Asuntos Exteriores VA 1 UK

Emilio Figueredo

Unemployment and globalization

t the G-7 meeting held in the city of Lille, northern France, late in March this year, President Chirac brought an interesting proposition with regard to the current international order. He held that, although it is evident that industrialized countries must adapt to globalization requirements and technological changes, it is also true that such innovations offer new opportunities to the most advanced countries in their quest to somehow solve their most serious problem of the end of the century: the unemployment crisis1. This issue has become a threatening source of conflict at a world level, particularly when there are more than 800 million unemployed persons. If the problem is structural for developing countries, it is all the more serious for industrialized countries 2 because its challenges the structure of a social security system that has been growing with difficulty since the last half of the nineteenth century as a fundamental alternative to warrant social peace 3 .

It is evident that the industrialized countries are going through a radical transformation of their societies and that is some cases such change has become conflicting, as evidenced by events in France, last year, related to the public employees' strike. The situation reached such a level that, for some French learned left-wing commentators 4 , the confrontations of late 1995 in France could very well mean the initiation of a new French revolution, or, in better words, a reaction against what they consider history's most reactionary period 5 , i.e. the ultra-liberal reform going from 1983 through 1993. Such an interpretation of social conflicts resulting from the change in the social security system, as well as from the reduction of acquired advantages, is identified by these intellectuals as a rejection to free enterprise policies, to market totalitarism and to the tyranny of globalization.
Faced with these comments, President Chirac has tried to draft a third road where he would assume leadership of new social dynamics to be adopted by all industrialized countries, i.e. to attach a social model to the economic phenomenon to preserve some degree of protection for the workers. The French President did not deny that in order to secure an adequate employment level a sustained and adequate rate of economic growth is required. On this issue no discrepancies were evidenced between the several members of G7; all member countries, with the exception of Japan, do follow more or less a budget gap reduction policy. However, there was no consensus as to the actions that should be adopted to foster the creation of new jobs, nor as with regard to the measures required to reduce unemployment levels that are reaching extremely high figures in Europe, where, under OECD estimates unemployment in 1995 was over 11% in France and Italy and is dangerously reaching 10% in Germany, while it is being lowered in the UK and the USA while in Japan, although it has grown, it remains at a very low level of 3.2%

The greatest divergence on this issue lies in the fact that, both for the United States and the United Kingdom, market rules must prevail both at times of hiring personnel as when dismissing it and also when determining minimum wages or minimum working hours. Continental Europeans and Canadians, on their hand, challenge deregulation of these activities and, accordingly, are of the opinion that market rules are not adequate nor fair to face these issues. In order to solve the problem they would prefer to explore other ways such as the reduction of social contributions and taxes on salaries or to stimulate the most dynamic sectors of the economy deeming that such measure would have a positive impact on employment. The latter comprise the sector of services to individual and businesses as well as new state-of-the-art information and computer systems 6.

Chirac, on his hand, rejected, both the U.S. approach of market deregulation and the guaranteed employment European system, and invited the other club members t adopt a "third road" to solve the employment crisis. However, one must point out that he was not too sharp in defining the contents of his proposal; rather, he centered on criticizing the lack of job stability in the U.S. and affirming that job market flexibility had led to a downward salary adjustment but, he did admit that although European laws protect the right to work, the unenmployment rate is still too high. The French President pointed out also that one of the negative impacts of the globalization of the economy is that appears to be associated to higher unemployment, unwarranted job security an greater poverty.

North Americans disagreed severely with Chirac and affirmed that Europe will not be able to reduce unemployment under 11% unless the labor market and the product market are deregulated, introducing a higher degree of competition and a reduction of state monopolies. Ronald Brown, the recently deceased Trade Secretary, told Chirac that one just had to compare the results. He affirmed that new jobs created in the United States en 1995 were at a 60" high-quality and high-wage jobs" 7.

A conclusion that one may draw from the Lille meeting is that even if Europeans leaders are convinced that the employment crisis in Europe is created by a stiff labor market and by high payroll costs, there is not in them a political will to face unpopular reforms and much less to oppose powerful unions.
One of the ideas drafted by Chirac "fortunately rejected by the Germans" was to link trade negotiations at the WTO to the labor levels and conditions on a world basis. If such criterion had been accepted it would have become and additional penalty for developing countries.

The recent debate at the G7 meeting has a lot to do with the discussions being carried on between the Venezuelan government and the International Monetary Fund and with the macroeconomic adjustments that president Caldera is undertaking. The unemployment problem in Venezuela is most serious, it is estimated that it reaches two digits; besides, there is little information on informal economy's size.

In a first phase, the macroeconomic adjustment will produce a contraction effect until the country's economy adapts to the new rules; however, one must go deeper into the reforms, far beyond exchange and interest rates liberation. One has to attack boldly the problem of social security in Venezuela; one has to face the need to create pension funds. Only thus objective conditions will be created that promote new employment. The private sector must become a fundamental pivot in the country's modernization and, as Eduardo Fernández said recently "one must strike from the Venezuelan Constitution the concept of the State as a businessman 6 and in order to do that a change of mentality is required and not just a provisional adjustment to walk out of the crisis. If the solution sought with the IMF agreements is aimed basically at balancing budget accounts and there is no clear course for Venezuela and its economy. If that were so, there is no way to overcome the causes that led to a critical productivity situation in the Venezuelan business and industrial sector. An that, of course,. would not allow to eliminate the conditions that prevent better job conditions both in quantity as in quality.

1.- See in this issue the work by Vilma Petráah, Techno-economics change and pressured democracies .
2.- Robert Reich . The work of Nations. Knopff. New York p58 y ss. 1991.
3.- Pierre Ronsanvallon. Le nouvelle question sociale. Editions du Seuil. París. 1995
4.- Erik Izraelewicz . La premiere revolte contre la mondialisation. LeMonde 7/12/95 y Claude Julien. La grende revolte francaise contre l'Europa liberale. Le Monde Diplomatique 01/96
5.- Ignacio Ramonet . La Chispa. El Pais (Madrid) 12/95.

"La sociedad no exite, solia decir Margaret Thatcher, aplaudida por los ultraliberales (de derecha) y de izquierda euroeos. Lanzados en la mayor ofensiva social desde mayo de 1968, los ciudadanos de Francia estáan demostrando la falacia de tal aforismo. Seis años después de la caida del muro de Berlín, este movimiento popular, por su amplitud y su fuerza, desmiente también las afirmaciones de aquellos que anunciaron a bombo y platillo el fin de la historia"

6.- Le Monde. 2/4/96
7.- Herald Tribune. 2/4/96

Translation by Carlos Armando Figueredo

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Message to the Author: efiguere@link7.lat.net