economic conundrum. Put simply, the United States confronts the 'one-price law.'
Whenever identical items sell for different prices, the one-price law tells us that people will buy in the low-priced market and sell in the high-priced one until prices converge at a single point for the two markets.
Since our workers receive relatively high wages compared with much of the rest of the world, this rule implies that America can preserve its wages only if it has better goods and better workers, or protects itself with market barriers such as tariffs.
If, in our zeal to maintain competitiveness, we rely primarily upon market forces, we will surely hasten economic decline for the two-thirds of our workers who have become the visible manifestation of the one-price rule in global labor markets.
Thomas Friedman's now famous argument that the world has grown flatter holds that almost all market barriers have disappeared, leaving in their stead a 'flat world.' According to Friedman, America's success depends upon major investments in science, engineering and education. His is a better-workers-and-products strategy.
Although he overstates the extent to which access to knowledge has been democratized, Friedman is nonetheless correct that the Western world's monopolization of leading-edge production technologies is slipping. This threatens even the middle classes, who had regarded themselves as exempt from the one-price rule. Ford's restructuring will hit many white-collar workers almost as severely as it does those who labor on the production lines.
Yet, following Friedman's advice that the nation invest in science - as important as this is - will not be sufficient. We have seen little evidence that technology alone improves the lot of the working class. Cellphones, video games and digital TV are poor substitutes for decent housing, civil neighborhoods, adequate health services and good food, all of which are difficult to obtain for substantial portions of the American population. It often seems as if new technologies are designed to lull those who have them into a sleep that prevents them from seeing they, too, can be swept into the economic maelstrom of the one-price law.
Education, as crucial as it is, is also not enough. Degrees alone will not create jobs for those displaced by technology, especially when the rest of the world is dramatically increasing its expenditures on schooling. America can't afford to ignore education and technology, but it can't afford to ignore its workers' immediate needs, either.
For the past 25 years, world leaders have been enamored of markets and flexibility. Their economic strategy has been to increase competitiveness through social insecurity.
This misguided strategy asks workers to accept increased risks for their old-age security at a time when the economic environment in which they labor has grown extremely shaky. Likewise, in the name of efficiency, it also discourages the enforcement of workplace regulations such as those that should have protected the West Virginia miners. To create flexibility, the U.S. and other countries continue to undermine labor laws protecting workers' rights to organize.
As union power has declined, the lobby for worker security has become ever less effective. America cannot afford to have labor's legitimate concerns brushed aside in the name of competitive strategies that have so far failed miserably.
We cannot afford to lose labor's voice because it alone will insist that trade and technology be used to generate funds that ease the social transitions of a dynamic market.
Strong labor movements in many European countries ensure that their nations' governments assume greater responsibility for jobless benefits, retraining and family leave. Even if this entails higher levels of unemployment, they pursue a 'high road' strategy to support productive, long-term investments in families.
Dismantling the labor standards that protect our least-advantaged citizens is a strategy that surrenders the price of labor. Our goal instead must be to see the rest of the world rises to our standards.
[Dan Jacoby holds the UW Harry Bridges Chair of Labor Studies at the University of Washington, Bothell. A conference on 'Labor, Knowledge and the Economy' is being organized for fall 2006.]
Copyright 2006 The Seattle Times Company
View the original hereSocial Insecurity is Not a Viable Economic Strategy
Ford Motor Company's new restructuring plan, calling for layoffs of 30,000 workers, once again reminds us of America's economic conundrum. Put simply, the United States confronts the 'one-price law.'
Whenever identical items sell for different prices, the one-price law tells us that people will buy in the low-priced market and sell in the high-priced one until prices converge at a single point for the two markets.
Since our workers receive relatively high wages compared with much of the rest of the world, this rule implies that America can preserve its wages only if it has better goods and better workers, or protects itself with market barriers such as tariffs.
If, in our zeal to maintain competitiveness, we rely primarily upon market forces, we will surely hasten economic decline for the two-thirds of our workers who have become the visible manifestation of the one-price rule in global labor markets.
Thomas Friedman's now famous argument that the world has grown flatter holds that almost all market barriers have disappeared, leaving in their stead a 'flat world.' According to Friedman, America's success depends upon major investments in science, engineering and education. His is a better-workers-and-products strategy.
Although he overstates the extent to which access to knowledge has been democratized, Friedman is nonetheless correct that the Western world's monopolization of leading-edge production technologies is slipping. This threatens even the middle classes, who had regarded themselves as exempt from the one-price rule. Ford's restructuring will hit many white-collar workers almost as severely as it does those who labor on the production lines.
