Manhattan Contrarian

View Original

"Saving The Jobs": Nobody Volunteers To Move Into A Prison

Back in the 1960s and 70s, the UK economy was known as the "sick man of Europe."  The big industries like steel, automobiles, coal -- much of them in state ownership -- were all losing money and threatening plant closures and massive layoffs.  Successive Labour and Conservative governments struggled to "save the jobs" of workers in these and other industries by refusing to let the factories, mills and mines close, and by throwing ever-increasing taxpayer subsidies at them.  Nevertheless, unemployment crept up year by year, and economic growth was stuck right around zero.

Then in 1979 came Margaret Thatcher.  Most nationalized industries were promptly privatized, taxpayer subsidies ended, and plants were allowed to close.  The immediate result looked terrible:  Unemployment spiked to 12% by 1984, and a substantial part of Britain's industrial capacity shuttered:

In the words of one eminent British historian [Marxist Eric Hobsbawm], Thatcher oversaw an "industrial holocaust", which saw Britain's industrial capacity decrease by fully one quarter during the years 1980–84.  

But by the late 1980s Britain was experiencing economic growth of 4+% per year and people were calling it an "economic miracle."  Today, the steel and coal industries are almost entirely gone from the UK, and the auto industry has been totally transformed from a mass market business to one dominated by high-end specialty brands like Bentley, Aston Martin and Jaguar.  Yet the UK economy is one of the strongest in Europe.  Is there a single person alive today who thinks that "saving the jobs" of the steel workers and coal miners of the UK from the 1970s up to the present would have been a good idea?  (Hint: Hobsbawm died in 2012.)

Meanwhile, over in France, they have taken a different approach to "saving the jobs":  they have made it virtually impossible to fire anyone.  And how is that working out in creating robust employment opportunities for the people?  According to an article in the New York Times Business Section on Friday:

Since France emerged from a recession in 2010 after Europe’s debt crisis, growth has languished below 2 percent annually. Unemployment is stuck around 10 percent, more than twice the rate in Germany. Nearly a quarter of young people are without work, and many of the new jobs being created are on precarious temporary contracts. 

The Times article, by Liz Alderman and headlined "A Leading Candidate in France Is Intent on a Conservative Overhaul," reports that a guy named Francois Fillon has leapt to the forefront of the presidential race in France by essentially proposing a Thatcherite "shock therapy" for the country's economy.  Alderman relates the story of one Philippe Plantier, owner of a midsize industrial cleaning company:

In the sluggish economy, his orders fell this summer for cleaning big industrial structures, like bridges and cement factories. Mr. Plantier moved to lay off several of his more than 50 employees to adjust for declining income.  But the workers sued to block the layoffs and sought more than €100,000 in damages. “When you hire someone in France, it’s for life,” he said.

The point:  Under these circumstances, why would Plantier hire anyone new or expand his business?  A similar principle is that no one volunteers for life imprisonment.  But Alderman's article reports on how protests break out in France any time anyone proposes to roll back by even a little the raft of "labor protections" that France is known for. 

Back here in the U.S., we have just seen our first big exercise in government "saving the jobs" in many years, namely Donald Trump's jawboning of Carrier to keep about 1000 air conditioner manufacturing jobs in Indiana, rather than moving them to Mexico.  No details have been released as to exactly what combination of threats, promises, sweet talk or handouts convinced Carrier to change its decision.  According to an interview with Mike Pence on Fox News, the key factor in persuading Carrier was a promise of rollback of senseless regulations of the Obama era.  Fine.  But then there was this "Tweetstorm" issued by Trump this morning:

The U.S. is going to substantialy reduce taxes and regulations on businesses, but any business that leaves our country for another country,

— Donald J. Trump (@realDonaldTrump) December 4, 2016

fires its employees, builds a new factory or plant in the other country, and then thinks it will sell its product back into the U.S. ......

— Donald J. Trump (@realDonaldTrump) December 4, 2016

without retribution or consequence, is WRONG! There will be a tax on our soon to be strong border of 35% for these companies ......

— Donald J. Trump (@realDonaldTrump) December 4, 2016

wanting to sell their product, cars, A.C. units etc., back across the border. This tax will make leaving financially difficult, but.....

— Donald J. Trump (@realDonaldTrump) December 4, 2016

these companies are able to move between all 50 states, with no tax or tariff being charged. Please be forewarned prior to making a very ...

— Donald J. Trump (@realDonaldTrump) December 4, 2016

expensive mistake! THE UNITED STATES IS OPEN FOR BUSINESS

— Donald J. Trump (@realDonaldTrump) December 4, 2016

It looks like he's talking there about a new punitive tariff that would have to be enacted by Congress.  With any luck, Congress will be sensible and not do it.  Still, it's discouraging that our new President understands so little about basic economics, and is willing to follow the road that has led to economic stagnation for England, France and many others.  As a businessman, he should know better.  Nobody volunteers to move into a prison.