US Federal Reserve Chairman Alan Greenspan said in an 11/30/01 speech to a group of business leaders that the US economy and the dollar are stronger than the European Union economy and the Euro because: "Over the decades, Europe has sought to protect its workers from some of the presumed harsher aspects of free-market competition." "To discourage layoffs, discharging employees was made more difficult and costly compared with doing so in the United States."
Conversely, it follows that the US economy and dollar are stronger because the US does not protect its workers from the harshest effects of free-market competition. The protection from the harshest effects, to which Greenspan refers, is, in part, the European governmental requirements that laid-off employees continue to receive much better unemployment compensation and health benefits for far longer than in the US. Laid off employees also may qualify for retraining and education, also at the former employers' expense. Even more generous benefits and protections are enjoyed by workers in the more socialistic economies. Most European employees are entitled to longer and more frequent vacations, as well as paid time off for sickness, family emergencies, births, deaths, etc.
On 1/7/02 The Greenspan ideas were repeated as the central theme of a commentary on National Public Radio. In a letter to NPR, we suggest the network's coverage of capitalism is less than objective:
If Morning Edition pretends to present a balanced treatment of controversial political and economic opinion, lets hear a rebuttal to the Amity Schlays (Financial Times) commentary (1/7/02) (RealPlayer Audio file) which parrots the US Chamber of Commerce and Alan Greenspan rhetoric defending the corporate practice of routinely laying off workers at the slightest sign of an economic downturn.
Schlays rehashes the supply-sider claim that the US economy is stronger than that of the European Union because of EU protections for workers which make layoffs less attractive as a business strategy. That the US model forces workers to shoulder most all the suffering and sacrifices of boom and bust economic cycles bothers Schlays not at all. Her exclusive concern is the protection of investors.
Schlay's central argument is that the ease with which layoffs can be implemented is an incentive to job creation. This spin ignores the cost of US government subsidies for "job creation" which underwrite, at taxpayer expense, the inefficiencies of laying off trained workers at the drop of a hat - or of a quarterly dividend.
Schlays further cites the relatively higher rates of unemployment in Europe as a weakness. However, she ignores the fact that, due to the superior benefits such as long term unemployment compensation and health care for laid off workers, unemployment does not mean dire poverty for the Europeans as it so easily can for Americans.
The European level of worker benefits include longer vacations, more unemployment compensation, stricter workplace safety regulations, and paid time off for births and family emergencies. If Schlay's argument was correct, the European companies would be unable to compete with US businesses; that the EU is managing to shield workers while still remaining competitive (say "Airbus") is a conclusive rebuttal of the supply side propaganda.
Ivan Illich, Tools For Conviviality and Deschooling Society, challenges the sacred capitalist axiom that economic growth is essential for a healthy economy. Instead, Illich claims a "stable," no-growth economy would be sustainable and more conducive to the conviviality (communal health) of the society. The real needs of the people would be met, perhaps not with the lure of upper middle class prosperity, but without the threats and dislocations of periodic recessions -- and without the distractions of over consumption.
The capitalist growth-dependent economy is a giantic pyramid scheme in which cash flow must always stay a step ahead of debits. Boom and bust cycles are inevitable under such conditions. Continual growth is impossible; what goes up must come down. Far from being anomalies, these fluctuations allow speculators, "entrepreneurs" and "investors," to operate the capitalist pyramid scheme just as if it were a giant gambling casino. Whenever the cash flow dries up and the bills become past due, the "investors" quickly fold their hands and leave the table - temporarily. Meanwhile, workers, and everyone in the lower 2/3 of the economic scale, are left holding the bag, facing layoffs, bankruptcies, loss of housing and health care, homelessness. When the pool of unemployed is replenished and the job seekers are desperate enough, the money managers pull up a stool and re-enter the game.
The mystery is, why in the world do many American workers, in the face of admissions such as Greenspan's, vote in favor of doctrinaire capitalist candidates? Are workers so ignorant that they don't perceive that it is in their own economic self interest to curtail the power of the rich and to empower the government to enforce restraints and require standards and benefits? Can workers not understand that in a democracy such as ours, it is we, the people, who make up the rules, including the rules for making profits and paying taxes? Yet, we accept like sheep - no, like cloned sheep - the nonsense of "supply-side" economic theory, as if the indignity of passivity and dependence on trickle down were not palpable insults; as if we cannot see the obvious inequity of the rich and the wannabe-rich cashing in on our sweat and labor.
Of course, the answer to the question of why? is that American workers are fed a steady diet of capitalist propaganda, and the contrary views are excluded from the public education system *. The ubiquitous media brainwashing convinces many to believe their votes can't make a difference, and it intimidates those who continue to vote into sucking up to the rich.
* As an example, see the popular Economics textbook Economics Today and Tomorrow by Roger LeRoy Miller, Glencoe/McGraw-Hill, 1995.