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Hyperdemocracy : When Democracy Exhausts the Resources of Its Own Survival

The European Democratic Model and Its Promise of Emancipation

Since the Second World War, the European democratic model has embodied a promise of emancipation. It protects individuals against arbitrary power, guarantees equality of rights and has extended rights for all by organising solidarity through the State, without which individuals would be left to face the uncertainties of life largely on their own. It has also developed mechanisms to correct inequalities, with the aim of promoting equality of opportunity and strengthening social cohesion. The welfare state, combined with the rule of law, represents one of the most advanced expressions of this model. It has delivered tremendous progress and rightly stands as one of the great political and social achievements of our time. For decades, economic development and social progress went hand in hand.

Gradually, however, and without sufficient awareness of the potentially damaging consequences, the balance that had made this model successful began to break down along two dimensions.

First, rights continued to expand without a corresponding development of duties and responsibilities. Second, the pursuit of equality was pushed ever further, increasingly seeking to equalise people’s circumstances and outcomes rather than their opportunities.

These two distinct but complementary trends have progressively generated an endogenous distortion of democracy: an entropy within our social model. I use the term entropy here in the sense in which it is employed in the social sciences, rather than in physics. It describes the endogenous dynamics of a system when those dynamics produce a gradual and cumulative decline in its effectiveness, progressively undermining its capacity to reproduce itself and potentially leading, in time, to its collapse.

The dynamics set in motion along these two dimensions will therefore ultimately exhaust the very resources on which the survival of our social model depends, unless we address them with determination.

This is what I call hyperdemocracy: a form of democracy that fails to recognise and manage its own limits and constraints, even though these are precisely what make it viable in the first place.

The pursuit of broader rights and greater equality rests on principles that are, in themselves, noble. But when these principles become disconnected from the actual workings of society and its economy—in the original sense of how a system functions and regulates itself—and when they are pursued beyond certain thresholds, they weaken the foundations of the system and thereby endanger its own survival.

In other words, a progressive aspiration, pursued without an awareness that its unlimited extension may paradoxically and inexorably produce the opposite of its intended effect, can ultimately lead to regression.

The Consequences of the Unlimited Expansion of Rights

As our democracies have continuously expanded rights, protections and mechanisms to correct inequalities, without corresponding obligations or responsibilities, they have also increased the expectations placed on public authorities. The State has become the natural recourse for an ever-growing range of individual and collective difficulties, as well as grievances and perceptions of injustice. In response, it has multiplied administrative arrangements, regulations and procedures.

This development is not simply the product of an administrative apparatus seeking to expand its own power. It stems from an accumulation of demands that are democratically legitimate and, considered individually, entirely understandable. Yet their cumulative effect, in the absence of an overarching vision or a broader assessment of their implications, can set in motion a dynamic that gradually escapes collective control.

The continuous expansion of public intervention progressively reduces society’s autonomy while simultaneously increasing the demand for State intervention. The process becomes self-sustaining.

The State and its administration expand because society asks them to solve an ever-growing number of problems. But once an administrative mechanism has been established, it develops a logic of its own. The administration builds up its expertise, procedures, operating requirements and institutional legitimacy—and acquires an incentive to grow further. The rules it produces generate new situations requiring regulation. A largely autonomous dynamic of expansion gradually takes hold.

The State enjoys a decisive advantage in this process: it can turn its interventions into binding rules and mobilise substantial resources to enforce them. It consequently becomes the principal organiser of society.

In the absence of an overarching vision and effective oversight, this dynamic generates over-administration, complexity and declining effectiveness. The problem cannot be measured simply by counting civil servants. It lies in the extension of administrative logic into an ever-wider range of social activities, with the machinery continually feeding its own expansion. The administration is no longer merely an instrument of political authority: it begins to escape political control and becomes the environment within which society itself must operate.

Yet even as this development undermines administrative effectiveness, it produces an even more pernicious vicious circle: the relationship between protection and responsibility.

A modern society must protect its members. Illness, disability, unemployment, old age and life’s unforeseen setbacks all justify mechanisms of solidarity. Abandoning these protections would represent a regression in our model of society.

But the continual expansion of protection also affects behaviour.

When the community assumes responsibility for an ever-growing share of individual risks, each person’s sense of responsibility tends to weaken. This is generally not a deliberate choice.

The more the welfare state intervenes and expands, the more individuals come to rely on it. The weaker family and local solidarity become, the less individuals maintain their capacity to anticipate difficulties, organise themselves and take responsibility for their own circumstances. And the weaker these forms of local solidarity become, the greater the demand for State intervention. The circle closes.

Individuals gradually cease to be citizens who possess rights while accepting corresponding duties. Instead, they become increasingly dependent, developing a growing need for protection—until they begin to lose their autonomy and their capacity to cope with difficulties on their own.

This excessive protection, once it becomes a perceived necessity, also increases anxiety and therefore the demand for State intervention. Dependence gradually becomes the new norm, a new entitlement. Individuals increasingly see themselves as beneficiaries of public schemes, as claimants with a legitimate claim against the State—in other words, against society as a whole, and therefore against everyone, a connection they may no longer clearly perceive.

The problem, then, is not protection itself. It arises when State protection ceases to be a means of emancipation and becomes a permanent substitute for the capacity to protect oneself and act independently. The welfare state can then produce a paradoxical effect: dis-emancipation.

Tocqueville anticipated this tension. (1) In a society where individuals become increasingly equal yet increasingly separate, there is a risk that they will turn ever more readily to an administrative power expected to satisfy their needs, gradually surrendering much of their autonomy and sense of responsibility.

This pernicious dynamic deserves to be taken seriously. It benefits neither individuals nor society as a whole.

A Society Without Autonomy Is an Empty Social Fabric

The question of intermediary institutions becomes central here.

Democracy does not rest on only two poles, the individual and the State. It needs an intermediate sphere made up of associations, businesses, trade unions, mutual insurance organisations, local authorities, families and professional communities. These institutions make proximity possible, organise cooperation, build trust, make compromise possible and give individuals the opportunity to act together.

When the State mediates most interactions between the different elements of society, these spaces lose some of their autonomy. Horizontal solidarity gives way to a single form of vertical solidarity organised by the State. The social fabric risks becoming hollow.

The result is troubling: a society whose members no longer know how to organise among themselves inevitably becomes more dependent on the State.

Hannah Arendt’s thinking illuminates this issue from another angle. Political freedom cannot be reduced to the possession of individual rights. It presupposes a space in which citizens can act together, deliberate and build a common world. When collective life is progressively transferred to administrative mechanisms, the risk is not merely bureaucratic. It is political. Citizens may lose some of the spaces in which they exercise their freedom and capacity for action in concrete terms.

This is where the concept of autonomy takes on its full meaning. An autonomous society is not a society without a State, but one in which the State does not need to organise everything because individuals and groups possess sufficient capacity to organise themselves.

Institutional, Economic and Civic Entropy

Hyperdemocracy is not simply a hypertrophy of the State. It is a process of institutional, economic and civic entropy: a gradual accumulation of rules, procedures, administratively managed organisations and rights without corresponding obligations. This increases the system’s complexity while reducing its capacity to deliver the intended results effectively, ultimately undermining the very conditions required for its continued reproduction.

This entropy is difficult to perceive because it develops through successive additions. Every new rule appears reasonable. Every additional procedure seems justified. Every new scheme claims to address a need. Yet the sum of these measures eventually makes the system difficult to understand, insufficiently responsive and increasingly ineffective.

Society consequently devotes a growing share of its energy to managing its own complexity. By producing more rules and controls, and spending ever more time administering them, it produces less wealth, trust and social cohesion.

Entropy also has a financial dimension. As rights and protections expand without corresponding duties and responsibilities, and as local forms of solidarity—within families, geographical communities, professional groups and elsewhere—gradually weaken, hyperdemocracy leads to an unchecked increase in public spending and debt.

The entropy is economic when taxation, complexity and the constraints arising from overregulation and over-administration weigh on work, investment, competitiveness, initiative and the attractiveness of employment.

It is civic when citizens gradually cease to feel responsible for matters that concern others or the collective good, having grown accustomed to delegating that responsibility to public authorities, which have progressively disintermediated them from one another.

It is civic, too, when citizens, confronted with declining public-service effectiveness despite very high levels of public spending and compulsory levies, and with ever-increasing debt, gradually lose confidence in politicians and institutions, in one another and even in themselves. This unease is already widespread in French society.

Ultimately, hyperdemocracy produces a major nexus of contradictions.

As the welfare state becomes increasingly paternalistic and promises ever-broader protection, it is bound to disappoint more and more people, both because its effectiveness declines and because the resources required to fulfil its promises cannot be found.

