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The principle of the "economic culture file" is to cross two themes that have nothing in common in order to allow you to deepen your economic background thanks to our critical eye. It allows you to gain some perspective on certain essential knowledge, to understand the fundamental principles of the economy, its challenges and its importance in our capitalist society.

Who are we?

My name is Rémy Martel and I am 18 years old. Since secondary school, I have been fascinated by information, and more particularly by economic news which has always intrigued me. In the first year of high school, I co-founded with a friend a media that deciphered political news. We had the opportunity to interview 4 candidates for the 2019 European elections. In order to refocus on economic news, in October 2019, I founded my own platform ( on Instagram) which offers a synthesis of articles from the daily press and now has 11.8k subscribers. As such, I have been invited to editorial boards of various media (Pour l'éco, Datagora...) to tell my project and share our points of view. Enriched by the experience of these seasoned journalists, I now try to apply many of their tips to improve Actu Eco! Also in 2019, I was selected to participate in the Banque de France's Economic Excellence Competition. To my surprise, I was honoured to win the First Prize. As a reward, I was offered an internship at the Banque de France during my studies. I am now in the first year of a preparatory class at the Lycée Notre-Dame du Grandchamp in Versailles with the aim of entering a business school in 2022. My ambition is to eventually work in an international organisation such as the IMF, the World Bank or the ECB.

My name is Baptiste Bourdeau. I am a French student in my second year at the London School of Economics where I am studying a Bachelor in Management (specialising in maths and statistics). I am passionate about economics and finance. I regularly write articles to share my opinion on these subjects. What I like in economics is the link between the quantitative and the theoretical approach. Through theories, I discover the thoughts of authors who have transformed the way we understand the economy and the world around us. The quantitative approach, on the other hand, allows us to apply these theories to concrete problems. tackle I believe that the study of debt is fundamental, especially in the current context of the health crisis we are going through, because it is the cornerstone of the contemporary capitalist system and is the basis for the financing of the majority of states. The idea of a dossier bringing together two seemingly distant subjects seems interesting to me. Indeed, I think that reflections should never be locked in boxes and thought unrelated to each other. On the contrary, I consider the economic study as a whole in which each dimension studied interacts with all the others. Enjoy your reading.

"China is now a great power".

Sentence pronounced during the speech of the Chinese Prime Minister Wien Jabao at the davos forum 2009.

The Chinese who are overtaking us...

The 1980s marked a profound transformation of the Chinese economy. China approved new regulations to strengthen the development of its regions. Provinces were able to enter into foreign investment agreements without having to apply to Beijing. A huge time saving! This is a far cry from the French bureaucracy... The provinces were thus able to acquire control of their own companies and also a certain financial autonomy. Competition between the provinces has also helped to stimulate the development of the Chinese economy.

Shenzhen is the symbol of this dynamic. The city, which is now home to many Chinese transnational firms (Huawei, ZTE, etc.), has grown from 30,000 inhabitants in 1980 to 17 million today. On a visit to Shenzhen in 1992, Deng Xiaoping (the Chinese president at the time) said: "The special economic zones belong to the socialist family and not to the capitalist family, as we can see in Shenzhen. In this way, he explained the concordance between economic success and the success of the socialist system inspired by the USSR. The communist ideal allowed the Chinese to identify themselves and to find themselves in a common project. National solidarity was one of the keys to Chinese success during this period.

The policy of opening up trade began with the four modernisations (agriculture / national defence / industry / science and technology) led by Deng Xiaoping in 1978. Under the impetus of the Cultural Revolution led by Mao Zedong, the objective was to make the country prosper economically. Thanks to these reforms, the standard of living of the population improved drastically. During the first ten years of the Xiago era, annual growth was constantly increasing by almost 10% of the GNP (gross national product). In addition, per capita income increased by 8% per year.

Today, the will to open up has not stopped.

