They should not, however, underestimate the depth of the crisis facing Western nations, which has been developing for the past 20 years. In 1993, unemployment in industrial countries exceeded 32 million, 3 million more than in 1982 when the last recession was at its worst. For millions, work in the traditional sense is disappearing. Manual labour is being displaced by technological development. Much routine work can be carried out in developing countries, where costs are lower. Many Western industries can only stay in business by laying people off. According to some estimates, German industry will have to regard more than one-third of its workers as 'superfluous' if it is to achieve maximum productivity. None of this would matter if Western nations could create new jobs, as good as the old. So far, they have failed. 'No country,' says the United States government paper for this week's job summit, 'has yet found the right approach to adjusting and succeeding in the new world economy.'
In western Europe, the rewards of economic growth have been hogged by those in work. Since the early 1970s, real wages (discounting inflation) have risen by 40 per cent or more while unemployment has grown. In the US, by contrast, real wages have fallen by 10 per cent while the number of jobs has almost doubled. British ministers think this a triumph for an unregulated market and for a country free from welfare state featherbedding. But even the Americans doubt this. Many of the new jobs barely pay subsistence wages. Real wages have fallen not because the comfortably employed have restrained themselves but because millions of people at the bottom of the labour market live in poverty.
There is no evidence that the US has paid a smaller price than Europe in social dislocation. Rather the contrary, judging by the extent of violent crime, drug use and inner-city unrest. And this is where the Western nations are caught in a bind. Their economies, they are told, can only compete by reducing costs. That entails not just lower wage costs but lower social costs - they cannot afford bloated public sectors and high welfare benefits because these impose too great a burden of taxation on industry. But cutting people's wages or putting them out of work, while also reducing their welfare state services and benefits, will lead some of the victims into crime. That, in turn, will lead to higher costs in police, prisons, criminal courts and insurance. In other words, the social costs return, but in a different form.
These enormous challenges require a more imaginative response than that outlined in the Government's Detroit paper, which is devoted largely to the supposedly miracle cures of deregulation and privatisation. The foundation of any attempt to tackle unemployment must be large-scale investment for the future: investment in education and training, in research and development, in better communications. The way forward for the West is to compete on quality, not on price. The American paper for Detroit acknowledges this and acknowledges, too, that government has a role. The British paper does not. This is best illustrated by its long list of 'measures to help unemployed people compete effectively'. (Britain has Jobsearch Clubs in which 'stationery, stamps and telephones are all provided' our industrial partners are helpfully informed.) But, as the American paper implicitly recognises, raising the skill levels of those who are already in jobs is at least as important as training those out of work. The Americans conclude: 'Competition should be based on investments in quality and innovation with workers viewed as assets to be invested in and not just costs to be minimised.' If the West ignores that advice, it faces social and economic disaster.Reuse content