At bankrupt Delta Air Lines union pilots who earn an average of about $150,000 a year are resisting 18 percent wage cuts to keep the airline flying. In France students riot in the street to protest the idea of postponing for two years the French guarantee of lifetime employment. In Italy Prime Minister Berlesconi is voted out of office (just) after failing to pass legislation in his five year period in office that would make Italy’s labor market for flexible and Italy more competitive. And, let us not forget the German electorate that nearly died of fright last fall when an advisor to candidate Angela Merkel proposed tax rate cuts.
Now George Will writes about the agonies of General Motors, a corporation that pays $100,000 to $130,000 a year to keep 14,700 laid-off workers in a “Job Bank.” And the United Auto Workers union is threatening a crippling strike if bankrupt Delphi gets the bankruptcy court to cut wages of its members.
What goes up comes back down, especially in the marketplace. But the welfare state is founded on the notion that a government can legislate economic relations and that people should never have to suffer unemployment or reduction in wages.
The beauty of the market system is that is spreads risk around. The danger of the political system is that it concentrates risk, and it encourages people to resort to political power to avoid losses and setbacks.
The history of the industrial era teaches us that it is essential for the market to adjust to new conditions every day. If you try to resist economic change you just put it off, so that the eventual change becomes wrenching, or even catastrophic.
But some people never learn.
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