Yet, following Friedman's advice that the nation invest in science - as important as this is - will not be sufficient. We have seen little evidence that technology alone improves the lot of the working class. Cellphones, video games and digital TV are poor substitutes for decent housing, civil neighborhoods, adequate health services and good food, all of which are difficult to obtain for substantial portions of the American population. It often seems as if new technologies are designed to lull those who have them into a sleep that prevents them from seeing they, too, can be swept into the economic maelstrom of the one-price law.
Education, as crucial as it is, is also not enough. Degrees alone will not create jobs for those displaced by technology, especially when the rest of the world is dramatically increasing its expenditures on schooling. America can't afford to ignore education and technology, but it can't afford to ignore its workers' immediate needs, either.
For the past 25 years, world leaders have been enamored of markets and flexibility. Their economic strategy has been to increase competitiveness through social insecurity.
This misguided strategy asks workers to accept increased risks for their old-age security at a time when the economic environment in which they labor has grown extremely shaky. Likewise, in the name of efficiency, it also discourages the enforcement of workplace regulations such as those that should have protected the West Virginia miners. To create flexibility, the U.S. and other countries continue to undermine labor laws protecting workers' rights to organize.
As union power has declined, the lobby for worker security has become ever less effective. America cannot afford to have labor's legitimate concerns brushed aside in the name of competitive strategies that have so far failed miserably.
We cannot afford to lose labor's voice because it alone will insist that trade and technology be used to generate funds that ease the social transitions of a dynamic market.
Strong labor movements in many European countries ensure that their nations' governments assume greater responsibility for jobless benefits, retraining and family leave. Even if this entails higher levels of unemployment, they pursue a 'high road' strategy to support productive, long-term investments in families.
Dismantling the labor standards that protect our least-advantaged citizens is a strategy that surrenders the price of labor. Our goal instead must be to see the rest of the world rises to our standards.
[Dan Jacoby holds the UW Harry Bridges Chair of Labor Studies at the University of Washington, Bothell. A conference on 'Labor, Knowledge and the Economy' is being organized for fall 2006.]
Copyright 2006 The Seattle Times Company
View the original here
![]()
email2friend
economic conundrum. Put simply, the United States confronts the 'one-price law.'
Whenever identical items sell for different prices, the one-price law tells us that people will buy in the low-priced market and sell in the high-priced one until prices converge at a single point for the two markets.
Since our workers receive relatively high wages compared with much of the rest of the world, this rule implies that America can preserve its wages only if it has better goods and better workers, or protects itself with market barriers such as tariffs.
If, in our zeal to maintain competitiveness, we rely primarily upon market forces, we will surely hasten economic decline for the two-thirds of our workers who have become the visible manifestation of the one-price rule in global labor markets.
Thomas Friedman's now famous argument that the world has grown flatter holds that almost all market barriers have disappeared, leaving in their stead a 'flat world.' According to Friedman, America's success depends upon major investments in science, engineering and education. His is a better-workers-and-products strategy.
Although he overstates the extent to which access to knowledge has been democratized, Friedman is nonetheless correct that the Western world's monopolization of leading-edge production technologies is slipping. This threatens even the middle classes, who had regarded themselves as exempt from the one-price rule. Ford's restructuring will hit many white-collar workers almost as severely as it does those who labor on the production lines.
Yet, following Friedman's advice that the nation invest in science - as important as this is - will not be sufficient. We have seen little evidence that technology alone improves the lot of the working class. Cellphones, video games and digital TV are poor substitutes for decent housing, civil neighborhoods, adequate health services and good food, all of which are difficult to obtain for substantial portions of the American population. It often seems as if new technologies are designed to lull those who have them into a sleep that prevents them from seeing they, too, can be swept into the economic maelstrom of the one-price law.
Education, as crucial as it is, is also not enough. Degrees alone will not create jobs for those displaced by technology, especially when the rest of the world is dramatically increasing its expenditures on schooling. America can't afford to ignore education and technology, but it can't afford to ignore its workers' immediate needs, either.
For the past 25 years, world leaders have been enamored of markets and flexibility. Their economic strategy has been to increase competitiveness through social insecurity.
This misguided strategy asks workers to accept increased risks for their old-age security at a time when the economic environment in which they labor has grown extremely shaky. Likewise, in the name of efficiency, it also discourages the enforcement of workplace regulations such as those that should have protected the West Virginia miners. To create flexibility, the U.S. and other countries continue to undermine labor laws protecting workers' rights to organize.
As union power has declined, the lobby for worker security has become ever less effective. America cannot afford to have labor's legitimate concerns brushed aside in the name of competitive strategies that have so far failed miserably.