It generates permanent dissatisfaction and anxiety, partly as a consequence of the loss of autonomy and the erosion of personal responsibility that this dependence creates. It isolates individuals from one another by weakening the intermediary structures that connect them.

Finally, to sustain this model, it demands ever-higher public spending and compulsory levies. These, in turn, constrain the economic dynamism needed to make the model sustainable and contribute to an uncontrolled rise in public debt relative to GDP.

The Consequences of an Insatiable Pursuit of Equality

If the unlimited expansion of rights without corresponding duties is one of the defining sources of hyperdemocratic entropy, the same is true of equality when it ceases to mean equality of rights and opportunity and instead seeks to correct indefinitely inequalities of circumstances and outcomes.

Equality before the law and equality of opportunity are fundamental principles that have brought about decisive advances in civilisation. They free individuals from the constraints of inherited privilege and enable them to shape their own lives. Correcting excessive inequalities of wealth contributes to this objective and helps sustain the social cohesion on which society depends. The ultimate aim is a more harmonious form of social development.

But no democratic imperative can justify equalising people’s circumstances and outcomes without limit without risking serious damage to the economic and social model and, ultimately, to democracy itself.

A dynamic society is necessarily a society of differences. Individuals differ in their talents, tastes, efforts, choices, willingness to take risks and ambitions. These differences are not realities that must be corrected. They are, moreover, among the sources of prosperity and progress.

Systematically seeking to eliminate every difference in circumstances gradually turns every difference into a suspect inequality and every inequality into a problem requiring public intervention.

As the distinction between inequality and difference disappears, every asymmetry becomes suspect. Success may increasingly be interpreted not as the product of merit, hard work, responsibility or personal choice, but as the result of privilege or morally questionable behaviour. Hierarchy becomes domination. Authority raises suspicions of potential violence. Selection is accused of exclusion.

Hyperdemocracy then ceases merely to correct injustices. It tends to seek to correct differences themselves.

This may be described as a dynamic of indifferentiation, which in practice leads towards a post-democratic form of indifferentiation. A society that can no longer tolerate individuals, groups or institutions occupying different positions without immediately suspecting injustice becomes progressively incapable of recognising the legitimacy of authority. The same applies to excellence, merit and selection.

The legitimate effort to identify discrimination and abuse then becomes a single, systematic interpretative framework for social relations, in which every difference triggers a search for hidden domination or systemic inequality that must be corrected.

This dynamic carries political risks.

History shows that ideologies which have sought to remake society from the ground up, erasing the past in order to create a “new man”, have had to resort to increasingly total forms of coercion to impose their model on a human reality that resisted it.

The pursuit of equality and justice becomes dangerous when it ceases to acknowledge that the human condition has limits that no political organisation can abolish.

As Tocqueville had already observed, this quest for “total” equality threatens freedom and fuels destructive passions such as jealousy. (2) In contemporary societies, the unlimited drive towards equalisation risks leading to societies with increasingly totalitarian tendencies.

Indifferentiation: The Risk of Renewed Mimetic Violence and the Threat to Prosperity and Democracy

Furthermore, as René Girard has shown, when the differences that structure social relations disappear, mimetic competition for the same goods, status and recognition can intensify to the point of unleashing a spiral of mimetic violence and fuelling the search for scapegoats.

Indifferentiation, far from fostering harmony, can thus produce new forms of violence and intolerance, while identifying new scapegoats.

A living democracy cannot accept inherited privilege or discrimination. But neither can it, without taking substantial risks, regard every difference as an injustice to be rectified.

It must accept that equality of rights and opportunity can lead to differences in circumstances, life trajectories and outcomes. This is, indeed, one of the conditions for freedom, lasting democracy and a dynamic society.

It is also here that the question of equality connects directly with economic growth.

An economy progresses because a sufficient number of people take risks, start businesses, innovate, invest, and create new products and companies. Some succeed; others fail. Some sectors disappear while others emerge. This continuous differentiation is not a flaw in the economic and social model. It is one of its driving forces.

This is precisely what Schumpeter’s theory of growth explains. Progress does not result from an ever more perfect distribution of a fixed stock of wealth. It arises from innovation and creative destruction.

People must therefore have an incentive to take risks, experiment and succeed. A society that rewards success gives people a reason to take risks. A society that accepts failure allows experimentation.

Conversely, when differences in outcomes are systematically neutralised, the expected return on effort, investment, risk-taking and innovation diminishes, potentially to the point of disappearing.

This is not merely a matter of financial incentives. The desire to build businesses, achieve success, surpass oneself and earn social recognition also contributes to economic dynamism.

Innovation inherently creates temporary differences in circumstances, before competition and further innovation gradually reduce them.

It is therefore impossible to pursue simultaneously a society that constantly equalises outcomes and an economy that generates growth and rising living standards.

The unlimited pursuit of equality of circumstances consequently attacks the very engine of income growth from which the redistribution it seeks to achieve must ultimately draw its resources.

It can gradually produce a society that is less differentiated, less entrepreneurial and less willing to take risks—and therefore less capable of generating the wealth required to finance its social model.

This does not, of course, mean that every inequality is justified or that all redistribution is harmful.

A market economy requires the rule of law, social protection and redistribution, including measures to correct certain inequalities. Well-designed redistribution can benefit both economic growth and social cohesion.

But there is an essential difference between correcting inequalities that undermine equality of opportunity or lead to economically inefficient outcomes, and seeking to eliminate differences that arise from individual choices, efforts and life trajectories.

The first approach emancipates individuals; the second can ultimately constrain them.

For if every difference in outcome is treated as an inequality that must be corrected, the demand for correction can never be satisfied. Since individuals do not share the same preferences, abilities, behaviour or aspirations, equalising outcomes is, by its very nature, an unlimited objective.

Genuine equality, understood as a democratic value, must therefore be conceived differently. It means guaranteeing equality of rights, pursuing a deliberate policy of equality of opportunity, and enabling everyone to shape their own life trajectory.

It must accept that freedom necessarily produces differences in circumstances and outcomes.

Social justice does not mean making everyone’s destiny identical. It means preventing, as far as possible, people’s destinies from being predetermined and enabling everyone to improve their circumstances.

This is therefore a second manifestation of the entropy generated by hyperdemocracy. As with the indefinite expansion of rights, it ultimately consumes the resources and undermines the mechanisms on which its own reproduction depends.

By seeking ever more extensively to correct the outcomes of economic activity, it progressively weakens—and may ultimately destroy—the very economic dynamism on which those outcomes depend.

The French Case

France provides a revealing illustration of the phenomenon described above. (3)

Our country has built an ambitious and protective social model. It has delivered considerable progress and remains an essential component of social cohesion.

Moreover, income inequality after redistribution has remained broadly stable in France over the past twenty-five years. Inequality is moderate by developed-country standards, broadly in line with the European average and considerably lower than in the United States, for example.

Yet France has allowed the endogenous distortions of the system—that is, hyperdemocracy—to develop without sufficient self-regulation.

The result is a system that has become extraordinarily complex and costly, and particularly difficult to reform, thereby undermining the resources needed to sustain it.

France has progressively devoted an exceptionally large share of its wealth to public spending and compulsory levies. Yet this expenditure has not translated into economic and social performance commensurate with the resources mobilised.

Potential growth is weak. The competitiveness of French businesses has deteriorated over the past thirty years. Employment rates remain insufficient. Public services are becoming less effective, while public debt has risen sharply and budgetary room for manoeuvre has narrowed considerably.

The problem is therefore not simply that spending is too high. It is that the internal dynamics of the model generate ever more rules, expenditure and administration without producing enough growth, employment and productivity to justify and finance them sustainably.

This is where the sustainability of the welfare state is at stake.

A social system can protect a society over the long term only if that society generates sufficient wealth, employment and trust to finance the protection it provides.

Debt allows the moment of truth to be postponed, but it cannot eliminate it. More than that, by buying time, debt makes the eventual reckoning more acute and the resolution of the problem considerably more difficult.

Debt therefore postpones the constraint while dangerously exacerbating it.

Rights, Duties and Equality

Hyperdemocracy can thus be understood through our relationship with rights, duties and equality.

A modern democracy must never abandon fundamental rights. But rights cannot be sustainably separated from duties.

A right creates, in practice, an obligation for the community—and therefore a duty for everyone. To overlook this is to adopt a form of one-sided thinking.

Likewise, protection requires funding, solidarity requires contributions, and public services require resources.

The point is not to reduce rights, but to place them within a framework of reciprocal responsibilities and a shared understanding of their implications.

Nor is the objective to turn away from the emancipatory value of equality. It is to avoid confusing equality of circumstances and outcomes with equality of rights and opportunity, which form the foundation of a democratic society.

Finally, moving beyond hyperdemocracy does not in any way mean giving free rein to laissez-faire.

