Lhe Minister of the Economy, Bruno Le Maire, aroused the ire of employers at the end of August by planning to spread the reduction in “production” taxes already promised. The publication of the national accounts for 2022, on August 31, partly explains this decision: companies have now overcome the shock due to Covid-19 and regained their dynamism. Above all, they benefit – like the State – from inflation. Indebted on average for long periods and at fixed (and low) rates, non-financial companies are seeing their real debt reduced thanks to “surprise” inflation, which is increasing their nominal income, and not their repayments. This has gone from more than 81% of GDP at the start of 2022 to 79.4% in mid-2023, even though they have contracted new loans, i.e. a gain of around 3% in added value for companies. Despite the rise in interest rates, even new borrowings still benefit from real rates close to zero, or even negative (even if their effective real rate will depend on inflation over the next few years).
Like any inflationary episode, the one we are experiencing therefore has winners and losers, and companies are (on average) part of the winning side. This is not the first time, even if we have somewhat forgotten it with the disappearance of inflation since the 1980s.
During other periods of higher inflation, the increase in the general level of prices had a positive, and unintended, effect on investment and growth. In the 1920s, when everyone was lamenting the fall of the franc, companies took great advantage of it by strongly increasing their exports and investing massively. Nevertheless, some favored the distribution of dividends to shareholders, to the detriment of the strengthening of their equity and their productivity, and found themselves weakened at the beginning of the crisis of the 1930s.
Learning from these mistakes, a different model was chosen in the 1950s. of the vast newly nationalized infrastructure sector (railways, energy), highly indebted – but also that of the private sector. The collective political choice was to favor investment over dividends, so that growth made it possible to increase wages without cutting into profits. Domestic demand could then replace exports as the main driver of growth.
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