Pauperizing Workers to Gain Efficiency


February 18, 1993|By WILLIAM PFAFF

MINNEAPOLIS — Minneapolis.--The international economic competition of the past decade has proved a competition in terminating jobs and reducing living standards -- or so it seems to many Americans, who have come to think they can only win by losing. The same realization is only now beginning to come to Europeans.

The fundamental question both the Clinton administration and the American economy confront is this: Can social justice and competitive economic success be reconciled in today's world? In the U.S. during the past 12 years the answer has been no. Jobs have been lost, benefits cut or negotiated away, wage sacrifices demanded, all in the name of productivity and competitiveness.

The result has been U.S. productivity gain -- on paper, at least -- but relative decline not only in living standards but in the American international economic position. At the same time, the three countries that have done best in international competition all are countries with very high levels of social protection.

Germany has possibly the most comprehensive social insurance system in the world today, and even after the shock of reunification, the German economy remains highly competitive and productive.

The French have comprehensive quasi-governmental health insurance, government-guaranteed retirement income, universal free education that extends from day-care centers for pre-schoolers to university graduate school. Yet the French economy by most criteria is in better shape than any other in Europe.

The Japanese situation is more complex than in Europe, since high levels of social and job security in the major industrial groups are accompanied by much insecurity in the secondary economy.

But can these countries go on protecting their people while out-competing the United States? The difficulties are increasing. Official unemployment rates are higher in western Europe than in the United States, and the costs of social insurance systems increasingly strain government budgets, even though rates of taxation are much higher in Europe than they are in the United States -- and will still be higher even after the American tax rises President Clinton has promised.

Moreover, social costs are working against industry in the high-insurance countries. The French now are talking about ''social dumping,'' which is the deliberate transfer of employment from countries with high social charges and taxes, and strict rules on how labor is treated, to countries willing to supply low-cost labor and negotiate reduced benefits. Britain is at odds with the Continental countries even now over the ''social charter'' included in the new Maastricht Treaty on further European unification.

The social charter attempts to equalize labor practices and working conditions across Europe. Britain has refused to accept this. (The Labor Party challenges the Conservative government on this, but alone cannot block the decision.)

The need for something like a social charter is also what Bill Clinton was talking about during the presidential campaign. He said that different labor practices and environmental controls inside the North American Free Trade Area could send North American jobs -- and environmental pollution -- to Mexico, where standards are lower.

This is a serious matter that until now has not been treated as a general problem of the advanced industrial economies. Productivity increase and economic rationalization is supposed to benefit all voters, not just stockholders and managers. If it is achieved through pauperizing workers and reducing popular living standards, there will eventually be a terrible political backlash.

Certainly in western Europe, where the Social Democratic and Social Christian traditions are powerful, governments cannot long tolerate being made the victims of social dumping. If this continues, it will prove a much more powerful motive for protectionism and a ''fortress Europe'' than agricultural export rivalries or aerospace competition.

Thus everyone has an interest in a social charter covering all the advanced industrial countries, just as common environmental standards are needed (for peculiar reasons, a more popular argument these days; but are trees more important than people?).

Productive economic competition comes from technological improvement and rationalized industry. The unemployed are not productive, and increasing the number of jobless is not the way for a country to grow richer. Nor is impoverishing those still with jobs through cutting wages and benefits a socially acceptable form of productivity increase.

The advanced economies need a level social playing field, to adapt a slogan from the Reagan years. There needs to be an internationally agreed standard of working conditions if the countries that have high levels of social protection are to be able to keep that protection, and if the United States is to bring itself up to the standards of its competitors.

William Pfaff is a syndicated columnist.

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