Criticising an omnipresent State does not imply advocating a minimal State. It means advocating a State that is strong in its essential functions and protective in fulfilling its fundamental responsibilities, while recognising the limits and constraints it must impose on itself to allow society—that is, individuals acting both independently and collectively—to remain responsible and capable of taking action.

This is, fundamentally, the logic of a social market economy.

The State guarantees the rule of law, protects the most vulnerable, finances essential public goods, invests in education, research and infrastructure, corrects market failures and ensures fair competition.

But it does not substitute itself for society.

The State must conceive of its own role in terms of enabling a society that is cohesive, responsible and autonomous. A social market economy is also one in which society develops the vitality and dynamism needed to sustain prosperity and raise living standards for all, as far as possible.

This requires a return to the principle of subsidiarity.

What individuals, social groups or professional communities can do should not be done by the State. What society can provide should not be administered by the public authorities. What can be decided effectively at a local level should not be imposed uniformly from the centre.

Subsidiarity is not a doctrine of State withdrawal. It is a principle for allocating responsibilities appropriately.

This requires room for autonomous intermediary institutions to develop and regain their vitality: associations, trade unions, businesses, local authorities and citizens capable of organising and acting for themselves.

This is, in fact, a condition of State effectiveness.

A Democracy That Reflects on Itself and Regulates Itself

The decisive question, ultimately, is this: can democracy correct its own endogenous dynamics and recognise its limits and constraints with clear eyes? Can it regulate itself?

Democracy—in this context, its institutionally organised system of representation—must be able to evaluate public policies, abolish regulations, reconsider expenditure and reform forms of protection that produce perverse effects.

It must therefore equip itself to assess potential consequences before legislating or regulating, experiment before generalising, and evaluate effectiveness after implementation, making improvements where necessary.

It must also measure not only the immediate benefits of a new rule, but the additional complexity it imposes on the system.

Before creating a new right or introducing a new scheme, it should ask a few simple questions:

Who will pay for it? Who will administer it? What level of effectiveness can reasonably be expected? Which responsibilities will be transferred? What will be the effects on the autonomy of individuals and society as a whole? What unintended consequences might arise?

Democracy’s capacity to critically examine its own institutions and modes of operation is a condition of political freedom and health.

It is also essential to maintaining citizens’ trust—and therefore to preserving democracy’s capacity to reform itself.

A democracy that can no longer reform itself gradually becomes a democracy that is merely endured, rather than actively shaped by its citizens. It ultimately weakens itself to the point of endangering its own survival.

Moving beyond hyperdemocracy does not mean abandoning equality of rights, equality of opportunity or social protection. It means restoring a balance between protection and responsibility, solidarity and autonomy, rights and duties, equality and freedom, and the State and society. (3)

A sustainable democracy must protect individuals against risks they cannot bear alone. But it must also leave them the space they need to address the risks they can manage themselves.

It must guarantee rights without overlooking the duties that properly accompany them.

It must provide essential forms of solidarity without replacing local solidarity or individual responsibility.

It must establish the rules that are indispensable without multiplying those that stifle initiative.

And it must promise only what it can deliver.

For a democracy that does not recognise its limits ultimately breeds disappointment and a loss of trust.

A democracy that no longer trusts its own society ends up making that society dependent on the State.

A democracy that no longer knows how to accompany rights with the necessary duties ultimately undermines those very rights.

A society that can no longer reform itself generates the entropy that weakens it and sets it on a path of decline.

Finally, a society that, in the name of equality, becomes intolerant of all differences, including those that are legitimate and necessary, ultimately puts democracy itself at risk.

Notes

(1) Alexis de Tocqueville, Democracy in America.

“I see an innumerable multitude of men, all alike and equal, who turn endlessly in pursuit of the small and vulgar pleasures with which they fill their souls. […] Above them rises an immense and protective power, which alone undertakes to secure their enjoyment and watch over their fate. It is absolute, meticulous, regular, far-sighted and gentle. It would resemble paternal authority if, like that authority, its purpose were to prepare men for adulthood; but, on the contrary, it seeks only to keep them irrevocably in childhood. It is pleased when citizens enjoy themselves, provided they think of nothing but enjoyment. It willingly works for their happiness, but it wants to be its sole agent and arbiter. It provides for their security, anticipates and meets their needs, facilitates their pleasures, manages their principal affairs, directs their industry, regulates their estates and divides their inheritances. What could it not take away from them entirely, if only it could spare them the trouble of thinking and the burden of living?

“In this way, every day it makes the exercise of free will less useful and less frequent; it confines the scope of individual initiative to an ever narrower space and gradually deprives each citizen even of the use of himself. Equality has prepared men for all these things: it has disposed them to endure them and often even to regard them as a benefit. Having thus taken each individual in turn into its powerful hands and moulded him as it pleases, the sovereign extends its arms over society as a whole. It covers its surface with a network of small, complicated, minute and uniform rules, through which even the most original minds and the strongest spirits cannot find their way to rise above the crowd. It does not break men’s wills, but softens, bends and guides them. It rarely compels people to act, but constantly obstructs action. It does not destroy; it prevents things from being born. It does not tyrannise; it constrains, compresses, enervates, extinguishes and dulls, until each nation is reduced to nothing more than a flock of timid and industrious animals, of which the government is the shepherd.”

Note: This English rendering of Tocqueville’s passage is provided as a translation of the French quotation supplied in the original article.

(2) Alexis de Tocqueville, Democracy in America.

“I believe that democratic peoples have a natural taste for freedom; but they have an ardent, insatiable, eternal and invincible passion for equality. They want equality in freedom, and, if they cannot obtain it, they still want equality in slavery. They will endure poverty, servitude and barbarism […]”

Note: This English rendering follows the French quotation supplied in the original article.

*(3) Olivier Klein, Dette, réformes et démocratie : comment sortir du cercle vicieux français [Debt, Reform and Democracy: How to Break Out of France’s Vicious Circle], Décryptage Éditions, May 2026.

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France Must Get Itself Out of This Crisis

France can no longer afford to wait. The very recent and sharp increase in the risk premium on French government debt is a major warning sign. International investors are becoming increasingly concerned about the trajectory of France’s public finances. The danger is a self-reinforcing spiral: higher interest rates increase the cost of government borrowing, drive up debt-servicing costs and widen the deficit, which in turn fuels investor mistrust. Restoring confidence urgently requires a firm commitment to credible structural reforms that demonstrate our determination to end denial and put the public finances back on a sustainable footing without stifling growth.

Three priorities stand out.

Reform the pension system. Demographic ageing makes it necessary to adjust the length of working lives. In a pay-as-you-go pension system, the rising number of retirees relative to the working population cannot be sustainably offset by higher contributions or lower pensions.

Decoupling pension increases from inflation can contribute to an immediate adjustment. But it is merely a stopgap, made necessary by our inability to reform. If maintained over time, it would squeeze pensioners’ living standards and undermine the confidence of both retirees and working people in the pay-as-you-go system. Above all, it must not become another pretext for postponing the essential reform yet again.

France cannot indefinitely remain an exception to the changes already under way in so many other European countries, as the progressive American economist Paul Krugman has just reminded us. In his view, a failure to control the debt, combined with France’s refusal to acknowledge the need to raise the retirement age, could trigger a major financial crisis and undermine the European project.

Increase youth employment and boost productivity. Encouraging employment at every age, improving workforce training, decisively raising educational standards and strengthening business competitiveness are essential to increasing our potential growth and sustainably financing our social model.

Bring public spending under control and make it more effective. The aim is not to indiscriminately cut public services, but to reassess ineffective programmes, duplication and spending whose outcomes do not justify its cost. A credible, quantified multi-year plan must gradually stabilise the public finances without sacrificing worthwhile investment or social cohesion.

We must break out of the relentless race between public spending and compulsory levies that has brought us to unsustainable levels that can no longer—and must no longer—be increased. This has weakened our competitiveness and incentives to work, while setting us on an uncontrolled debt trajectory. Fiscal responsibility and control of the debt ratio are not enemies of social protection. Quite the contrary.

France can still, at the eleventh hour, avert a crisis by choosing to put its public finances back on track. But that room for manoeuvre is rapidly shrinking as financial mistrust takes hold. A coherent and ambitious reform programme that finally puts an end to denial could restore confidence and quickly bring down our worrying risk premium. It could also persuade investors to give France the time it needs to change course.

Politically impossible? The National Assembly must recognise the immense stakes. France is too big to be abandoned, but also too big to be rescued without divisions within Europe and without stringent conditions. It must therefore get itself out of the very serious predicament into which it has allowed itself to drift.

It is urgent to act responsibly to avert the looming crisis, whose inevitable outcome would be a bitter austerity cure, with effects that would be long-lasting and painful. European cohesion would also be put at risk. Will we know how to avoid such an outcome?

