FRANCE (1980-2100): Debt Crisis Forecasts

In a prior post (French Debt, Collapse of the Government and COVID-19), I presented a single Business-As-Usual (BAU) forecast for French DEBT. In this post, I present some Geopolitical policy options (hypothetical forecasts)  for lowering DEBT. They are presented in the graphic above.

• BAU Model (BAU) Debt keeps rising but eventually stabilizes after 2100 when France becomes a Steady-State Economy at a higher level of debt.
• Random Walk Model (RW) In the random Walk (RW) policy makers try "one damned thing after another" trying to find a solution. Anything can happen, but the RW will create continuing street protests.
• European Union (EU) Models Membership in the EU provides certain constraints on Debt. If France operates within these constraints, debt is forecast to return to pre-2000 levels (notice that policy actions after 2000 kept Debt from climbing).
• US Geopolitical Leverage (Wall Street) If Wall street calls the shots, French debt is forecast to fall back to 1980 levels.
• World Geopolitical Leverage (Global Debt Markets) If France aligns itself with Global Debt Markets, DEBT is forecast to fall to levels not seen in the Late 20th Century.

What the French Political System might do in the future is not clear, but see my best guesses below.

A Blog Roll of my current postings on France is available here.

You can run the FRL20 Model written in R-Code on my Google Site (here). The French Economy is stable and headed toward a Steady-State Economy around 2030.

Notes

• French Debt, Collapse of the Government and COVID-19 The lingering effects of the COVID shock are still with us and the French government is still preoccupied with Random Walk components rather than controlling the overall Economy.
• Has Austerity Helped or Hurt the French Economy? It's complicated but leads to a lot of Protest.
• Breaking Cycles of Austerity in France Find some way other than Austerity to control the Economy.
• How Does the Economy of France Work? The main controllers of the French Economy are not Austerity and Neoliberalism but rather the Environment and Unemployment.

Wikipedia Links

• Economy of France  a highly developed social market economy with strong state participation in strategic sectors. It is the world's seventh-largest economy by nominal GDP and the ninth-largest economy by PPP, constituting around 3% of world GDP.
• Politics of France  a semi-presidential system determined by the Constitution of the Fifth Republic. The nation declares itself to be an "indivisible, secular, democratic, and social Republic". The constitution provides for a separation of powers and proclaims France's "attachment to the Rights of Man and the principles of National Sovereignty as defined by the Declaration of 1789".
• History of France he first written records for the history of France appeared in the Iron Age. What is now France made up the bulk of the region known to the Romans as Gaul. 
• 2000 in France The year 2000 is in particular remembered in France by a media campaign on the conditions of detention of prisoners. A parliamentary board of inquiry was created. The conclusions of the report were that French prisons were both unhealthy and over-populated. The sanitary arrangements were considered to be scandalous. The government of Lionel Jospin launched a program to renovate and build new prisons.
• Geography of France a terrain that is mostly flat plains or gently rolling hills in the north and the west and mountainous in the south (including the Massif Central and the Pyrenees) and the east (the country's highest points being in the Alps). Metropolitan France has a total size of 551,695 km² (213,011 mi²) (Europe only). It is the third-largest country in Europe by area (after Russia and Ukraine) and the largest in Western Europe.

 FRL20 DEBT Measurement Model

The French Debt Controller is FR1 = (Q-DEBT). Typically, DEBT is measured as a percentage of GDP, however the comparison does not reveal whether DEBT in under control.

 FRL20 DEBT BAU Model

The FRL20 DEBT BAU model is stable and under control.

FRL20 DEBT AIC Statistics

The Akaike Information Criterion (AIC) statistics for the FRL20 DEBT Models are presented above. Using the AIC, the RW model is best. The other models have overlapping Confidence Intervals so it difficult to pick a second-place model. I imagine that, under uncertainty, policy makers choose BAU or RW but France also has to satisfy the EU.

JAPAN: JP1 Growth and Collapse Forecasts

This page is UNDER CONSTRUCTION.

There are two attractive modes for the Economy of Japan: (1) Growth as a regional player in Southeast Asia (AJ) or (2) Business-As-Usual (BAU, see the JP_LM BAU Model). Each of these "attractive" growth modes are compared to a Random Walk (RW or Muddling Through) in the graphic above.

There are also three Geopolitical Collapse Modes or Japan: (1) AXJ, alignment to the Asia Region without regard for the Japanese economy, (2) US, alignment with the United States and (3) W, alignment with the world-system (displayed above).

