political revue

Year XXXVI, 1994, Number 2 - Page 138




 The European economy is going through a critical phase. Despite considerable growth, above all in the second half of the 80s, it must now deal with an extremely serious unemployment crisis. Even the most optimistic forecasts estimate growth rates of 2 or 3% for the coming years, insufficient to create the jobs needed to provide good prospects and a bright future for young Europeans.
Thanks to the contribution of Asian countries and those from other areas that have entered a period of tremendous growth, the world economy has on the other hand registered sustained growth. Throughout Europe the search is underway to identify the means to adapt European countries’ productive structures to the new rules of the world market. This phase of economics is profoundly different to the experiences of the past, in particular with regard to the effects of inflation and private consumption on economic growth.
Growth and inflation.
From the 1970s on, the advanced economies, and in particular European ones, have no longer conformed to Phillips’ correlation between inflation and economic growth.[1]
Inflation no longer fulfils the role of economic stimulator that had been noted in the past, and a new term has been introduced into the economic lexicon to express the simultaneous existence of inflation, and slow economic growth: “stagflation”.
This change has not been analysed in detail by economists and seems even now a marginal subject in economic research. With the reappearance of recession in Europe, many economists have suddenly rediscovered the idea that an accommodating monetary policy, which allows for a certain increase in the inflation rate, is a suitable recipe for overcoming the current difficulties, without on the other hand taking into account the experience of stagflation that has characterised recent cyclical phases in the European economy.
The lack of research into the causes of stagflation makes it difficult to analyse the changes which have come about in economic behaviour, and which lie at the root of the new situation, and, as a result, to establish whether these are long-term causes. One hypothesis observes how, precisely in the period that inflation was losing its role of economic “elixir”, there occurred a strong shift of financial wealth away from firms and the state toward households, and how this phenomenon is more pronounced in Europe than the United States.
Households began to establish increasing amounts of savings, which they then placed at the disposal of firms and the state through the financial markets, which, in turn, became increasingly more integrated at the international level. While until the 1970s most people were relatively indifferent to inflation, from that moment on the defence of the real value of savings became the goal for increasing numbers of households, until there was a diffuse, pan-European demand for monetary stability. The German Bundesbank was the first central bank to establish a policy of monetary stability; this was in keeping with the fundamental interests of the German people, whose average age was rising rapidly, to safeguard its savings and above all to maintain the purchasing power of pensions. This policy of monetary stability later came to be an essential condition for the realisation of a single European currency, institutionalised in the Maastricht Treaty along with the constitutional innovation of the independence of Europe’s future central bank.
There have been proposals to re-launch the European economy by relaxing the fight against inflation, many of them put forward during the summer of 1993, particularly on the occasion of the crisis in the EMS. Such proposals were also given significant backing by numerous American Nobel prize-winners, but fortunately they were not followed up, and the presentation of the Delors report on “Growth, Competitiveness and Employment” marked the definitive end of all illusions of a quick fix for European economic recovery. In this way the idea that monetary stability is a requirement for European economic development, and that only the swift implementation of a European currency can allow a policy of low interest rates, above all long-term ones that are decisive for investment, has become the consensus.
Growth and private consumption.
The European economy can hope to achieve sustained growth again if it is able to export products and services to the emerging countries.
The possibility of increasing consumption in Europe, particularly of durable goods such as electrical appliances, cars, televisions and so on, is by now limited because the market is saturated and so demand tends to be stable. In addition, environmental and ecological constraints are becoming increasingly tight. Only collectively-used services, such as education, culture, sport, and the quality of living, show increased demand, as do advanced services, such as telecommunications and transport.
The trend toward privatising the agencies and businesses that operate in this field indicates how it is necessary to decentralise costs directly onto the families in all households where the market can function, given the additional fact that technology has now broken the monopolistic barriers in many sectors that previously could be run only by a public operator. The other emerging trend in this period, federalism (particularly fiscal federalism), that decentralises public expenditure that was previously managed at the centre to smaller territorial units, responds to the need to widen the availability of collective services to the general public.