On land and sea, the new Silk Road wanted by Xi Jinping (current Chinese president) is intended to open up trade routes from China to Europe. To achieve this, colossal works will be undertaken to provide infrastructure in the regions crossed, which are sometimes deserted. China estimates that its "belt and road initiative" will have an impact on more than 4.4 billion people, or 63% of the world's population. It could account for 29% of global GDP. Planned for 2049, the centenary of the People's Republic of China, the Silk Roads aim to restore China's millennial influence.

The 1990s saw a huge increase in investment in infrastructure. It was at this time that China built to meet the exploding consumer demand of the early 2000s. But one problem persisted: some provinces, despite development aid, failed to fully integrate into this project of expanding economic activity.

A logical rebalancing of subsidies took place between the neglected provinces and the rich coastal cities.

The construction of the Three Gorges Dam is an example of this. The world's largest hydroelectric project provided electricity to the cities on the one hand, and development in the interior on the other. This principle is a recurring theme in recent Chinese history. We will make everyone work to open up" is the hallmark of Chinese success! During the 1990s, employees saw their working and material conditions improve, so that it became difficult for companies in large metropolises like Shanghai to remain competitive internationally. The development of the railway business has played a major role in China's growth over the past 30 years. China now has 29,000 kilometres of high-speed lines, the largest network in the world. The country has 2/3 of the world's high-speed lines.

The state-owned company that built all these lines is now 5 trillion yuan in debt. However, as this network is there for several decades, China has deemed this investment indispensable and, in the end, certainly profitable. Another principle identified: "let's make the sacrifice today, by investing now". I couldn't find the word 'procrastinate' in the Chinese dictionary ☺ With its entry into the WTO (World Trade Organisation) in 2001, China has deployed multiple economic zones, such as Shenzhen, throughout the country. Chongqing is also one of the symbols of the expansion of Chinese metropolises. This municipality has 31.02 million inhabitants, as many as Austria!

In the early 2000s, a pension system was set up for 10% of the population (90 million people) before being generalised. This is an illustration of the "experimentation" chosen by the Chinese for a progressive adaptation to the system. This method is now recognised by many economists!

China, aware that the "cheap labour" argument was behind it, decided to put the issue of innovation at the forefront. "We cannot always furnish our tomorrows with what others produced yesterday," Xi Jinping recently said! In this sense, the French economist Philippe Aghion believes that innovation is the main source of economic prosperity for a nation (see Challenges 22 October 2020).

China is now the second largest investor in research and development. 2.5% of GDP is earmarked for investment in computers and their storage, space research and fossil fuels. The country's objective is to become the world centre for artificial intelligence by 2030. Thanks to the establishment of several foreign groups, China has been able to benefit from the transfer of foreign technologies. For example, the country founded its train transport field thanks to German, Japanese and French techniques.

This transfer was contested but with the Chinese investments that were subsequently made in these other countries, it is less and less questioned today. In 2005, the takeover of the personal computer branch of IBM (a large American group) by the largest Chinese computer group, Lenovo, sounded like a turning point. Other firms, thanks to their massive profits, have invested in foreign companies. In 2005, China became the world's fourth largest economy. At the end of the 20th century, European countries provided financial aid to African countries, but only on condition that the states were run democratically.

China, on the other hand, limited itself to a purely economic relationship, without any counterpart. Of course, China has been the most attractive... Between 1995 and 2017, the amount of trade between China and Africa rose from 3 to 147 billion dollars... In Angola, in 2017, it represented 40% of trade! Many bridges, roads and other means of transport have been built in this region thanks to Chinese investments. China lent Ethiopia $575 million for the construction of an aerial metro in 2015. In Kenya, $3.7 billion was used to build a train from Nairobi to Mombassa. There are hundreds of examples like this... Are we heading towards Chinese commercial dependence on African countries?

In the future, China wants to strengthen its international military power to secure its oil routes (the aim being to no longer depend on the United States for oil).

In 2006, the state built a national submarine. In 2019, it acquired a second aircraft carrier.

A large budget is dedicated each year to space progress. It should be remembered that China has an international space station.