You can run the JP_LM BAU model using R-code on my Google site (here). Data is from the Maddison Project.

Notes

• Economy of Japan a highly developed mixed economy. It is known as an East Asian model for its public investment into strategic sectors. Japan is the fourth-largest economy in the world by nominal GDP and the fifth-largest by purchasing power parity (PPP).
• Politics of Japan a framework of a dominant-party bicameral parliamentary representative democratic constitutional monarchy. A hereditary monarch, currently Emperor Naruhito, serves as head of state while the Prime Minister of Japan, currently Sanae Takaichi since 2025, serves as the elected head of government.
• History of Japan The first human inhabitants of the Japanese archipelago have been traced to the Paleolithic, around 38–39,000 years ago.^[1] The Jōmon period, named after its cord-marked pottery, was followed by the Yayoi period in the first millennium BC when new inventions were introduced from Asia. During this period, the first known written reference to Japan was recorded in the Chinese Book of Han in the first century AD.
• Economic History of Japan Deflation in Japan started in the early 1990s. On 19 March 2001, the Bank of Japan and the Japanese government tried to eliminate deflation in the economy by reducing interest rates (part of their 'quantitative easing' policy). Despite having interest rates near zero for a long period, this strategy did not succeed.
• Japanese Economic Miracle a period of economic growth in post–World War II Japan. It generally refers to the period from 1955, around which time the per capita gross national income of the country recovered to pre-war levels, and to the onset of the 1973 oil crisis.
• Geography of Japan  an archipelagic country comprising a stratovolcanic archipelago over 3,000 km (1,900 mi) along the Pacific coast of East Asia. It consists of 14,125 islands. The five main islands are Hokkaido, Honshu, Kyushu, Shikoku, and Okinawa. The other 14,120 islands are classified as "remote islands" by the Japanese government. The Ryukyu Islands and Nanpō Islands are south and east of the main islands.

JP_LM Measurement Model

The JP_LM model has three component state variables that explain 100% of the variation in the indicators. JP1 = (Overall Growth), JP2 = (XREAL-HOURS) an Export-Employment controller and JP3 = (HOURS+XREAL - N) a Population-Export-Employment controller.

JP_LM AIC Statistics

All the Akaike Information Criterion (AIC) statistics have overlapping confidence intervals; models have to be chosen on other criteria.

JP_LM BAU Model

The JP_LM BAU model is unstable but easily stabilized by reduction growth rates (see the JP_LM Model in my Google site).

 

USL20 Poverty-Hardship Forecast

In a prior post (here) I quoted President Trump saying that Poverty numbers were "Great" in the US and presented a forecast of the US Hardship Index (of which Poverty SI.POV.DDA is a component). This might confuse some readers who expected to see actual Poverty data, so I have presented that above with a Forecast and Prediction Intervals. It reaches the same conclusions.

Note

USL20 Poverty Model

USL20 Poverty Model AIC Statistics

 

What Happened to Labor's Share of National Income around 1970 and 2000?

This page is UNDER CONSTRUCTION.

Notes

The Neoclassical Causal Model

 

Why is the US Labor Share in Income Declining and Will It Stop?

This page is UNDER CONSTRUCTION. Your comments and answers to questions would be appreciated. The topic is by no means simple and easy to analyze!

Except for a peak in the year 2000 (graphic above), Labor's Share of national Income (Q/L) in the United States has been consistently declining. There are two outstanding questions: (1) Why? and (2) When will it stop or possibly reverse? This post tests seven State Space models of the US economy to decide which model best explains the decline and forecasts what might happen in the future under each of the different models. The "best" model explains the labor share time paths as a result of inputs from the World System in which the US Economy is embedded.

The competing explanations for the decline in Labor's share are:

• Technological Change Technology can be embedded in the Capital Stock and cheaper Capital can be Substituted for Labor.
• Dynamics of the US Economy Shocks to the economic system (for example, technological shocks) can lead, over time, to changes in Labor's Share.
• Globalization and the World System Labor income can be driven down by cheap global competition and rewards for capital-labor substitution (using the KOF Index of Globalization).

In the graphic at the start of this post, six of the models are compared against a Random Walk, that is, no explanation.

In Neoclassical Economic Theory, Labor's Share of National Income and Capitals's share are constant parameters. At equilibrium, both are constant. Over time, differences can result from shocks and resulting system dynamics.

In Marxist Theory, Labor's share is driven to the subsistence level necessary to reproduce labor. Profit is whatever is left over after subsistence wages are paid.

