International Herald Tribune
THURSDAY, MARCH 30, 2006
PARIS The demonstrations by French students, workers and
would- be workers, with unions and the French left riding on their bandwagon,
have amounted to a spontaneous revolt in France against something that I
suspect few of the participants fully appreciate.
The protests' ostensible purpose is to force withdrawal of a
minor change in this French government's employment policy, but they have taken
on a radically different significance.
The crowds in the street contest a certain form of
capitalist economy that a large part, if not the majority, of French society
regards as a danger to national standards of justice and, above all, to
"equality" - that radical notion of which France is nearly alone in
proclaiming as a national cause, the central value in its republican motto of
"liberty, equality, fraternity."
Prime Minister Dominique de Villepin undoubtedly had little
notion of the consequences when he launched what seemed to him a small but
constructive employment initiative, intended to loosen current structural
inhibitions to job-creation.
He inadvertently opened what many of the French see as a
central question to their national future, just as two years ago they saw in
the European constitutional referendum disturbing questions about the future
nature of the European Union and about the model of capitalism that would
prevail in Europe's future.
They are not alone in this concern. A kindred debate about
"models" of capitalism has been a persistent factor in Germany, now
suffering labor unrest, and in the European Commission itself, which since EU
expansion to 25 members, has tipped away from the traditional European
"social" model. Even in Britain last Tuesday there was the biggest
strike since the 1920s, on the question of pensions.
The French, of course, have been against "capitalisme
sauvage" ever since that rough beast loomed amid the satanic mills of
Britain in the 19th century, subsequently making its trans-Atlantic journey to
establish another lair.
A recent international opinion poll on the free-enterprise
and free-market system, found that 74 percent of the Chinese say they think it
the best system of all, compared to only 36 percent of the French. (The Germans
were not far off the French.)
The essential question is, what capitalism are we talking
about? Since the 1970s, two fundamental changes have been made in the leading
(American) model of capitalism.
The first is that the "stakeholder," post-New Deal
reformed version of capitalism (in America) that prevailed in the West after
World War II was replaced by a new model of corporate purpose and
The earlier model said that corporations had a duty to
ensure the well- being of employees, and an obligation to the community
(chiefly but not exclusively fulfilled through corporate tax payments).
That model has been replaced by one in which corporation
managers are responsible for creating short-term "value" for owners,
as measured by stock valuation and quarterly dividends.
The practical result has been constant pressure to reduce
wages and worker benefits (leading in some cases to theft of pensions and other
crimes), and political lobbying and public persuasion to lower the corporate
tax contribution to government finance and the public interest.
In short, the system in the advanced countries has been
rejigged since the 1960s to take wealth from workers, and from the funding of
government, and transfer it to stockholders and corporate executives.
While that may seem an incendiary comment, it seems to me a
simple factual observation. The criticism currently made of Europeans who
resist "reform" is that their policies block managers from downsizing
and outsourcing jobs, in order to add "value" to the corporation. (A
recent headline in the International Herald Tribune read: "AT&T-
BellSouth deal gets Wall St. applause. Merger would lead to 10,000 job
I once called this "CEO capitalism," since
corporate chiefs today effectively control their boards of directors and are also
the biggest benefactors of the system, subject only to critical attention from
investment-fund managers, themselves interested in maximizing dividends, not in
defending workers or the public interest. (The well-known American fund
manager, John Bogle, now retired, has taken up my argument and advances it in
his recent book, "The Battle for the Soul of Capitalism.")
The second change that has taken place is globalization. The
crucial effect of this for society in the advanced countries is that it puts labor
into competition with the poorest countries on earth.
We need go no further with what I realize is a very complex
matter, other than to note the classical economist David Ricardo's "iron
law of wages," which says that in conditions of wage competition and
unlimited labor supply, wages will fall to just above subsistence.
There never before has been unlimited labor. There is now,
thanks to globalization - and the process has only begun.
It seems to me that this European unrest signals a serious
gap in political and corporate understanding of the human consequences of a
capitalist model that considers labor a commodity and extends price competition
for that commodity to the entire world.
In the longer term, there may be more serious political
implications in this than even France's politicized students suspect. What
seems the reactionary or even Luddite position might prove prophetic.
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