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Live By Market Forces, But Don't Die By Them


Economic Viewpoint

LIVE BY MARKET FORCES, BUT DON'T DIE BY THEM

On a recent edition of NBC's Meet the Press, Pat Buchanan was lambasting foreigners for stealing American jobs and berating big corporations for laying off workers. Buchanan had an easy remedy: tariffs and quotas against imports. "What would you, as President, do [about AT&T'S layoffs]?" asked interviewer Tim Russert.

Buchanan was at an uncharacteristic loss for words. "That's a tough question. I don't have the answer," he finally admitted. Does anybody? In the new, hypercompetitive economy, every CEO feels the need to be lean and mean. Long-term obligations to employees appear to be a relic of a bygone era.

Free-market conservatives think the answer is lower taxes, more deregulation, smaller government, and freer competition. All of this will supposedly stimulate growth, and growth will benefit everyone. But the economy has been moving precisely in the direction of freer competition ever since Ronald Reagan took office--and insecurity has only intensified. This is hardly surprising, since the fewer constraints there are on market forces, the freer companies are to treat employees like commodities.

What, then, to do? In my last column, I praised Senator Jeff Bingaman's (D-N.M.) proposal to encourage corporations to treat employees more like "stakeholders." Under Bingaman's plan, corporations that invested in their workers, gave them decent health and pension benefits, and had measures to cushion layoffs would receive preferential tax and regulatory treatment. This is fine as far as it goes, but it doesn't dispose of Russert's question to Buchanan. A company such as AT&T could subscribe to Bingaman's good-conduct code but still pursue downsizing. So in addition to the kind of social compact Bingaman offers, we need two more remedies.

SOCIAL TARIFFS. The first is full employment. The displacement that has become endemic to American industry will be bearable only when other jobs are plentiful. Education and training are lauded as a big part of the solution, but education alone does not produce jobs. Many workers being displaced by today's downsizing are well-educated. The Federal Reserve must remove the cap on economic growth.

The second remedy is social income. Providing a new kind of social compact between corporations and employees is fine, but fewer and fewer people are employed by large corporations. Who is the other party to a social compact with a worker who is self-employed? In an economy of shifting employment, benefits must be universal. These can include health insurance as a perquisite of citizenship, not employment; fully portable pensions; and lifetime training opportunities in the form of vouchers. This is a new kind of welfare state--one that facilitates flexible employment and entrepreneurship rather than subsidizing unemployment.

Fairer trade is part of this story. Truly free trade requires symmetrical market access, and U.S. trade negotiators should bargain hard for it. And if we Americans decide on certain social standards at home, we can reasonably insist that those who enjoy free access to our markets either observe the same practices or pay a social tariff. We should not freely import products from nations that allow child labor, prison labor, or prohibit unions.

HARD-WON GAINS. Greater corporate regulation, full employment, more social spending, and global labor standards--this is hardly Pat Buchanan's kind of program. Buchanan rightly calls attention to the issue of economic insecurity. But Buchanan's remedy of simple nativism doesn't address all the economic instability that is homegrown.

A generation ago, a more managed economy made for a more stable workplace. Basic industry was either regulated or oligopolistic. The AT&Ts, NBCs, and GMs could make long-term commitments to employees. American industry was also more heavily unionized. To the naked eye, much of this looked like benign paternalism or the accidental byproduct of American global ascendance, but a lot of it was the result of hard-won struggles by unions and other protagonists of a managed economy.

In the 20th century, liberal and moderate pragmatists invented a mixed economy to temper the cruelty of a pure market system. Today, conservative visionaries are invoking the technical imperatives of the 21st century to offer a reversion to a 19th century brand of capitalism.

It took the most conservative candidate to raise the issue of economic insecurity. But Buchanan's conservative populism is not serious about a remedy. The more market forces are let loose, the more we need countervailing social cushions. The situation calls for a new mixed economy. To scapegoat foreigners is a very poor substitute.BY ROBERT KUTTNER


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