The importance of public utility firms compared to manufacturing enterprises indicates the significance of the changes that have taken place in the European economic system, and in industrialised countries in general.
Employment levels and production increases.
The arrival of the scientific and technological revolution in Europe is underway, and the process is not only irreversible but is tending to gather speed. Employment in traditional industrial sectors, as happened in the past for agriculture, tends to be dramatically reduced.
In every phase of development a particular aspect of technology has markedly influenced the mode of production, as was the case for the internal combustion engine and engineering in the last century, and subsequently for electrical energy and chemistry in the current one.
The arrival of the computer age is a real revolution for the economic system, as was clearly foreseen by the famous “Nora” report,[2] commissioned by the French government in the 1960s. Mass production at the beginning of the century generated the production technique called “Fordism”, which comprised the simplification and repetition of industrial workers’ tasks. But precisely the capacity of computers to “automate” all simple operations has sparked off a process of the progressive substitution of machines for repetitive work. This is profoundly modifying the structure of the labour market, which is moving away from blue overalls and white collars toward white coats.
Unskilled tasks are being reduced in companies (regardless of their size) and technicians and specialists are taking over. Even the service sector is by now profoundly affected by the scientific and technological revolution – it is enough to consider the spread of automatic vending machines for all kinds of products.
Employment, which in recent years made up for the jobs lost due to new industrial technologies by new opportunities in the tertiary sector, is no longer on the rise. Unemployment now exceeds 10% in nearly all European countries, afflicting mainly young people and employees who are unable to learn new skills rapidly.
Production is increasing, but the greater productivity made possible by the scientific and technological revolution is notably changing the labour market and markedly reducing the number of traditional jobs in factories and offices.
The emergence of “self-employed” work.
Firms tend to reduce drastically the number of their employees as a result of two ever more widespread trends: 1) increasing investment that results in the spread of automation; 2) the farming out of a growing range of services that were previously carried out in-house. As a result the demand for jobs tends to display new characteristics: a) in large firms and businesses, functions that are both “specialised and managerial”; b) in activities carried out in small firms (craft, distribution/retail industries), creativity, flexibility, and adaptability; c) the spread of low-paid, unskilled, temporary work. The supply of labour must, as a result, change and adapt through: a) advanced education and technical preparation for carrying out all functions in the “employed”, “self-employed” and “quasi self-employed” sectors, the latter two growing in relation to traditional employment forms; b) the flexibility, re-training and permanent updating of workers.
The changes all countries have already introduced into the labour market as concerns employing people, mobility, and training are steps in the right direction. Clearly in this new period the protection of employees must be undertaken differently from the past, relying much more on the “professional” status of workers than on the traditional defence of the union.
Entering the labour market tends to come about (as is already the case in the US) through temporary jobs, that are low-skilled and precarious, and a subsequent transfer to “self-employed” or specialised activities in larger firms, following the acquisition of suitable training and experience.
The challenge of the world market.
Only firms which can penetrate the world market have prospects for expansion and development. The possibility of relying solely on domestic national markets will no longer guarantee a firm’s future, which must instead, meet the international challenge with adequate research capacity and a skilled workforce.
World integration puts pressure on the labour market both due to the competition brought on by the mix of lower wage levels and advanced technology that characterises newly-industrialised countries, particularly those in Asia, and through immigration which impinges on work opportunities in marginal and unregulated sectors. The retention, and possibly the creation, of skilled jobs in Europe depends on the ability of businesses to compete by focusing on research and the innovation of processes and products.
The proposals of the Delors plan.
The Delors plan’s main proposal to re-launch employment concerns reducing the social costs imposed on jobs, particularly less-skilled ones. The lost revenue will be made up by a tax on energy consumption; this has been forcefully re-proposed by the Commission notwithstanding the resistance that still emanates from some states, such as the United Kingdom.