We cannot afford to lose labor's voice because it alone will insist that trade and technology be used to generate funds that ease the social transitions of a dynamic market.
Strong labor movements in many European countries ensure that their nations' governments assume greater responsibility for jobless benefits, retraining and family leave. Even if this entails higher levels of unemployment, they pursue a 'high road' strategy to support productive, long-term investments in families.
Dismantling the labor standards that protect our least-advantaged citizens is a strategy that surrenders the price of labor. Our goal instead must be to see the rest of the world rises to our standards.
[Dan Jacoby holds the UW Harry Bridges Chair of Labor Studies at the University of Washington, Bothell. A conference on 'Labor, Knowledge and the Economy' is being organized for fall 2006.]
Copyright 2006 The Seattle Times Company
View the original hereThe URI to TrackBack this entry is: http://www.solidarityeconomy.net/2006/09/27/social-insecurity-is-not-a-viable-economic-strategy/trackback/
3 Responses to “Social Insecurity is Not a Viable Economic Strategy”
Leave a Reply
Please note: Comment moderation is currently enabled so there will be a delay between when you post your comment and when it shows up. Patience is a virtue; there is no need to re-submit your comment.
[SolidarityEconomy.net is proudly powered by WordPress.]
Dan Jacoby is right that in the last 25 years or so the emphasis on deregulation has allowed speculative capital to run free has been highly destructive and that Friedman´s perspective is highly simplistic. However, he misses the point on Labor´s role in dealing with the situation. Labor´s response should not be simply to ¨ensure that their nations’ governments assume greater responsibility for jobless benefits, retraining and family leave¨. It should be to take the lead in actively creating a society that does those things, by first and foremost ensuring that we have an economy that is competitive, technologically advanced and based on a High Road vision of development.
Jacoby looks to Unions in Europe longingly because they pressure their governments for social services, etc. but they also take a much more active and important role. There unions strike when they don’t like their company’s business plan. They see it not only as a being practical but also as being their duty. That means GM and Ford workers should strike not over pay or firings, but over things like a short term business model that depends on selling in-efficient cars. That is, unions should take direct responsibility for the character and nature of the economy, their industries and companies, not expecting the government to do it for them. All of this in the context of developing educational institutions, technology, etc. The important thing is that Labor take the lead in doing these things and that it reach it out to the portions of the business sector that want to do the same.
I agree with arrasate. The new economy means a new role for labor… but it also means a new role for government as well.
Labor should encourage the state to take a much more active role in the economy – not through price-fixing or direct management of enterprises – but in wealth creation in general.
For example, why shouldn’t the state (at any level of government) set up investment funds that can provide patient capital to small business start-ups, expansions and networks of businesses?
The key to a high performance/low unemployment/high standard of living economy is effective wealth redistribution in the context of a dynamic, entrepreneurial High Road business sector (private, co-op, hybrid, etc.).
Right now most of the debate about government’s role focuses on providing incentives (usually tax breaks) to big companies (generally a multinational)that choose to locate in one state and not the other.
The return on investment for the state in question here is dubious at best. This kind of focus ignores where most employment is created: in small and medium businesses with less than 500 employees.
A tax credit means much less to these businesses than an effective workforce development system, a technology-transfer infrastructure, support for expanding capacity, training existing employees, expanding into new markets, networking with other companies.
Then there’s the issue of succession: the majority of businesses are privately held, which means the owner or owners will want to retire… in the majority of cases they have no succession plan. This provides labor and communities with an opportunity to step into wealth creation directly and root productive assets locally. (A change in the social relations of production on a small scale?)
The form (co-op & ESOP) exists, but an adequate supply of patient capital and technical assistance to help in the development of high performing, democratic workplaces is in short supply.
I agree, but here’s two additional pointa.
1. The principle of ‘subsidiarity’ shoul apply, meaning keep the state’s role at the lowest level of government practical–say counties, or metro areas, or bioregions. Of course, some things require national and global regulation and investment intervention, but the principle still applies.
2. Right wing talk radio, and some libertarian economists, argue that government creates nothing of value itself, but only employs others, less efficiently, to do so. They’re wrong on both counts. First, government can and does create value– information in myriad forms, some quite valuable and obtainable in no other practical way, information that can in turn be used to create further wealth and health for the common good. Second, many infrastructures, especially those of high design and sustainability, are beyond the reach of private firms in pulling together the overal project. I’m thinking of China’s recent joint effort with several European alliances to build 10 or 20 brand new futuristic, medium-sized ‘eco-cities’ to handle a rural population displaced by the inductialization of agriculture.