Workers' paradise? Kenneth Rogoff The GUARDIAN / January 13, 2008 2:00 PM
http://commentisfree.guardian.co.uk/kenneth_rogoff/2008/01/workers_paradise.html Will the political resurgence of labour unions throw a wrench into the wheels of globalisation? Or will their growing strength serve to make globalisation more sustainable by fostering great equality and fairness? One way or the other, unions stand as a major wild card for the evolution of our economic system in 2008 and beyond. Unions' rising influence is evident in many recent events: the German chancellor Angela Merkel's controversial deal to raise minimum wages for postal employees; several American presidential candidates' open misgivings about trade and immigration; and the Chinese leadership's nascent concerns about labour standards. Along with their political clout, unions' intellectual respectability is also experiencing a renaissance. After decades of vilification by economists for raising unemployment and strangling growth, the union movement is now receiving backing from thought leaders such as Paul Krugman, who argues that stronger unions are needed to counter globalisation's worst excesses. The sudden emergence of unions as a political force is particularly surprising in the United States, where private-sector union membership has fallen from 25% in 1975 to 8% today. From high-tech Google to mass retailer Wal-Mart, US companies have found ways to keep their shops union-free. Only the public sector, where the membership rate is 35%, has remained a union bastion. One of my best friends from childhood married a union organiser who found it so difficult to land a job in the US that he eventually moved his family to strike-happy Canada. Today, US political leaders such as the congressman Barney Frank want to bring back unions. But there is good reason to be sceptical. For a relatively poor country like China, real unions could help balance employers' power, bringing quality-of-life benefits that outweigh the growth costs. Factory conditions in parts of China are all too reminiscent of the early 20th century, pre-union US. Thousands of Chinese workers die each year in coal mines that sometimes lack basic safety precautions. But, for the US and rich countries in Europe, the argument that stronger unions would bring more benefits than costs is far more dubious. Nowadays, most workers already have legal and statutory rights that cover the basic protections that unions originally fought for a century ago. Instead, union influence today all too often serves to promulgate inflexible work practices and flat salary structures that do not adequately reward work effort and skill. It is no surprise that the public sector, where productivity is low and fiscal constraints soft, typically has the greatest union concentration. Teachers' unions, especially, are a catastrophe, blocking any rationalisation or improvement of many countries' education systems. Before the modern globalisation era, unions could thrive by organising on a national scale, giving them enormous [!!!] bargaining power vis-a-vis both employers and consumers. Now, after the explosive post-war expansion of global trade, most unions have seen their monopoly power eroded, if not shattered. That is why unions throughout much of the developed world have been fighting so hard to block free-trade negotiations that might erode their position further. Some of the issues that unions are promoting, such as human rights and environmental quality, are unassailable. When they try to connect these issues with trade, however, their motives become questionable. A case in point is union lobbying against the US-Colombia free-trade agreement, ratification of which would greatly advance US-Latin American relations. Legitimate questions about how the Colombian government conducted its epic civil war with drug-financed rebels do not trump broader issues. So anti-pact activists have complained that Colombia is anti-union because it does not protect union members from rebel violence. Yet the Colombian government notes that all Colombians suffer from rebel violence - union members actually experience less of it than the rest of the population. Unfortunately, this play is being re-enacted across a host of trade issues, including many involving China. For rich countries, income redistribution is much better handled through taxes and benefits system, rather than by government edicts to strengthen unions. The rich today pay so little in taxes in many countries, that it would be a big improvement simply to move to a flat tax, with a very high exemption level so that lower-income families pay nothing. For middle-income countries, it is a tougher call. But here, too, increasing workers' legal and statutory rights, while allowing most unions to fade away, seems like the right approach. Unfortunately, we are far more likely to see unions' growing political influence become a major destabilising force in trade and growth, with highly uncertain consequences. When we see political leaders in many rich countries pander to unions by bashing each other on free trade and immigration, there is every reason to worry about trouble ahead. That is why unions will be one of the main economic wild cards in 2008. [I feel I have to dust off an old cliché: this is a pack of lies.] -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante.
