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“Private sector and public administrations both contribute to the creation of national wealth”

VSs in 2017, the presidential pre-campaign is full of disparaging remarks on the level of public spending and French public employment.  » World Champion « , with public expenditure representing more than 55% of gross domestic product (GDP), France should, according to several personalities pretending to the supreme magistracy, urgently commit to reducing it, as in that of public employment.

The expression used, “55% of GDP”, suggests that more than half of the creation of French wealth would be swallowed up each year in useless and even toxic activities for our country, because they dramatically hinder the vitality of the private sector, suffocated by an unbearable levy. We must break with this simplistic representation. Two recent publications, accessible and rigorous, fortunately allow us to do so.

There is not first a private sector which creates wealth, then public administrations which come to operate a levy and squander more than half of it. On the contrary, the private sector and public administrations both contribute to the creation of annual national wealth, measured by GDP, which is itself the sum of market GDP and non-market GDP (“To what extent do public administrations contribute to national production?”, Nicolas Carnot and Etienne Debauche, “Le blog de l’Insee”, 3 December 2021). Public expenditure is used both to produce goods and services provided free or at a price below the market and to redistribute.

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The production of wealth directly created by public administrations is estimated by the two researchers at approximately 20% of total wealth creation. It essentially covers the provision of sovereign services (defence, security, justice, general administration), education in public establishments and care in public hospitals.

In-kind transfers

Beyond this “direct” production of goods and services, public administrations also support national productive activity indirectly, for example by financing the acquisition of certain services from private producers. This is what happens when Social Security pays for the care delivered by liberal medicine or in private clinics or reimburses part of the drugs.

Similarly, business subsidies and public investment directly support the productive fabric for the benefit of certain types of production or products and stimulate the production of certain private companies, by offering them outlets through public procurement.

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