The curses of Idleness and Want

March 11, 1994|By Robert Kuttner

MONDAY, President Clinton will host an international summit on jobs in Detroit, to be attended by ministers from seven leading industrial nations. There are now over 30 million people unemployed in Western Europe and North America.

Supposedly, the United States is doing relatively well, with "only" 6 percent to 7 percent joblessness, depending on how you count, compared with over 10 percent in Europe.

Where the United States is not doing so well, however, is in the growth of wages and hence living standards. Average productivity has been increasing smartly, thanks to new technology, but average wages have not even kept up with inflation.

The job summiteers might prepare by reading a classic work published 50 years ago this June -- William Beveridge's "Full Employment in a Free Society."

Beveridge served in Winston Churchill's wartime government. Britain, like America, had experienced very high unemployment in the 1930s -- and abruptly attained full employment thanks to World War II. Beveridge hoped that in peacetime, society could remain at full employment through a judicious combination of public investment, management of demand, retraining, labor mobility, wage restraint, social supports and the reduction of working time.

"Only if there is work for all is it fair to expect working people, individually and in trade unions, to cooperate in making the most of all productive resources and to forgo restrictionist practices. . . .

"Idleness is not the same as Want, but a separate evil," Beveridge wrote. "Idleness, even on an income, corrupts; the feeling of not being wanted demoralizes.

"Yet another reason [for full employment] is the stimulus to technical advance that is given by shortage of labor. Where men are few, machines are used to save men for what men alone can do. Where labor is cheap it is often wasted on brainless, unassisted toil."

Taken in its entirety, Beveridge's blueprint for peacetime prosperity eloquently explains why full employment must be the centerpiece of other economic and social goals.

In many circles these views seem archaic. As before World War II, many serious people now think 6 percent unemployed is the best our economy can do without triggering inflation; they also think unemployment is the result of excess wages, even though real wages have lagged behind productivity growth.

The Federal Reserve, for one, tends to see inflation around the next corner, and predictably raises interest rates with the first buds of prosperity. That frightens the bond market, which reacts by bidding rates up further.

The recovery becomes self-canceling, reinforcing the conventional view that full employment is unattainable. When it turned out that growth in the last quarter of 1993 was a healthy 7.5 percent -- normal for the first flush of recovery -- the response in the money markets was gloom rather than celebration.

With a global economy, achievement of full employment is admittedly a more complex enterprise than in Beveridge's day. On the plus side, the global market transforms the relationship of unemployment to inflation (contrary to what the Fed thinks). Economic recovery no longer threatens wage inflation, for domestic wages are restrained by competition from lower-wage workers abroad.

On the minus side, low-wage competition means workers in advanced countries are denied the fruits of their productivity, because desperately poor workers are available to do the same jobs at lower pay.

Nations which export freely to the industrial democracies often commit labor practices illegal in the West -- exploitation of child labor, bans on free unions and use of prison labor or indentured servitude. U.S. law requires trading partners to have minimally decent labor standards, but enforcement is token.

The danger is that the jobs summit will conceive its task too narrowly, emphasizing education and training but not the broader issues. The administration plans to tout its proposed "Re-employment Act," a creative effort to re-target unemployment compensation funds so that subsidies are spent giving idle workers new skills.

Mr. Clinton deserves credit for highlighting the issue of jobs. But training is only part of a solution to the jobs problem.

Full employment at rising real wages also entails getting the Fed behind the enterprise (President Clinton's ability to fill two currently empty seats should help). It requires raising labor standards in the Third World, so that global wages don't converge downward.

As it happens, Mr. Clinton is considering an invitation to address the 75th anniversary meeting of the International Labor Organization (ILO) in Geneva next June. The ILO does heroic work improving wages, working conditions and worker rights worldwide.

Mr. Clinton plans to be in Europe, marking the 50th anniversary of D-Day. In their own way, the two anniversaries marking the Beveridge report and the founding of the ILO are as noteworthy as that of the Normandy invasion.

The president could remind us that World War II was not just about defeating fascism. It was about showing that a free society could also win the war against Beveridge's twin curses of Idleness and Want.

Robert Kuttner writes a column on economic matters.

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