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Against the Illusion of Ethics Without Efficiency : A Case for a New Alliance

The European model has been a historic success. Based on the social market economy, it has made it possible to reconcile growth, reduced inequality, social protection, and democratic stability. Its principle was simple: the market creates wealth, while public authorities set the rules, correct market failures, and guarantee social cohesion.

This model rested on a balance between the market and the state, as well as on their complementarity. But this balance has gradually weakened in the name of an ethic that has increasingly detached itself from the pursuit of efficiency, and at times even opposed it. Public action has intervened more and more, regulating, setting standards, and redistributing ever greater amounts, with the clear risk of damaging the economic and social dynamic itself.

We have too often opposed ethics and efficiency, as though the former belonged to the public and social sphere, and the latter to the world of business and markets. Yet this opposition is misleading. A market economy deprived of rules can produce rents, unsustainable inequalities, and repeated crises. But public authorities that accumulate regulations, procedures, taxes, and interventions can also become too cumbersome, hinder economic dynamism, and ultimately harm the social sphere. The challenge, therefore, is to restore the balance and complementarity between ethics and efficiency.

It is time to say this clearly: believing that controlling and making public spending more efficient damages the social model is a misconception. Combating the entropic tendency toward unlimited growth in public spending—including social spending—is essential to the sustainability of our social model.

As the welfare state expanded, a first distortion of democracy emerged, ostensibly in the name of an ever more absolute ethic: a demand for ever greater protection, rights, guarantees, redistribution, and correction of inequalities. Every new right, regulation, expenditure, or public intervention was considered legitimate, without even establishing the economic conditions, duties, and responsibilities that made them possible. Alongside this, and in the same spirit, a second distortion developed: an increasingly expansive conception of equality, which tended to move from equality of rights and opportunities toward the pursuit of equality of circumstances, or even equality of outcomes. This gradually led to a rejection of inequalities arising from talent, risk-taking, or initiative.

Taken together, these two distortions have weakened the engines of economic dynamism, thereby endangering the social model itself, which depends on them. We cannot multiply rights and protections, any more than we can intensify the pursuit of equality in every dimension, without ensuring that we preserve incentives to work, start businesses, invest, innovate, and take risks. Nor can we fail to ensure that social protection is used appropriately. These are the engines that create and preserve the resources needed to finance the social model.

These two distortions of democracy, which I call hyperdemocracy, do not represent the fulfillment of democracy. On the contrary, they are the harmful expression of a democracy that fails to regulate itself. They contain the same paradox: by seeking to expand ethics without any other consideration, they ultimately weaken the economic conditions and the efficiency of the system that make it possible to respond to legitimate social demands. When collective promises become incompatible with available resources, the result is either ever higher taxes, ever-growing debt, the deterioration of public services, or, ultimately, cuts in benefits. Confidence in the system’s ability to keep its promises then begins to erode. When the gap between promises and perceived reality becomes too wide, it is trust in public authorities, institutions, social groups, and individuals themselves—and ultimately in democracy—that is damaged.

Efficiency is a value that cannot be set against ethics. On the contrary, an administration that is itself efficient and serves the efficiency of the system as a whole better serves the general interest in every respect. Making public spending more efficient cannot be reduced to “making savings” in the narrow accounting sense. It means serving the country’s economic and social model. An inefficient administration, both in its own operations and in its tendency to over-administer, over-regulate, over-standardize, and over-intervene, creates entropy and gradually renders the socioeconomic system incapable of reproducing itself.

Europe and France do not have to choose between the American model and Chinese state-managed capitalism. But to break with the gradual suffocation that is stifling them, they must rediscover and renew what gives their social market economy its strength: a sustainable and dynamic balance between ethics and efficiency. This means putting an end to the opposition between the market and the state, business and social justice, performance and social protection. A well-regulated market economy that ensures fairness while rewarding risk-taking and success is the best ally of an ambitious social model.

It is this balance that will enable our democracies to remain free, prosperous, and united, without allowing the imbalances they create themselves to fuel the populist and illiberal movements that threaten them.

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Reform Rather Than Higher Taxes: Finally Breaking France’s Vicious Circle

29 September 2026 – Les Essais – Telos Collection

As the state of France’s public finances deteriorates, one diagnosis appears increasingly dominant in the public debate. Restoring the public accounts, it is argued, would require a combination of higher compulsory levies and lower public expenditure. This position is now defended by both political leaders and economists.

Two arguments are put forward. The first is one of budgetary arithmetic. If revenues increase while expenditure declines, the deficit will be reduced more rapidly. The argument is correct… on a spreadsheet. It follows from an incontestable accounting identity.

The second argument is political. Increasing compulsory levies, particularly on higher-income households or the most profitable companies, as well as taxing “privileged” retirees, would supposedly make reforms more politically acceptable. By creating the impression that the burden of adjustment is being shared fairly, this strategy would facilitate spending cuts and preserve social cohesion.

I believe both arguments miss the point. They adopt a static perspective, as if public revenues were independent of economic growth; as if taxation had no effect on behaviour, investment, employment or innovation; as if, beyond a certain level, taxation did not undermine corporate competitiveness and the attractiveness of work; and as if today’s political choices had no bearing on tomorrow’s reforms.

An economy, however, is not an accounting identity; it is a dynamic system in which behaviour adapts to incentives. Democracy is also a dynamic system: the successes or failures of public policies gradually influence citizens’ trust, and therefore governments’ very capacity to implement subsequent reforms.

Above all, these arguments overlook an essential question: why should France continue today to pursue a strategy that, in various forms, it has followed for more than forty years, when that very strategy has brought us to our present situation ?

France presents a paradox that is unusual among major advanced economies. Compulsory levies amount to approximately 43.5% of GDP, one of the highest levels in the OECD. Public expenditure is close to 57% of GDP, the highest level among developed countries.

Yet deficits have become permanent, public debt is now approaching 120% of GDP, GDP per capita has progressively fallen behind the euro-area average, the employment rate remains significantly below that of Europe’s best-performing countries, while trust in political leaders and institutions is among the lowest in Western democracies.

If the accumulation of compulsory levies had been the solution, these imbalances should gradually have disappeared. Yet precisely the opposite has happened. For several decades, each fiscal difficulty has led either to higher compulsory levies or, when further increases became more difficult, to greater public debt.

Structural reforms have often been postponed because stopgap solutions—fundamentally unsustainable, but politically convenient—provided temporary relief. That respite never resolved the underlying imbalances. More often than not, it merely shifted them into the future, allowing them to worsen.

The thesis of this article is that France does not primarily suffer from insufficient public revenues. Rather, it is trapped in two mutually reinforcing vicious circles.

The first is economic: the continued expansion of public expenditure calls for ever-higher compulsory levies and, when further tax increases become increasingly difficult to accept, greater borrowing. This dynamic gradually weighs on growth, investment, competitiveness and employment, ultimately weakening the country’s very capacity to finance its social model.

The second is democratic: the accumulation of deficits, the relative deterioration in public-sector performance despite growing resources, and rising indebtedness fuel growing distrust of government and public institutions. This distrust makes reforms more difficult, which in turn perpetuates economic imbalances.

Breaking out of these vicious circles now requires restoring the fundamental balances that underpin long-term economic prosperity and democratic vitality: more effective public expenditure, a higher employment rate, ambitious structural reforms, and a refusal to substitute yet another increase in compulsory levies for the transformations that have become indispensable.

France’s Two Vicious Circles: When the Economy and Democracy Weaken

One Another

Why does France, despite compulsory levies among the highest in the developed world and public expenditure unmatched elsewhere in the OECD, continue to accumulate deficits and rising debt? Why does this exceptional mobilisation of public resources translate neither into stronger growth, nor into an employment rate comparable with that of Europe’s best-performing countries, nor into greater citizen satisfaction with public services?

These paradoxes are not independent of one another. They are part of a cumulative dynamic that is progressively trapping France in two mutually reinforcing vicious circles.

The first is economic. For several decades, the growth of public expenditure has been faster than that of national wealth. To finance this gap, France has had to increase both its ratio of compulsory levies and its public debt relative to GDP. As compulsory levies have risen, their effects on economic behaviour have become increasingly significant.

Labour costs, corporate profitability and competitiveness, incentives to work, and the employment rate have progressively been affected relative to those of comparable, more efficient countries. This is not to suggest that taxation alone explains France’s lower economic efficiency. But it would be negligent to assume that taxation has become irrelevant when it reaches such high levels.

For several decades, France has suffered from an employment rate below that of Europe’s best-performing countries. This gap represents a major weakness, one that is often underestimated in the public debate. Every person who is not working despite being potentially able to do so simultaneously represents lost output, income, social-security contributions and tax revenues, while also increasing expenditure on social protection.

