Why France is burning

Cho Hyun-suk

The author is the economy news editor at the JoongAng Ilbo.

France is burning. Masked crowds roam the streets as fires break out across cities. Luxury stores have been smashed and looted. These are not scenes from a movie or videos manipulated by artificial intelligence. They are images of what is happening in French cities.

What's driving people into the streets is the country's fiscal crisis. With public finances exhausted and education, welfare and administrative services under strain, public anger has erupted.

Figures released by France's national statistics agency, INSEE, paint a troubling picture. The French government recorded a deficit of 152.5 billion euros ($177 billion) last year, equivalent to 5.1 percent of GDP. Government spending reached 1.71 trillion euros, exceeding revenue of 1.56 trillion euros.

This is hardly a recent problem. According to a French parliamentary report, the government has not recorded a fiscal surplus since all the way back in 1975. Five decades of deficits have accumulated into debt totaling 3.46 trillion euros. By the end of the second quarter this year, public debt had reached 119 percent of the country's GDP.

Nor are French citizens undertaxed. France's tax-to-GDP ratio stood at 43.5 percent in 2024, well above the Organisation for Economic Cooperation and Development average of 34.1 percent and Korea's 25.3 percent.

Today's French citizens are paying for debts accumulated over half a century. Their frustration is understandable.

A book published in 1977, when France's debt-to-GDP ratio was below 20 percent, anticipated precisely this predicament. In “Democracy in Deficit” (1977), economists James Buchanan and Richard Wagner warned of the fiscal consequences of politics distorting Keynesian economic principles.

John Maynard Keynes' fiscal prescription can be summarized simply: During economic downturns, governments should stimulate demand through deficit spending. During booms, they should restrain spending, accumulate surpluses and prepare for future crises.

Politics complicates that equation. Running deficits during recessions is relatively easy. The difficulty comes during prosperous periods, when governments should build reserves. Voters dislike spending cuts and higher taxes, while politicians prioritize winning the next election.

Consequently, spending continues, deficits accumulate and repayment is deferred to future generations. Buchanan and Wagner captured this tendency with the phrase “out of sight, out of mind.”

The consequences may take decades to emerge, but they eventually arrive. France is now confronting the costs of fiscal decisions repeatedly postponed over 50 years.

Once again, politics is making matters worse. President Emmanuel Macron has already lost much of his political influence. Rather than cooperating to contain unrest and address the fiscal crisis, politicians on both the right and left are exploiting the turmoil to consolidate their respective support bases.

Their overriding calculation, as The Wall Street Journal described it, is that this crisis presents an opportunity to seize the Élysée Palace.

Does this seem like a distant problem unfolding 9,000 kilometers (5,590 miles) away?

Korea's fiscal record offers an uncomfortable parallel. The Korean government last recorded a surplus in its managed fiscal balance in 2007, shortly before the global financial crisis. That surplus amounted to 6.8 trillion won (around $7.3 billion at the time).

Since then, government expenditure has consistently exceeded revenue. Through last year, Korea had recorded deficits for 18 consecutive years.

This year, despite a semiconductor boom generating more than 100 trillion won ($70.2 billion) in additional tax revenue compared to last year, the Lee Jae Myung administration has again drawn up a deficit budget.

Eliminating the deficit altogether may be unrealistic. But failing to make meaningful efforts to reduce debt even during an exceptional revenue boom is irresponsible.

The lesson from France is not simply that public debt is dangerous. It is that political leaders repeatedly find reasons to postpone difficult decisions until the accumulated burden becomes unbearable.

If Korea continues down the same path, the turmoil now engulfing France may offer it a glimpse of its own future.