The energy tax is particularly suited to facilitating the transition from the old to the new model of development, since it respects environmental and ecological factors by encouraging the substitution of obsolete consumer durables for low-energy consuming products. Households can subsequently recuperate the higher purchase price of these goods through lower running costs. Similar considerations hold for new concepts of the consumption and saving of energy in houses, offices and factories.
The introduction of an energy tax would also have a probably decisive effect on the competitiveness of European firms, which, being the first to be obliged to face the “energy” challenge would acquire a significant advantage over their rivals. A similar phenomenon previously took place in the countries that were the first to introduce ecological and environmental regulations – consider the example of the catalytic converter for the German car industry.
The Delors plan’s two other main proposals for the labour market are more traditional. The first, increasing the flexibility of the labour market, is a solution that has been proposed in many quarters as the only way out. This provision is already being implemented in Europe, but it makes sense (given Europe’s productive structure) only if it serves to create the conditions for the mobility of manual workers that are increasingly well trained and highly-skilled.
The second proposal concerns the concentration of all available financial resources in “training” and “re-training” programmes; this is certainly the best way to use European taxpayers’ money to maintain employment levels.
The challenge for young people.
The new generations that survey the world of work will have to meet a difficult challenge. All previous generations had to face enormous sacrifices, such as working in factories or emigration. Today, young people must obtain advanced qualifications that will occupy them in studying and training, but above all they must assume a positive attitude toward “risk”.
The guaranteed life-long “position” is no longer available to the coming generations. Instead, it is necessary to start with a “temporary” job, so as then to prepare for more challenging activities that will nevertheless require continuous training and mobility from one firm to another, and from one role to another.
Current employment legislation, which evolved gradually over the whole, more than century-long, span of the industrial revolution, is based on the defence and protection of employees. In the new period it is necessary rather to construct a system that facilitates the establishment of young people in self-employed activities or such like, based on professional qualifications or small cooperative enterprises. This concerns, particularly, the guaranteeing of equal assistance to those who enter a company and those who undertake “high risk” activities as outlined above, by: a) the extension of health assistance and the pension system to the self-employed; b) the introduction of insurance formulas aimed at guaranteeing workers a minimum wage, even in the event of difficulties in self-employed activities; c) awards and incentives aimed at covering part of the set-up costs of newly-established enterprises.
There exists a great task for institutions at all levels, from Europe to the municipal council, for associations, and for individual scholars, to understand the new situation and build an economic system that values the work of individuals, both within a firm and in the increasing number of self-employed roles.
A “Manchesterian” policy.
In the short term, an incomes policy for European workers that provides for the overall stability of nominal salaries, and even for a limited reduction of them, is possible without compromising real incomes. This is because of the benefits that opening international markets can contribute to reducing prices, primarily of foodstuffs and consumer durables. This is in reality the prospect opened up by the conclusion of the GATT agreement, which should enable the entrance of these goods into the European market from emerging economies at markedly reduced prices.
Monetary stability, guaranteed by a European currency, and the opening of markets can generate, at least for a considerable length of time, a situation of decreasing prices to which we are unaccustomed, given the psychological attitude of considering continually rising prices to be an unalterable characteristic of the economic system.
As at the outset of the industrial revolution, when the Manchester school hypothesised that a reduction of the price of grain would favour the first industrial factories that needed to pay low salaries, so probably today, at the threshold of the scientific and technological revolution, we find ourselves in a situation of being able to maintain the living standards workers have attained, even with lower salaries.
The challenge for Europe: reducing the working week.
The immense capacity for production, developed particularly following the second world war, provides consumers with goods and services in increasing quantities and at ever lower prices.
The possibility of working less while incomes increase is a constant feature of this century, but there approaches, particularly in the most advanced part of the world and hence in Europe, the opportunity to reduce more significantly the amount of time dedicated to work. This conquest is ideally bringing us close to liberation from the slavery of work, since, as Aristotle observed, “if every tool were capable of doing its task either on command or by predicting a command, ... and likewise bobbins wove of their own accord and plectrums played the zither, then craftsmen proprietors would clearly not need apprentices, nor would bosses need slaves.”[3] If Europe meets the challenge of international competition by spreading and expanding its scientific and technological capacities, a drastic reduction of the working week will be made possible. As a result, the needs to be satisfied will become increasingly tied to the quality of life, rather than to the availability of traditional goods and services.