Conversely, increasing the employment rate generates a double dividend. It directly increases national wealth and therefore public revenues, while reducing certain expenditures associated with unemployment or inactivity. It thus improves public finances by broadening the productive base, rather than by increasing the burden imposed on those who are already working.

The gap with some of our European neighbours illustrates this potential for improvement. Countries that combine ambitious social protection with sound public finances are not necessarily those that impose the highest taxes; they are those that succeed in maintaining a larger proportion of their population in employment. Financing the social model depends less on the level of taxation imposed on a narrow tax base than on the capacity to broaden that base through higher employment.

Pension reform, labour-market reform, vocational training, support for jobseekers, and the integration of young and older workers should therefore be assessed against this criterion: their contribution to sustainably increasing the number of people in employment.

An insufficient employment rate and weaker corporate competitiveness undermine the very base on which compulsory levies are raised and also increase certain social expenditures. Deficits therefore persist, debt continues to rise, and the temptation returns to increase taxation further while avoiding deep reforms.

The circle thus closes: higher expenditure leads to higher taxation, which eventually weighs on wealth creation, thereby generating new deficits that, in turn, lead to further increases in taxation or borrowing.

It is equally essential to increase the value added generated by those who are employed—in other words, productivity gains. These are also crucial to growth, rising purchasing power and, consequently, public finances.

Here too, reforms are indispensable: to foster innovation and its diffusion; to facilitate economies of scale and therefore the rapid growth of companies; to improve the quality of education and investment in human capital; to avoid excessive regulation and over-administration; to reduce the penalties associated with failure while better rewarding success; to create more effective links between private and public research and development; and to increase labour-market flexibility so as to facilitate the movement of workers towards companies in emerging high-growth sectors.

Increasing productivity growth is therefore also essential. But it requires long-term reforms which, however indispensable it is to initiate them as quickly as possible, will themselves only produce their effects over the medium and long term. Raising the employment rate must therefore go hand in hand with efforts to achieve higher productivity gains. However, the former is easier to decide upon and bring about in the short to medium term. This is why we will focus more heavily on the employment rate, without in any way underestimating the parallel importance of productivity gains.

That said, the same underlying factors contribute both to an insufficient employment rate and to inadequate productivity growth. Excessive compulsory levies, both in absolute terms and relative to comparable countries, have a negative impact on both. The incentives to become an entrepreneur, to perform at the highest level, the profitability required to increase research and development expenditure, and the capacity to scale up rapidly are all affected by the level of taxation.

The vicious circle described here therefore encompasses both dimensions.

But this first circle does not explain everything. It gradually feeds into a second, deeper one.

The Democratic Vicious Circle

When citizens observe that taxation and public expenditure have reached record levels, yet deficits persist, debt continues to rise and the perceived effectiveness of many public services deteriorates, trust inevitably erodes.

Trust in governments, in institutions, in political parties, but also trust among citizens themselves.

International surveys show that this distrust is particularly pronounced in France today. It becomes not only a political problem but also an economic factor. A society that increasingly doubts its institutions, and in which distrust between social groups and between citizens themselves is becoming dangerously widespread, finds it harder to accept reforms, even when they are necessary.

Every proposal is immediately interpreted as a threat to a particular group, every reform is suspected of being unfair, and every trade-off becomes more contentious.

Political leaders are then driven towards solutions that are least costly electorally in the short term: postponing reforms, creating new schemes, preserving existing expenditure and financing imbalances through additional borrowing.

Debt, in turn, becomes a means of reconciling growing social demands without genuinely arbitrating between them. But it also merely shifts the difficulties onto future generations, without resolving the imbalances of the present.

The first vicious circle therefore feeds the second, while the second reinforces the first. It is the dynamics of these interactions that explain why France remains trapped on a trajectory from which it has been unable to escape.

This perspective leads to an essential conclusion. The French problem is not primarily one of insufficient public revenues. It is a problem of a set of balances that have gradually been disrupted: between expenditure and the wealth produced; between solidarity and responsibility; between rights and duties; between redistribution and wealth creation; between protection and incentives; and between short-term political considerations and long-term sustainability.

Until these balances are restored, each new increase in compulsory levies risks doing less to resolve imbalances than to prolong the very dynamic that produced them.

The real question is therefore not how to finance ever-greater public expenditure, but how to make such expenditure more effective, how to implement the structural reforms that have become indispensable, while restoring the necessary balance between rights and duties in order to ensure the long-term financing of our social model.

International Experience Confirms That Reform, Rather Than Higher

Taxes, Is the Answer

The diagnosis above could be challenged if it rested solely on an interpretation of the French case. If the diagnosis developed thus far is correct, however, one consequence should be observable in the evidence. Countries facing serious fiscal imbalances should achieve better outcomes when they reform their economies and improve the efficiency of public expenditure than when they seek primarily to restore their public finances through higher taxation.

And this is indeed broadly supported by research on fiscal consolidations and by the experience of many advanced economies that faced comparable imbalances before France did.

The question is straightforward: when a country needs to restore its public finances, is it more effective to raise taxes, or to control expenditure while implementing structural reforms that sustainably strengthen growth?

The economic literature provides a broadly consistent answer. The work of Alberto Alesina, Silvia Ardagna, Carlo Favero and Francesco Giavazzi has renewed the analysis of fiscal consolidation. Their contribution was to examine not isolated measures but comprehensive adjustment programmes, incorporating the expectations of households and firms.

Their conclusion is robust: adjustments relying primarily on expenditure restraint tend, on average, to entail smaller output losses than those based primarily on increases in compulsory levies. They are also more durable.

These findings are not isolated. Research by Guajardo, Leigh and Pescatori at the IMF, based on a different methodology, reaches a similar conclusion. The OECD, as well as the IMF in its economic-policy recommendations, likewise stresses that when fiscal consolidation becomes necessary, it should preferably rely on controlling current expenditure, improving its efficiency and implementing growth-enhancing structural reforms.

This should be done while preserving the investment expenditure that determines future prosperity: education, research, innovation, infrastructure and training.

Why this convergence? Because a credible reform programme changes the expectations of economic agents. When firms and households anticipate a lasting stabilisation of public finances without a further permanent increase in the tax burden, firms invest more, households regain confidence, and the economy gradually benefits from additional growth.

Conversely, when fiscal consolidation relies primarily on higher taxation, particularly in an already heavily taxed country, the effects on investment, employment, competitiveness and innovation tend to offset part of the expected budgetary gains.

National experiences illustrate these mechanisms in concrete terms.

Canada is probably the most emblematic example. In the mid-1990s, faced with increasingly worrying deficits, the federal government undertook a comprehensive review of public policies. Every expenditure item was assessed in terms of its usefulness and effectiveness. Administrative structures were simplified and operating expenditure reduced, while priority missions were preserved.

Within a few years, deficits disappeared, public debt embarked on a sustained decline and growth resumed. This consolidation did not result from a heavier tax burden; it was based on a transformation of public policy and a restoration of confidence.

Sweden followed a comparable trajectory after the severe crisis of the early 1990s. It profoundly reformed its pension system, making it automatically sustainable in the face of demographic ageing; introduced strict fiscal rules; modernised its administration; and implemented reforms designed to sustainably increase the employment rate.

Thirty years later, it combines one of Europe’s most generous systems of social protection with a high employment rate, a very moderate public-debt ratio and sound public finances. Its example demonstrates that there is no inherent contradiction between an ambitious welfare state and demanding fiscal discipline. The condition is that wealth creation should grow at the same pace as the solidarity it finances.

These experiences lead to an important conclusion for the French debate. The real choice is not between austerity and solidarity, nor between a strong state and a weak state. It is between two strategies for restoring public finances.

The first consists in seeking additional revenues in order to preserve existing structures as far as possible. The second consists in improving the efficiency of public expenditure and implementing reforms that sustainably raise potential growth.

Empirical research on international experience indicates that the latter strategy produces the most significant and durable results.

France has, however, an additional characteristic that makes this conclusion even more decisive. The countries examined in this literature generally did not enter their consolidation programmes with a level of compulsory levies comparable to France’s. When the tax burden is already among the highest in the developed world, the negative effects of further increases may be even greater.

This is why the current temptation to add new taxes to an already record-high level of taxation is less likely to accelerate the exit from the crisis than to prolong the very logic that produced our imbalances.

The lessons of the research converge here with those of the French experience: a vicious circle is not broken by postponing reforms through additional revenues, but by finally addressing its underlying causes.

Reforming the Public Sector: Improving the Efficiency of Public

Expenditure

If neither continued increases in taxation nor ever-rising public debt constitute a solution, the alternative cannot, however, be a policy of across-the-board cuts in public expenditure. The real challenge lies elsewhere: making public expenditure more effective.

