May 5, 2013

What we can learn from Europe

Colin Read, Everybody's Business

— The middle and working classes in this country have had a difficult last few years. All but the top 5 percent have lost wealth. Some have been forced to delay retirement. Others in retirement no longer have the income and security that they once thought. And, still others grapple with persistent unemployment and underemployment.

Yet, we have been lucky compared to some nations.

Europe is often a microcosm of the best and worst an economic union has to offer. It remains divided, with some nations prospering while others flounder. Yet, somehow, it must knit itself together as an imperfect economic union.

Let’s begin with one of its strengths. Germany has forged a compact between free enterprise and its working class. The coalition promises social and economic responsibility by its corporations and inclusion of its workers. There, management and unions have figured out how to work together in the interest of the whole. They have learned to cooperate to provide long-term productivity and sustainability through a partnership.

A variety of German institutions assume responsibility for the training of their workforce. Universities educate a smaller share of their population than we do, but more of the young people who begin college in Germany finish it. Their institutions of higher education produce a good mix of doctors, nurses, lawyers, social workers, administrators and other professional white-collar and green-collar staff. And, they don’t leave as many highly trained individuals unemployed or underemployed as we do.

Companies and unions also cooperate to train those who see value and dignity in technical professions like electricians, heavy-equipment operators, machinists, welders, plumbers and pipefitters. They help sponsor the education of the next generation of blue-collar workers by providing internships that allow young people to get real-world experience in their trade. The companies then hire these workers who have received two or more years of training and practical experience beyond high school.

The cooperative between management and unions recognizes and embraces their shared destinies. In doing so, they sow the seeds of prosperity for the next generation.

Meanwhile, other nations maintain a more contentious relationship among corporations, unions and government. It is often fraught with conflict and contrived class warfare, with government the whipsaw of alternating interests that are seen as competing. It is sometimes too easy for irresponsible governments in Greece and Italy to overpromise one group or another, with full knowledge that any ruling party will only be in power for a dozen months or so anyway. The transience of Italy’s politics makes it easy to offer outrageous promises with the knowledge that another party will have to figure out how to pay for them.

Once a global financial meltdown occurred, brought on by irresponsible behavior and greed on both sides of the Atlantic, the day of reckoning began. Fiscally stressed nations that have promised too much and invested not enough often do just what we do individually when faced with dire financial circumstances. They slash spending in an effort to escape from a mountain of debt that appears even more looming once economic activity and tax revenues dry up.

Nations can adopt policies that encourage or doom recovery. If I decide I’m too heavy, I don’t try to lose weight by cutting off both arms. Nor will wishful gluttony solve an overconsumption disease. Rather, I ought to go on a sensible diet and combine caloric austerity with exercise to increase strength, stamina and longevity.

For a nation, a sensible fiscal diet and an investment in greater future productivity makes more sense than starvation and economic mutilation.

A nation that has lived for too long with a devil-may-care attitude must invest hope in its young people and its public infrastructure. Governments in recovery must put human resources back to productive work. These are not jobs for jobs sake. These are investments in 21st century skills.

We ultimately share the same future and hopes for our children. As President Johnson once said, we must offer a hand up rather than a too-convenient handout. If we can invest in each other, along the German lines, and combine these investments with compassion for those less fortunate, we can avoid the cyclical gyrations our country and Europe continue to suffer.

Colin Read contributors to and has published eight books with MacMillan Palgrave Press. He chairs the department of finance and economics at SUNY Plattsburgh. Follow his tweats at @ColinRead2040.