This development of military activity is largely linked to the strategic issue of the China Sea. Its gas and oil resources are making people jealous! For the time being, the United States is protecting China's other Asian competitors, notably Japan. A possible war between Asian countries could be caused for two reasons: On the one hand, because of the divergence on the question of human rights or ideologies and on the other hand, because of natural resources.

China's new activities in the region show the end of the US role as 'world policeman'. It is much less present there than before. Is this an excuse for a multipolar world or an abuse of weakness in the face of China? In 2001, there was a clear rapprochement between Russia and China through the Shanghai Cooperation Agreement. President Putin agreed to supply Beijing with gas and oil. China has chosen its enemies and its allies! The Chinese in all this...

According to a survey, the three wishes of the Chinese middle classes are: To earn money, to travel and to see China become the first power. Here we find the patriotic impulse that has made China successful. The middle classes are the backbone of the Chinese economy. They represent 450 million inhabitants, which is more than the population of Europe alone.

The standard of living of China's rich exceeds that of the West. An owner of an international manufacturing plant in China employs thousands of people... That's a small number of owners on the scale of the country, but in terms of the number of inhabitants, it's colossal! In China, only 5 million people, out of a population of 1.4 billion, own 70% of the country's wealth. This is a much higher concentration of capital than in the United States, and the inequality is even greater.

The new generation of Chinese workers is demanding their human rights despite the little social dialogue allowed in the country. The Chinese no longer accept being seen as 'tools'. The older generation has accepted this rather well.

The government has introduced new labour legislation to raise the minimum wage. In addition, every Chinese worker now has the right to join a union. There is only one trade union: the National Federation of Trade Unions (150 million members who are directly under the control of the party). Since its creation, there have been more than 1000 large-scale strikes. The union has only helped employees in extreme cases. The most striking example is the crisis at the Honda factory. The union asked the workers to stop the strike and go back to work, the union employees hit the workers to force them back to their posts.

In Europe, the rural exodus developed slowly (2 centuries). In China, between 200 and 300 million people came to populate the big cities in just a few years, under Deng Xiaoping. This is another example of "Chinese responsiveness".

- Those with power...

In China, the judicial system is not independent, the judges obey the leaders. To become a leader, one has to accept the high level of corruption that goes with power. A chief of a canto must buy his right. To run a district, even a poor one, you have to pay 3 million yuan (300,000 euros). 90% of the richest Chinese are children of party members. The statistics speak for themselves...

The inhabitants are against this massive corruption. "If Mao came back, he would kick out this bunch of corrupt people". (phrase taken from a documentary on Chinese peasants who use nostalgia for the Maoist years to indirectly criticise current politics. In addition, there is a high level of corruption among the bourgeoisie, who use their power to take over state-owned companies and benefit from the dividends reserved for shareholders. With the organisation of the Beijing Olympics in 2008, the demonstrators benefited from the eyes of the world turning towards them to show the repression exercised by the party. China tried to calm the tension by spreading a slogan around the world: "one world, one dream".

This is also the Chinese Paradox. Growth, massive and rapid development, but at what price?

A word about the future...

With its desire to become the world's leading economic power, China has undoubtedly scored points. It is expected to be the only major economy to continue expanding in 2020, according to projections by the International Monetary Fund (IMF). While the US and Europe are mired in a second wave of Covid-19, Beijing, thanks to better control of the epidemic, has returned to growth more quickly. Admittedly, Beijing could not avoid a stall compared to 2019 (GDP had grown by 6.1%). Admittedly, the figures in this country are still open to question. However, the Chinese economy is showing some resilience. GDP grew by 4.9% in the third quarter!

Malgré le tableau idyllique que veut offrir le régime, le pays ne sort pas indemne de cette période. La croissance reste insuffisante pour endiguer le chômage. En l’absence de filet social, que ce soit en matière de santé, de retraite ou d’éducation, des millions de Chinois ont basculé ces derniers mois dans la précarité. Rien ne dit que la reprise de la consommation observée cet été sera durable, d’autant que la hausse de l’endettement des ménages prend des proportions inquiétantes.

