Put the World Back to Work


Copenhagen -- It's good that someone -- anyone these days -- fights for the poor and the unemployed, even though the dark-suited gents (mostly) who ride every day in chauffeured black cars with tinted windows to the U.N. Summit for Social Development are as an unconvincing bunch of do-gooders as you could hope to imagine.

Unemployment, which only 20 years ago was regarded by most of the world as unacceptable, but marginal, has now become a social plague in both poor and rich countries. Since the first oil shock in 1974, rich countries seem to be unable to find, as they did for 20 years before, the way to combine high growth with low inflation and low unemployment. Poorer countries 20 years ago had most people gainfully, if lowly, employed on the farm. Now they have hundreds of millions idling in destitution in shanty towns.

Yet the facts do not support the defeatist view that the world is inexorably set on a path of "jobless growth" in which technological progress will benefit a few and disadvantage the many. Employment has grown most rapidly in the economies that have grown fastest. Where the unemployment crisis exists, both in the industrialized world and the Third World, it has been created, not by chance but by error, by incentives that distort and institutions that are inadequate.

The global debate has turned. Before we could choose to be capitalist or socialist. Now we are all capitalists, but we still have a choice: to tolerate unemployment or fight it. The price of continuing unemployment at present levels is going to be, at least in the long run, social instability and political polarization. Unemployment is not just morally untenable, wasting human resources and imposing human suffering. It is economically irrational, hindering national economies from working at their full potential.

Mammoth U.N. conferences serve a purpose: They push the debate on an issue -- the environment at Rio de Janeiro, population and development at Cairo -- a little higher up the chain of command. The Copenhagen "social summit" may get some well placed politicians to read the International Labor Organization's new document, "World Employment 1995." It shows that it is possible to return to full, non-inflationary employment in the industrialized world, and to insure in the developing countries steady growth in employment.

This actually happened between 1950 and 1973. For it to occur again we must have, as we did then, more international cooperation in financial and economic matters, and less speculative undiscipline.

Nations must coordinate macro-economic policies and insure an orderly system of international exchange rates. The Barings bank scandal highlights a central issue of our "go for it" world. In 1971, just before the collapse of the Bretton Woods fixed exchange-rate system, about 90 percent of all foreign-exchange transactions were for the finance of trade and long-term investment, and only about 10 percent were speculative. Today, the percentages are reversed. Barings, for one, had become nothing more than an incautious bookmaker.

As the ILO report convincingly shows, this kind of behavior has helped push interest rates up, slowing investment, growth and thus employment.

Don't blame the technological revolution for growing unemployment. Don't blame the Third World's low-cost competition. What we need is a better channeling of savings to productive investment. At the same time we need fewer tariffs than even the Uruguay Round has legislated, and a real effort to maintain labor standards, in particular job retraining for displaced workers.

Faster growth will then put the jobless to work. But no country can fulfill its growth potential unless it works cooperatively. Unlike Adam Smith's model for the individual entrepreneur, no invisible hand rewards selfish national behavior.

B6 Jonathan Power writes a column on the Third World.

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