The reduction of the working week: a revolution.
The reduction of the working week will have, long term, profound effects on the organisation of economic and social life.
For production, and for individual companies themselves, the reduction of the working week imposes changes to productive structures and the management of firms on the basis of work shifts. The discarding of the “Fordist” phase, already brought on by automation, will become crucial, and a new philosophy of business activity must replace that which characterised firms world-wide for almost a century.
The urban layout of the city itself will change notably with a reduction of the working week, given the possibility to reduce the number of journeys between the home and workplace with the transition to the city region designed by Mumford,[4] the reduction of pollution, the reorganisation of traffic, and so on.
Even individuals, and families themselves, will be directly affected by the reduction of the working week that will allow a more just division of the family’s duties among its members, and more time to dedicate to children’s upbringing, the needs of old people, the ill, and community activities.
The transition: “community service”.
It will not be possible initially, however, to make fully available to individuals all work-time freed by developments in the scientific revolution.
On the one hand the requirements of personal solidarity, which are manifested at the smallest levels of civil co-habitation, such as the municipality or the city district, can only be partially satisfied by the interventions of local bodies and other bureaucratic organs, given the enormous cost this would place on taxpayers. This makes it necessary to ask citizens to make a direct contribution. The growth of the voluntary sector is an indication of the trend we must follow, namely the need for all citizens to participate through “community service” in providing effective solidarity to society’s weakest and most needy groups.
On the other hand, the experience at the beginning of this century, when (with the creation of illness insurance and pension institutions) a type of obligatory saving for workers was introduced with the aim of helping to cope with difficult periods like illness or retirement, indicates how it is perhaps necessary, in the initial phase of the reduction of the working week, to provide for rules and institutions that make people accustomed to using the free time that will be gained in such a way that is useful for society.
This basically involves making it clear that people who dispose of a resource, such as free time, should dedicate some of it to society, in exchange for the help and assistance that they received from society during their periods of need, such as education, health assistance and so on.
The realisation of generalised “community service” undoubtedly creates many problems, but above all it should be implemented by allowing individuals a considerable amount of freedom as to how they should fulfil their obligations.
The debate is already underway in Europe, and “community service” will certainly be one of the most frequently discussed topics over the coming years.
There are certain questions about the introduction of “generalised” community service which, over time, must be answered. For example: who should do it and for how long; which institution should run it; where and in what fashion should it be carried out?
Some initial answers can be proposed: 1) people should be free to choose where to do community service – in the city district, in the region, in Third World countries; 2) it is necessary to identify an institutional level that is responsible for organising community service – probably the regional government or a body at the same level; 3) day-to-day management should be entrusted by the chosen institutional level to voluntary associations, cultural institutions, international bodies and such like, on the basis of agreements and conventions.
Over the past years, Europe has been faced with the problem of guaranteeing peace among the old belligerent states.
The long process embarked on with European integration has brought us to the threshold of a real European federal union that can now be realised through the adoption of a European constitution on the basis of a project elaborated by the European parliament. To obtain the support of citizens, however, it is necessary that Europe is able to propose projects to its citizens that meet the challenge of the scientific revolution and the progressive integration of all countries into a world market, and indicate new values to today’s young generations.
Alfonso Jozzo

[1]A.V. Phillips. “The Relation Between Unemployment and the Rates of Changes in the Money Wage Rates in the U.K. 1861-1957”, in Economica, vol. 25, 1958, pp. 283-299.
[2]Simon Nora, Alain Minc, L’informatisation de la societé, Paris, Documentation française, 1978.
[3]Aristotle, Politics, Cambridge Mass., Harvard Univ. Press, 1944.
[4]Lewis Mumford, The Urban Prospect, Essays, New York, Harcourt Brace/World, 1968.


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