4 |
2.1 |
1.7 |
1.8 |
1.7 |
Change in Money Supply: (M1) |
4.1 |
6.6 |
4.2 |
-5.5 |
-0.1 |
1.0 |
3.2 |
9.0 |
4.0 |
: (M2) |
5.6 |
2.4 |
2.4 |
-0.9 |
1.2 |
3.8 |
6.8 |
10.9 |
-1.9 |
Investment/GDP Ratio |
21.4 |
22.3 |
22.5 |
21.5 |
19.7 |
17.1 |
18.0 |
18.2 |
- |
Size of Trade Sector (% of GDP) |
21.3 |
22.8 |
22.6 |
22.6 |
22.5 |
20.9 |
21.7 |
22.3 |
- |
Total Gov't Exp./ GDP Ratio |
50.0 |
49.1 |
49.9 |
50.5 |
52.2 |
55.0 |
54.9 |
54.3 |
54.7 |
General Government Budget |
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Deficit (-) or Surplus (+) |
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As a Percent of GDP |
-1.7 |
-1.2 |
-1.6 |
-2.0 |
-3.8 |
-5.6 |
-5.6 |
-4.8 |
-4.1 |
Unemployment Rate |
10.0 |
9.4 |
8.9 |
9.4 |
10.4 |
11.7 |
12.3 |
11.6 |
12.5 |
* The figures in this table are in percent form. |
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a October, 1996. |
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p Preliminary. |
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The economic freedom rating of France has increased during the last decade, following a decline during 1975-1985. In 1995 France ranked 36th among the nations in our study, up from 75th in 1985 but virtually unchange from its 1975 position.
The improvement during the last decade was primarily the result of a reduction in monetary growth, greater price stability, and legalization of foreign currency bank accounts. Like most of the European welfare state economies, France achieved high ratings in the monetary and international sectors, but low ratings for government operations and takings, particularly the latter.
Given France’s high level of government expenditures (54% of GDP in 1995), our index may overstate the economic freedom of this country. If the components affected (primarily consumption and income transfers) were given more weight, its summary rating would lower. So, too, would the degree of improvement. After all, total government expenditures are now modestly greater than 1985 and substantially higher than the 43.5% figure of 1975.
Like other European countries with large transfer sectors and government expenditures equal to 50% or more of GDP, France is now caught in the budget deficit, declining investment, and high unemployment cycle. Budget deficits have averaged 4.8% of GDP during 1992-1996. During this same period, the investment/GDP ratio has averaged approximately 18%, down from the 22% rate of the 1980s. The unemployment rate stubbornly persists at double-digit levels. France needs to reduce the size of its transfer sector and deregulate its labor market. If it fails to do so, the current economic stagnation is likely to continue.
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| Last Modified: Wednesday, October 20, 1999. |