The Morality of Economic Choices

WILLIAM PFAFF

September 13, 1993|By WILLIAM PFAFF

London. -- The underlying issue is moral in today's debate over economic policy and tariff reductions. It is a moral decision to treat wage levels and employment as neutral factors in the functioning of the marketplace. It is equally a moral decision when a government intervenes in the market to protect wages or create jobs.

The moral aspect of economic policy choice is gaining increased attention. It was a subject of discussion in the economic section of the recent annual conference of the British Association for the Advancement of Science.

The moral position of the market economist may be described as attributing positive moral value to amorality. It holds that the introduction of moral considerations into the marketplace distorts the market's workings and therefore does harm. The critic of the market economist would say that economic policy is a means to ends that must be defined in terms of social and political values.

The critic might also say that if in today's circumstances national competitiveness is to be sought through lowering wages and increasing unemployment, with accompanying human suffering, this is a moral choice as well as an economic one. The difficulties posed for society cannot be resolved by the simple assertion that increased competitiveness all round and lowered tariffs everywhere will produce greater human happiness in the longer term. This cannot be proved. It is an argument based on a theory.

The current public-policy debate takes place between a new orthodoxy that demands restrictive economic policies to reduce inflation, plus free trade to produce competitiveness -- at the immediate cost of falling employment and production -- and advocates of a Keynesian policy that would promote growth, demand and production.

The orthodox say theirs is a necessary economic therapy that will produce jobs and prosperity tomorrow. The Keynesians say that growth can be created without the inflation that accompanied growth and expansion in the 1970s and 1980s (although not in the 1950s and 1960s). Both sides can cite evidence for their views, but neither can prove its case.

The orthodox say that in international trade, lifting trade barriers and increasing competition between low-wage and high-wage economies will benefit both by causing both to grow. This again is theory. History shows high growth occurring both in protected and open economies. The U.S. was a high-tariff country until after World War II. Britain became the dominant world industrial power in the 19th and early 20th centuries behind a protectionist system of imperial preference. Protectionism, on the other hand, is generally held to have worsened, if not caused, the Great Depression of the 1930s.

The director of information at GATT, David Woods, said recently, in answer to an earlier column of mine, that ''If companies need to cut their wages to meet the competition, it may be that they are uncompetitive. It may also mean that they are in the wrong business.''

Are IBM, GM, Boeing, Volkswagen, Mercedes-Benz and most of America's airlines in the wrong business? All recently made huge cuts in labor force. The Japanese Labor Ministry has just announced that Japanese industry needs to cut as many as 1.7 million jobs. Are the Japanese in the wrong businesses?

All may be uncompetitive, but uncompetitive by comparison with whom, and according to what standard? Overall Japanese wage-levels certainly are uncompetitive with those of mainland China or Malaysia or Indonesia. West European social-security costs make European wages uncompetitive with those of Japan. Wages in U.S. and Canadian industry are uncompetitive with those in Mexico.

The moral issue involved in these economic policy choices is that of ends versus means, one of the most difficult and dangerous of moral problems. What harm are we permitted to inflict in the short term in order to do good in the long term, when the harm is concrete and immediate, and the causal relationship between the short-term harm and the long-term good merely a plausible hypothesis?

The trouble with hypotheses is obvious. Leninism justified dictatorship, induced famine with the deaths of millions, committed mass imprisonments, murders and vast population transfers, all on the basis of a theory that said these measures were necessary in order to make everyone happy in the future. Millions found this a plausible hypothesis, at least for a time -- including hundreds of thousands of well-meaning Western academics, intellectuals and workers.

I believe that the sound general rule is to do as little as possible concrete and immediate harm. Obviously one makes policy on the basis of a theory about a policy's consequences. But the theory is not a reality. Reality is what exists around us. Reality is that the industrial nations in general are experiencing stagnant or falling living standards and the highest levels of unemployment since the Great Depression. Our obligation would seem to me to be to deal with that, within a time-frame meaningful to those alive today.

William Pfaff is a syndicated columnist.

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