France's
Politicized Students - Capitalism Under Fire
By William Pfaff
30 March, 2006
IHT
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 responsibility.
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 cuts.")
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.
© 2006 The International
Herald Tribune