ChatGPT summarizes it's findings as:

Here is a Causal Diagram of the ChatGPT explanation.

or a Simplified Model:

From the AIC Statistics below, the WL20-Input Model is best. However, the BAU model is a close second and the confidence intervals overlap.

Notes

Questions

1. What policy measures (if any) would you recommend to address the decline in Labor's Share of National Income?
2. Develop the Causal Diagram above in Neoclassical From (see see this post).
3. Derive the Simplified model of Labor's share from the Causal Diagram above using Loop Reduction Rules.
4. In the references below, do you find the World System mentioned directly or just indirectly? Do you think this is an important omission?
5. Is it necessary to go on to test the structural models (Solow-Swan vs. Marx-Ricardo) to understand the decline in Labor'ss Share?

References

NY Times (Sep 7, 2026) Why is Labor's Share of National Income Declining Is Technology the most important factor?

BLS, Second Quarter 2026, Revised, Economic News Release Labor productivity by sector

IMF (2017) What Explains the Decline of the U.S. Labor Share of Income? An Analysis of State and Industry Level Data we find that in addition to changes in labor institutions, technological change and different forms of trade integration lowered the labor share. In particular, the fall was largest, on average, in industries that saw: a high initial intensity of “routinizable” occupations; steep declines in unionization; a high level of competition from imports; and a high intensity of foreign input usage.\

NBER (2018) Is Automation Labor-Displacing? Productivity Growth, Employment, and the Labor Share We find that automation displaces employment and reduces labor's share of value-added in the industries in which it originates (a direct effect).

BLS (2020) Assessing the Impact of New Technologies on the Labor Market: Key Constructs, Gaps, and Data Collection Strategies for the Bureau of Labor Statistics Private and public decisions related to labor markets and working conditions are increasingly being influenced by technological considerations. Spurred by a wave of technological developments related to digitization, artificial intelligence (AI), and automation, governments around the world have declared that the creation and deployment of these technologies present both important opportunities and challenges to their citizens.

AER (2022) The Decline of the Labor Share: New Empirical Evidence We use time series techniques to estimate the importance of four main explanations for the decline of the US labor income share: rising firm markups, falling bargaining power of workers, higher investment-specific technology growth, and more automated production processes ... Our results point to automation as the main driver of the labor share.

 

Wikipedia Links

• Solow-Swan  an economic model of long-run economic growth. It attempts to explain long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity largely driven by technological progress. At its core, it is an aggregate production function, often specified to be of Cobb–Douglas type, which enables the model "to make contact with microeconomics".
• Marxian Economics  a heterodox school of political economic thought. Its foundations can be traced back to Karl Marx's critique of political economy.
• Ricardo: Iron Law of Wages a proposed law of economics that asserts that real wages always tend, in the long run, toward the minimum wage necessary to sustain the life of the worker. The theory was first named by Ferdinand Lassalle in the mid-nineteenth century. Karl Marx and Friedrich Engels attribute the doctrine to Lassalle (notably in Marx's 1875 Critique of the Gotha Program), the idea to Thomas Malthus's (1798) An Essay on the Principle of Population, and the terminology to Goethe's "great, eternal iron laws" in Das Göttliche.
• Akaike Information Criterion (AIC) an estimator of prediction error and thereby relative quality of statistical models for a given set of data. Given a collection of models for the data, AIC estimates the quality of each model, relative to each of the other models. Thus, AIC provides a means for model selection.
• Labor's Share the wage share or labor share is the part of national income, or the income of a particular economic sector, allocated to wages (labor). It is related to the capital or profit share, the part of income going to capital, which is also known as the K–Y ratio. The labor share is a key indicator for the distribution of income.

Solow-Swan

In the Solow-Swan Neoclassical economic model, wages (W) and profits (R) have fixed parameters in the model, w and r respectively.

Marx-Ricardo

In the Marx-Ricardo model, the Iron Law of Wages determines that, in the long run, the wage parameter, (w), is fixed at the level of subsistence as a result of market pressure and capitalist exploitation.

AIC Statistics

In terms of the AIC Statistics (smaller is better), the best model takes the World System (WL20 model) as input.

TECHE Forecast: Union Membership

Union Membership is forecast to be zero around 2060 as a result of Technical Efficiency Changes (TECHE). However,

There is not a lot of separation between the model AIC Statistics (above) and their confidence intervals.

TECHE Forecast: KOF Globalization

The KOF Index of Globalization is forecast to continue growing beyond 2100.

USL201 Forecast: W Index

The WL20 Model is in growth-and-collapse mode and is forecast to peak after 2050.