The level of public expenditure is not, in itself, an indicator of success or failure. What matters is the service actually delivered to citizens, the growth it helps sustain and the quality of the public goods it finances.

From this perspective, France presents a troubling paradox. Never has public expenditure represented such a large share of national wealth, while French citizens’ satisfaction with many public services has progressively deteriorated.

This paradox reflects a phenomenon that may be described as entropy in public action. As administrative structures multiply, regulations accumulate, schemes overlap and procedures become increasingly complex, a growing share of resources is absorbed by the functioning of the system itself rather than by its purpose. As in any complex system, energy is progressively consumed by the organisation itself.

Education provides a first illustration. France devotes to its education system—once the issue of the weight of pensions in its budget has been adjusted—a share of national wealth comparable to that of many European partners. Yet pupil performance has declined in international assessments and equality of opportunity has deteriorated. Moreover, teachers are, on average, less well paid than their counterparts in other European countries—twice as much in Germany.

The problem is therefore not primarily one of resources, but of their allocation, the organisation of the system and its governance.

Healthcare presents a similar picture. France devotes more than 11% of GDP to health expenditure, among the highest levels in the developed world. Yet hospital pressures are increasing, healthcare professionals express deep dissatisfaction, waiting times for care are lengthening in many areas, and coordination between primary care, hospitals and prevention remains insufficiently organised.

German nurses are also paid one-third more than French nurses. Here again, the central issue is not the volume of expenditure but its effectiveness.

This pursuit of efficiency also requires us to reconsider the incentives embedded in our social-protection system. The objective is in no way to challenge the fundamental rights to which the French are legitimately attached. It is to ensure that these rights are exercised in accordance with their purpose and that collective mechanisms do not inadvertently encourage behaviours that ultimately weaken the system itself.

Sick-pay expenditure illustrates this need. It has been increasing much faster than national wealth. A substantial part of this increase is naturally explained by population ageing, wage developments and certain deteriorations in working conditions. But reports by the French National Health Insurance Fund (CNAM) also show that monitoring mechanisms remain insufficient and that practices vary considerably.

The issue is not to challenge legitimate sick leave. It is to ensure that national solidarity fully benefits those who genuinely need it.

The same logic applies to healthcare consumption. France has one of the lowest levels of out-of-pocket healthcare expenditure in the OECD. This reflects a legitimate commitment to protection. But a good whose cost is almost entirely invisible at the point of use tends to be consumed more extensively.

Without questioning universal access to healthcare, it is therefore legitimate to consider how care pathways are organised, the role of the primary-care physician, prevention, and greater individual responsibility through the introduction of a fair and sufficient level of out-of-pocket payment.

The same reasoning applies to employment policies. A solidaristic society must naturally protect those experiencing periods of unemployment or precariousness. But solidarity fully achieves its purpose when it effectively facilitates a return to employment.

The reforms surrounding France Travail, the strengthening of personalised support and changes to unemployment-benefit rules all reflect this logic: the objective is not to oppose rights and duties, but to reconcile them. Social protection is all the more legitimate when it enables people to regain sustainable autonomy rapidly.

This reflection extends beyond these areas. It calls for a reassessment of the entire organisation of government: the multiplication of administrative layers, duplication between public bodies, the proliferation of regulations, the fragmentation of responsibilities and the absence of systematic evaluation of public policies.

Reform does not mean weakening the state. It means enabling it to perform its essential functions more effectively.

The issue ultimately goes beyond budgetary savings. More effective public expenditure improves the services delivered to citizens, strengthens trust, creates room for greater investment in education, research, innovation and the ecological transition, and makes it possible progressively to reduce the weight of operating expenditure in national wealth without diminishing the quality of the social model.

This is precisely what distinguishes a reform policy from an austerity policy. The former seeks to generate greater public value from resources that are more appropriately allocated and better used. The latter merely reduces resources.

Only the former is capable of sustainably breaking France’s vicious circle, rather than merely enduring its consequences.

Restoring the Fundamental Balances: A Democratic as Well as an

Economic Imperative

Reforming public expenditure, raising the employment rate and restoring potential growth are the economic conditions for escaping France’s vicious circle. But they face a deeper difficulty, one that goes far beyond public finances.

Why does a country with a high-quality administration, distinguished economists and strong institutions struggle so much to implement reforms that are extensively documented and have often been successfully introduced by several of its neighbours?

The answer is, to a considerable extent, related to the evolution of our democracy.

Over several decades, our democracy has progressively prioritised the continuous expansion of individual rights and collective protections, without paying comparable attention to the responsibilities that make them possible—or, indeed, while allowing the duties that should accompany the expansion of those rights to decline.

Social progress is an essential achievement. But it cannot be sustained over time except by an economy capable of generating the wealth required to finance it.

As Nicolas Dufourcq has rightly observed, social protection cannot expand indefinitely. This observation does not imply any rejection of solidarity. It recalls an obvious truth that is too often forgotten: every system of collective protection ultimately requires sufficient wealth creation upstream.

When rights expand faster than the economy’s capacity to finance them, debt becomes a means of promising today what national production can no longer afford.

The same imbalance appears in our conception of equality. Reducing excessive inequalities is one of the fundamental functions of the welfare state. But seeking to reduce ever further all differences in income, wealth or circumstances gradually leads to ever-increasing transfers and the taxation required to finance them.

Beyond a certain threshold, this logic ultimately weakens the very factors that create the wealth to be redistributed: work, investment, innovation, entrepreneurship and risk-taking.

Economic history shows that no society can sustainably improve redistribution while simultaneously undermining the conditions for wealth creation.

Social justice and economic efficiency are not opposites; they can be combined and mutually reinforcing when the balance between the two is maintained at a level that permits a socio-economic optimum.

Conversely, when the demand for equality in every respect expands without limit, it eventually weakens the very social model it seeks to protect.

It is this imbalance that now feeds the second vicious circle described in this article. Despite taxation and public expenditure being among the highest in the developed world, citizens observe that deficits persist, debt continues to rise without control, and the effectiveness of several essential public services is increasingly questioned.

This contradiction fuels growing distrust of political leaders and public institutions, between social groups and even among citizens themselves.

International surveys are particularly concerning in this respect. French citizens’ trust in their democratic institutions is now significantly lower than that observed in several major European countries.

This distrust is not merely a symptom; it becomes a cause in its own right. The more trust declines, the harder it becomes for governments to implement structural reforms. And the more reforms are postponed, the more economic imbalances worsen.

Finally, the more these imbalances deteriorate, the further trust continues to erode.

This is the dynamic that, in other work, I have proposed analysing under the term “hyperdemocracy.” This does not refer to democracy being excessive in its principles, but rather to an endogenous drift within democracy, progressively making it less capable of arbitrating between the present and the future, between rights and duties, between solidarity and responsibility, and between redistribution and wealth creation.

It is a democracy that finds it increasingly difficult to say no to immediate demands and that shifts onto debt the trade-offs it no longer dares to make.

Breaking France’s vicious circle therefore requires more than fiscal consolidation. It requires restoring the fundamental balances upon which every sustainable society rests: producing before redistributing, protecting without undermining incentives, guaranteeing rights while reinforcing the duties that make them possible, and investing in the future rather than financing the present through debt.

Only under these conditions can trust gradually be restored—a prerequisite for the success of the reforms themselves.

Today, the state of France’s public finances requires important decisions. But the right diagnosis must first be established. The debate is currently dominated to a large extent by an accounting or static approach. We can no longer ignore the causes of the trajectory France has followed for more than forty years. Nor is it acceptable to disregard what international experience teaches us.

Against this background, proposing once again to increase compulsory levies and the rate of redistribution in order to accompany some subsequent reductions in expenditure amounts to reproducing the very mechanism that brought us into this predicament.

This strategy may appear reassuring because it creates the impression of accelerating fiscal consolidation or distributing the burden of adjustment more evenly. But it remains based on a view that overlooks the actual dynamics of cause and effect.

It fails to recognise that, in an already heavily taxed economy, another increase in compulsory levies risks further weakening corporate competitiveness and the attractiveness of work—and therefore the employment rate, potential growth and, ultimately, public finances themselves.

Nor does it recognise that by providing another period of fiscal respite, it may once again encourage the postponement of fundamental reforms, while further aggravating the already widespread state of distrust in France.

The challenge, therefore, is to break with a logic that consists in financing for ever longer the consequences of our imbalances rather than addressing their causes.

This requires reforming the organisation of public action in order to improve the effectiveness of every euro spent. It requires sustainably increasing the employment rate, a key determinant of potential growth and future public revenues.

It also requires restoring coherent incentives within our social-protection system, so that it fully protects those who need it while encouraging employment, responsibility, risk-taking and wealth creation.