Sur le plan industriel, l’économie chinoise s’est remise en ordre de marche dès le mois d’avril. La montée en puissance de la production a permis à la Chine d’augmenter sa part des exportations mondiales. Profitant des mesures de confinement à l’étranger, Pékin a massivement exporté du matériel médical pour suppléer aux pénuries mondiales, ainsi que du matériel informatique, alors que les entreprises occidentales basculaient vers des mesures de télétravail. Parallèlement, les plans de soutien à la consommation des gouvernements étrangers ont alimenté la demande d’importations en provenance de Chine.

La dette : leur faute, notre problème.

En 2020, la France affiche une dette à 120% de son produit intérieur. Ce niveau d'endettement est un danger pour la pérennité de notre système économique. Il est aussi symptomatique d’une utilisation intéressée des politiques budgétaires visant davantage à manipuler un électorat sur le court terme qu’à assurer la santé économique française sur le long terme.

« Une dette est pour l'homme libre une servitude cruelle. » (Proverbe latin). La dette (mot d’origine latine « debeo » signifiant « devoir, ce que l'on doit à quelqu'un ». Étymologiquement, s’endetter c’est donc être redevable envers quelqu’un et par conséquent renoncer à une partie de sa liberté. Mais, depuis plusieurs décennies la dette publique semble être devenue un concept purement théorique et beaucoup remettent en question les véritables contraintes qu’elle représente : « On entend dire régulièrement qu’au-delà de 100% de dette par rapport à la richesse produite pendant un an (PIB) par le pays, c’est la catastrophe. Cela n’a jamais été prouvé. Mais par contre on connaît au moins un pays endetté à plus de 200 % et qui n’en est pourtant loin d’en être mort : le Japon » Jean-Luc Mélenchon.

Alors la dette, est-ce grave docteur ? Autrement dit, l’endettement exponentiel est-il un modèle économique viable ? Quelles seront les conséquences à long terme de l’endettement d’aujourd’hui ? Qui paiera ?

Les politiques semblent avoir fait leur choix : la dette n’est pas la priorité. Depuis l’élection de François Mitterrand à la présidence de la République en 1981, l’évolution de la dette publique a été implacable : 21 % du PIB en 1981, 34 % en 1990, 60 % en 2000, 80% en 2010 et enfin plus de 100 % en 2020. Ainsi, même si “la politique n'est passionnante que dans l'opposition ” (Conchon), les responsables politiques semblent avoir trouvé un terrain d’entente sur l’adhésion aux thèses keynésiennes et la stimulation de la croissance par le déficit publique. Mais, "les crises de demain sont souvent le refus des questions d’aujourd’hui " (Lagadec), et l’on peut se demander si ce choix politique n’est pas davantage le fruit de la pression électorale que du courage politique ?

En janvier dernier Olivier Blanchard, ancien économiste en chef du FMI déclarait que l’endettement massif des états ne représentait pas un danger tant que les taux d’intérêt seraient inférieurs aux taux d’inflation. La logique est implacable, l’inflation étant supérieure aux taux d’intérêt, elle permet de grignoter l’endettement. L’endettementmassif devient non préoccupant et il convient de fustiger ceux qui le fustigent. Aujourd’hui en France, les taux sont négatifs (- 0,20 % en février 2020) et inférieurs à l’inflation, l’état s’endette donc gratuitement et devrait, en suivant cette logique, continuer de le faire.

