Article at a glance:
Although France and Germany have enjoyed decades of rising prosperity, the cost of their social programs makes it harder to balance their budgets. In this 1997 report, the McKinsey Global Institute compared productivity, employment, and output in Europe's two largest economies with global benchmarks. The study examined economic performance at the national level as well as within key industries, including automotive, housing construction, telecommunications, and retail banking.
The take-away
The economic performance of France and Germany lagged behind that of their best-practice rivals, in part because policies inspired by their social goals have raised barriers to growth and employment. The two countries would serve these social goals more successfully by adopting economic policies that focus on growth.