Finally, it requires rebuilding trust by restoring the fundamental balances between rights and duties, solidarity and responsibility, redistribution and production, the present and the future—balances that underpin democracy and prosperity themselves.

Ultimately, trust is the true capital of a democracy.

It cannot be decreed. It cannot be purchased through debt. Nor can it be regained through a succession of tax increases.

It emerges from a country’s ability to look lucidly at its difficulties, accept the reforms that are necessary, and demonstrate over time that public action can be both effective, responsible and fair.

Only under these conditions can France finally escape the vicious circle in which it has progressively become trapped.

This is in no way about calling the French social model into question. Quite the opposite. The best way to preserve it is to restore the economic and societal foundations that will ensure its long-term sustainability.

A generous system of social protection cannot thrive indefinitely on an economy that is weakening and a society in which trust is eroding.

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Monetary Debasement: When Abundant Liquidity Undermines Trust and the Social Fabric

Olivier Klein and Olivier Lendrevie — 27 April 2026

Monetary debasement, long associated with the manipulation of precious metals, today encompasses a more diffuse process: the risk — under certain conditions — of a gradual or sudden destruction of the value of money through the excessive creation of liquidity. This dilution of scarcity, set in motion by the end of the Bretton Woods system in 1971 and amplified after the 2008 crisis, is now profoundly reshaping the relationships between generations, social classes and monetary powers. Under the Ancien Régime, debasement referred to reducing the gold or silver content of coins in order to expand the money supply for the benefit of the sovereign power, at the expense of those who held the currency.

After 1944, the Bretton Woods system established a stable hierarchy: the dollar, as the only currency directly convertible into gold and the anchor around which the other currencies were organised within a system of fixed parities, became the linchpin of the global system. President Nixon’s decision in August 1971 to suspend the convertibility of the dollar into gold broke that contract of trust and ushered in the era of currencies based on confidence alone — currencies whose value rests on institutions such as the central bank and the State, which confer their sovereignty upon them. The value of modern money is thus tied to the belief in the ability of States to honour their debts and in the ability of central banks to conduct an independent policy that guarantees monetary and financial stability.

This institutional architecture entails a delicate balance. Monetary trust rests on a stable relationship between the evolution of debt and the creation of real wealth. The advantage of modern money is precisely that its quantity does not depend on a stock of precious metals — which is by nature disconnected from the needs of economic development — but on bank credit, which follows the needs of economic actors themselves. However, when money creation ceases over the long term to be correlated with actual growth, trust in the currency can erode to the point of triggering catastrophic crises.

Since the mid-1970s, the expansion of credit has established a regime in which money no longer rests on a tangible, material base linked to an exogenous quantity, but on the counterpart — formed by credit — to the debt of banks, which are the issuers of deposit money. The creation of liquidity in central bank money then increased massively with the support provided by central banks to the economy after 2008 — that is, from the great financial crisis onwards — through their policy of “quantitative easing.” This unconventional monetary policy proved very useful in averting the major deflation and systemic crisis that the financial crisis could have triggered. However, once growth rates and credit production had returned to normal, central banks did not gradually wind down their interventions. The quantity of central bank money thus continued to grow at a pace far above nominal GDP. This dynamic was further amplified during the Covid period — rightly so, since it effectively suspended for a time the monetary constraint on States, which were generously supporting firms and households in order to prevent the pandemic from irreversibly destroying the productive capacity of our economies.

With the abrupt return of inflation, central banks then raised their policy rates very significantly and embarked on a phase of quantitative tightening — or rather of quantitative normalizing, to use the language of central bankers — meaning a reduction in the quantity of central bank money, accompanying a gradual normalisation of monetary policy.

But, between roughly 2017 — the date when our economies returned to normal — and at least the outbreak of the pandemic, the abundance of liquidity, growing faster than GDP, kept long-term interest rates artificially low for too long. The result was a sharp rise in the prices of wealth assets, equities and real estate, together with a compression of risk premia, leading to a build-up of financial risk, an accelerated and dangerous proliferation of zombie firms (which normal interest rates would have driven into bankruptcy) — and therefore a decline in productivity gains — and a rapid increase in the value of asset holders’ wealth.
This asset price inflation — in real estate, equities and bonds — amounted to an artificial revaluation of the wealth of the most affluent households, while younger generations saw the prospect of access to home ownership recede. This evolution signals a social debasement: wealth creation ceases to reflect a fair relationship between effort and reward. That said, it is worth noting that in France, in the sharing of value added, labour income has grown faster than capital income — dividends and interest combined — since 2000, with interest itself falling sharply until 2022, given the squeeze on interest rates and risk premia induced by quantitative easing.

Nonetheless, the rise in asset values and the compression of interest rates have blurred fundamental economic benchmarks. The interest rate, the central tool for the allocation of capital, has lost its function as a signal of risk. Its compression to levels close to zero has driven an overvaluation of assets and, even though France has not experienced a rise in income inequality, has increased wealth inequality.

In parallel, the monetisation of sovereign debt by central banks has become structural: States have financed a non-negligible share of their deficits through central banks’ purchases of the bonds they issued — that is, through the issuance of central bank money — blurring the boundary between fiscal policy and monetary policy. Debt monetisation — its direct or indirect purchase by the central bank — can temporarily resolve the issue of a punitive rise in interest costs that the market might impose in the event of pronounced concern about the level of debt. But this solution carries fundamental dangers as soon as it is repeated and becomes entrenched over time. Unlimited monetisation creates substantial risks of a loss of confidence in the debt and, ultimately, in the currency itself. As for the outright cancellation of all or part of the public debt by the central bank, it would be no more than a zero-sum operation, providing no relief to the budget while taking the risk of profoundly disrupting the confidence of economic actors.

By lifting the monetary constraint — that is, the need to repay one’s debt or to refinance it under normal conditions — one introduces a political moral hazard into the democratic game. Why adhere to budgetary orthodoxy and undertake painful structural reforms when central bank policy neutralises the negative consequences of an uncontrolled debt on interest rates, and when the single currency — the euro — or the currency that enjoys an exorbitant privilege — the dollar — strongly dilutes the usual fallout on interest rates and exchange rate parities?

Yet trust in money refers to a reliable and effective system for the settlement of debts. Money is indeed the means by which the debt arising from market exchanges is discharged: the loss of trust in the proper settlement of debts therefore leads to a loss of trust in the outcome of exchanges, and in money in the very essence of its function. Money is thus the fundamental bedrock of the social bond in market economies, as Michel Aglietta argued.

When trust in State money erodes, economic agents look for substitute assets. Gold, neglected during the period of strong growth, has since 2010 regained its function as a safe-haven asset. The central banks of emerging countries — China and Russia foremost among them — have steadily increased the share of their reserves held in the form of gold, no doubt encouraged by the increasingly frequent instrumentalisation of the dollar for purposes of sanctions (dollar weaponisation) in geopolitical conflicts.
In parallel, the emergence of crypto-assets, foremost among them Bitcoin, embodies in digital form the same aspiration to break free from the arbitrary power of unlimited money creation or sanction wielded by States. By inscribing scarcity in the code, these assets establish a form of technological counter-currency. But, stablecoins aside, they rest on no tangible economic counterpart and remain deprived of the support of any institution capable of underpinning trust in this new currency. Lacking, moreover, the cultural, historical and industrial foundations that contribute to the legitimacy of precious metals as a store of value, these assets ultimately appear unmoored from any fundamental value.

Monetary debasement has also taken on a geopolitical dimension. Since 1945, the pre-eminence of the dollar in international transactions has conferred on the United States a unique power of intervention. This privilege, a pillar of the post-Bretton Woods system, is today beginning to crack under the effect of the diversification of official reserves by the central banks of emerging economies, particularly those of the “Global South,” while China is methodically preparing the internationalisation of the yuan. This strategy aims to build a monetary multipolarity and to reduce dependence on the dollar in trade settlements. The road to that destination will still be a long one, given that the use of the dollar as an international currency produces a lasting hysteresis effect and given the depth and performance of US financial markets. But over the long term, it is certain that the fragmentation of the world and the coexistence of two hyperpowers cannot allow the existing monetary order to be preserved — an order that was the fruit of the sole political, diplomatic, military and economic dominance of the United States, a dominance that has come to an end with the emergence of China as a systemic rival across all of these dimensions.

Monetary debasement, as such, ultimately crystallises two tensions of the contemporary situation: on the one hand, the need to create liquidity in order to preserve the stability and unity of each monetary area, and on the other hand, the risks generated by a sustained excess of such creation. These risks today (but tomorrow?) are no longer principally those of hyperinflation, but rather those of an accelerated asset-price inflation, a generator of financial instability and a destroyer of the social fabric, together with a drift of public debts that undermines confidence in ordinary bank money — leaving open, despite their complete lack of institutional backing, the possibility for private currencies and for gold to serve as safe havens and alternatives.