This line of reasoning therefore accepts, as a first necessity, extremely low interest rates. By thinking in this way we lock ourselves into the necessity of maintaining interest rates at their current level, i.e. -0.20% (or extremely low). States thus seem to dream of a world with negative interest rates where debt would be free forever. But "after the dream, the awakening shows us the earth is not very beautiful" (Augusta Amiel-Lapeyre) and the current influence of the negative rate could fade, plunging our economy into one of the darkest phases in its history. Because locking ourselves into a negative rate (or zero rate) logic would be a negation of the whole economy and its fundamental principles. First principle: risk has a cost. It is impossible for the creditor to be sure that he will be repaid because the solvency of any economic agent is never total. The interest rate remunerates this risk by taking inflation into account. To give up the rate is to deny the risk. The negative rate implies giving up the idea that time has a value. One thinks of the famous: "Time is money". The negative rate denies the fundamental economic principle that time allows money to grow. It denies the philosophy of progress. In fact, the negative rate is a race to the bottom because it considers the loss of money as normal. The investor invests to lose and companies produce at a loss. Stagnation becomes the ideal because it makes it possible not to lose. The negative rate denies inflation, risk and growth. Some might argue that these rates, however illogical, do not directly affect the average person. This is a mistake! Negative rates penalise the profitability of banking institutions and the prosperity of savers. Thus, "negative rates are like a supernova that will explode" (William H Gross, manager of the PIMCO fund). And, far from representing a paradise for investment and growth, negative rates would be attractive stars but ready to explode in mid-air. Even if we remain in a world where interest rates stagnate around zero: today "debt is 116 million euros a day" (Archer).

So who will pay? Ricardo already warned us: "a present deficit is a future tax". The debt is what we leave to future generations, it is a strong economic link that unites us and as our president Emmanuel Macron said: our debt "will be paid by our children". We all dream of a France in which, when we die, we leave our children no other debt than those of gratitude. But to do this, we will have to pay! And a lot... For the economist Jean Yves Archer, validly reducing the debt means bringing it down to around 1,000 billion euros. Thus, it would be necessary to release around 1,700 billion euros, i.e. 34 years of collective effort at the level of 5% of our compulsory levies. These calculations are only theoretical assumptions. But they allow us to understand the magnitude of the task ahead of us, the burden that this debt represents for future generations and, above all, the inability of our tax system to pay off our debt. The manipulation of our current electoral system by many politicians is the root of the problem. Nowadays, many candidates take the easy way out. To get elected, they promise their electorate a lot and their lists of proposals often have no other financing than debt.

Thus, since the 20th century, public spending has risen from less than 10% to 57% of GDP, and what we sorely lack is political courage! Once our leaders are elected, nothing gets better and budgetary policies are too often tools for electoral manipulation. The state is no longer Tinbergen's "benevolent and omniscient despot" but Nordhaus' "cynical" character. It has become a self-interested manager of power pursuing short-termist budgetary policies whose primary objective is the immediate satisfaction of the electorate. I do not want to suggest that the voters are mere myopic followers who can be easily manipulated. But they are the direct victims of this political and economic game undertaken for several decades by the coldest of all cold monsters. I would also like to make it clear that I am not at any time making a hierarchy of the essential drivers of the debt and when I speak of "the origin of the evil", it is because, in my opinion, this problem is the most serious because it results from a moral choice. Moreover, the choice of "political courage" is not subject to any particular circumstance and therefore seems to me particularly interesting from a theoretical point of view.

The current crisis of the covid-19 and the necessary European-wide recovery plan of about 500 billion euros to deal with it will inevitably increase our deficit even further. So now, more than ever, we need to be aware of the danger of our debt levels. Especially as our safety valve, the eurozone, is cracking. When you have a common currency, if one country in the zone collapses financially, the health of all the countries in the zone is called into question.

Italy's financial situation is worrying all the financial players. And while François Écalle, former general rapporteur at the Court of Auditors on the situation and prospects of public finances, speaks of this country as the "weak link" of the euro zone, creditors seem to have lost confidence in its solvency. Indeed, Italy is now borrowing at 2.2%, while Germany is at -0.530%. The same questions as for Greece in 2012 are now being asked. Can Italy continue to borrow? If it cannot, what will happen? A return to the lira? In any case, for France, the economic collapse of Italy would be a catastrophe because "If Italy falls. The next domino is France" (François Écalle).

Our debt, like that of many Western states, has only been increasing for several decades and, even if it is not yet worthy of that of the war effort, it is getting dangerously close. Today, for many politicians, the best way to solve a problem is to deny it, but let's be brave and face the truth. For cowardice is projecting onto others the responsibility that we refuse to accept, and ignoring the problem of debt is throwing our burden onto our children.

Remy Martel & Baptiste Bourdeau


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