Monetary history shows that every rupture of the social bond constituted by money leads to an institutional refounding. Monetary debasement is therefore not merely a technical phenomenon: it is a crisis of trust — in institutions, in effort and in the future. In this sense, restoring trust represents the foremost condition of any lasting monetary reconstruction, and must take precedence, in our monetary stewardship, over the temptation to resort to unconventional policies in order to smooth out every economic cycle or to anaesthetise every negative externality.

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Cryptocurrencies, Bitcoin, and the Challenge to Official Currencies

By Olivier Klein, Professor of Economics at HEC

A cryptocurrency is a digital currency whose transactions are recorded and verified by decentralized technology, often the blockchain. Bitcoin, which appeared in 2009 (notably at the very end of the global financial crisis), is the first cryptocurrency to have achieved major success. Its founding principles are decentralization, the absence of a central authority controlling the creation or regulation of money, a limited supply, transparency, and the immutability of transactions.

The founders of Bitcoin promoted this currency for several reasons. First, it would allow protection against inflation of the money supply and monetary manipulation: unlike official currencies, created by banks and regulated by central banks, Bitcoin relies on a fixed, predetermined protocol, without the intermediation of a financial institution. Next, it offers greater individual freedom and autonomy, granting the user anonymity and independence from a national currency and its constraints. It also introduces the notion of algorithmic trust: instead of relying on an institution, one relies on technology and the distributed consensus of the network. Finally, it can foster financial inclusion in regions where access to banking services is limited.

Bitcoins and other cryptocurrencies of the same nature ultimately derive from the utopia of a world in which money would no longer be national but universal, valid for all countries and for everyone, transferable securely and without cost. Such money would dispense with intermediaries, its value could not be manipulated by governments or central banks, and it would be tied to decentralized private management. It would guarantee transaction anonymity, with its guardian not being a central bank but an algorithm—assumed to be infallible. A form of anarcho-capitalist utopia. In the 1970s, Friedrich Hayek and the Austrian School advocated for the denationalization of money, removing the monopoly of monetary creation from governments and entrusting it to private industry. In some sense, the development of cryptocurrencies could be seen as an attempt to fulfill this wish.

The differences with official bank-issued money are therefore fundamental. Modern money is always, at issuance, a debt of the issuer (a bank, here) against itself. But this private debt must be recognized by society in order to be universally accepted as legal tender —that is, as a means of extinguishing the debt arising from an exchange. Modern money is issued by banks, no longer in proportion to gold or silver reserves, but in relation to the development of the economy. Money is created from the act of credit, which simultaneously generates a deposit in favor of the borrower. This deposit appears on the bank’s liabilities. It is, de jure, a debt of the bank to the deposit holder. And bank deposits constitute money, because they are accepted by society as legal lender (except in cases of collective loss of confidence in the bank’s solvency). Credit thus creates deposits. Today, banks create money ex nihilo, since it no longer bears any relation to quantities of precious metals held, but instead to credit demand—that is, to the needs of the economy. Finally, this system is regulated by an external institutional authority, the central bank, since the automatic regulation of monetary creation through the possibility of converting currency into gold or silver has disappeared.

The severe, repeated financial crises of the second half of the 19th century led to the creation of official institutions—central banks—after repeated bank failures. By homogenizing the monetary space (a dollar, for example, issued by one bank in the United States henceforth always equaling a dollar issued by another American bank), and by acting, when necessary, as a lender of last resort, central banks created the possibility of stability. Hence the usefulness of institutions and rules…

Bank money—which is therefore a bank liability—regulated by central banks and governments, rests on trust in these institutions. It is in this way validated by all as a discharging means of payment. To trust money is thus to trust the effectiveness of the system for settling debts. And since the money supply is backed by credit to the economy, its evolution is mainly tied to the evolution of the economy’s needs.

Bitcoin and other cryptocurrencies, by contrast, have a limited, predetermined supply, independent of the economy’s evolving needs. Since they are backed not by any official institution but by a protocol, and have no economic counterpart, they are highly volatile, their value being entirely self-referential. Bitcoin, for example, is worth only what its buyers and sellers accept it to be worth, without any external objective reference, such as the economy, and without any external regulation. Their legal framework is also uncertain. As a result, their universal adoption remains very limited.

Taking a broader perspective, with anthropological and political philosophy lenses, it becomes clear that the ideas of the libertarian school regarding the role of institutions illuminate the choices of “bitcoiners.” They promote cryptocurrencies as a response to institutions considered inherently dangerous or oppressive. Thus, they create a new, unofficial alternative “institution”: a set of rules coded in a protocol, norms, and a system of trust based on technology rather than the state. Libertarians hold that institutions are artificial constructs that hinder the self-organization of human beings. They therefore see them as harmful and dangerous. We, however, along with the institutionalist school and thinkers such as René Girard, argue that institutions—whether visible or invisible—are the product of the spontaneous evolution of society. They represent the sedimentation of humanity’s historical learning, aimed at improving society’s effectiveness, its capacity to live together, and its mastery of violence. Of course, some institutions may also become inefficient or even harmful, for reasons discussed in some of our articles. But in such cases, our aim is to warn of their fragility and potential deviations or abuses, not to deny their foundational and regulatory role. In other words, the goal is to preserve their utility and correct those that become ineffective or even disruptive, potentially dangerous for the balance of our societies.

The institutionalist school, in economics as in sociology, views institutions as deep and resilient social structures. They encompass both formal rules—laws, contracts, central banks, visible institutions—and informal norms—customs, conventions, shared beliefs, invisible institutions. They constitute the “rules of the game” that structure social interaction, provide benchmarks for collective action, and enable society to function in a stable and predictable manner. Among visible institutions we can cite constitutions, laws, money, the judiciary, or the educational system. Among invisible institutions we find social norms, trust, shared values, and cultural codes. Institutions make effective cooperation possible, strengthen mutual trust, and reduce both transaction costs and conflicts. Without them, markets, economic life, and social peace would be unstable, uncertain, even chaotic. They therefore form the basis upon which social consensus and mutual trust rest, ensuring better economic and social outcomes than could be achieved in their absence.

René Girard, for his part, sees institutions as regulators of violence. According to him, all human societies are marked by potentially contagious dynamics of violence, arising from mimetic desire—that is, the tendency to desire what others desire. To avoid the risk of paroxysmal and destructive crises, societies invented institutions: religious rites, moral codes, judicial systems that channel, redirect, or transform violence. The emblematic institution in his thinking is the scapegoat mechanism: the community discharges its collective violence onto a victim or group, temporarily restoring peace. In modern societies, these sacrificial mechanisms are replaced by more “civilized” institutional forms—such as justice, police, or even money—all of which play a role in organizing and pacifying rivalries.

Whether we refer to the institutionalist school or to Girard, an institution presupposes shared rules, explicit or implicit, collectively accepted, as well as a structure of trust enabling individuals to rely on the predictability of others’ behavior. It also implies a capacity to regulate conflicts: justice regulates punishment, money regulates exchange, the rule of law channels rivalries over power or wealth. Institutions, whether visible or invisible, thus appear, both for institutionalists and for René Girard, as the primary regulators of human societies. In this sense, Bitcoin—a private currency not backed by a public institution, issued without any external objective reference, detached from the evolving economic needs of society—cannot be validated by all as a universal discharging means of payment. This is all the more so given that its self-referential value, and therefore the extreme volatility of its price, makes its everyday use as a means of payment highly difficult.

And yet, institutions themselves are not immutable, immune from drift; they can be fragile. Over time, each risks losing effectiveness, developing dangerous entropy, or being undermined by a poor understanding of the mechanisms of human societies. If monetary constraint, for example, were suspended for too long—if public debt were permanently monetized by creating money to finance it—then trust in the debt-settlement system, and thus in money itself, could be called into question. And if confidence in money were lost, we could face not traditional inflation but a flight from money. The consequences would be disorganization and possible collapse of both economy and society. Money is, in fact, constitutive of the social bond. As Michel Aglietta put it: “Money is the alpha and the omega of society.” Or again: “Money is the fundamental social bond of market-based societies.”

Cryptocurrencies, and Bitcoin in particular, could thus establish themselves as an alternative or even substitute currency, whose value would keep rising, if debt levels continued to increase relative to GDP—as is the case worldwide—and if fear spread that “official” money might be corrupted by the lasting monetization of such debt. Otherwise, their characteristics make them hyper-speculative assets, whose value can only remain highly uncertain, being the product solely of market participants’ anticipations of their own future behavior. A speculation “in the void.” They are not money. Let us beware of their becoming so.