Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, September 24, 1995 TAG: 9509260115
SECTION: HORIZON PAGE: D1 EDITION: METRO
SOURCE: RAY MARSHALL FOREIGN POLICY MAGAZINE
DATELINE: LENGTH: Long
Almost one-third of the Earth's 2.8 billion workers are either jobless or underemployed. Many of the employed are working for low wages with little prospect for advancement.
High levels of joblessness result not only in an enormous waste of resources but also in human suffering and hopelessness, rising inequality and a host of social ills.
These conditions threaten to undermine the smooth running of democratic institutions or make them much more difficult to establish.
And growing global interdependence causes such problems in one country to negatively affect others.
Almost every country suffers from a combination of insufficient employment growth and a lack of jobs adequate to enable workers to maintain and improve their incomes.
For the most part, America owed its economic success to an abundance of natural resources, economies of scale in its mass-production system, a large and growing internal market and supportive institutions and policies.
In the more competitive, knowledge-intensive world of the 1990s, although the United States still boasts the world's wealthiest economy, it nonetheless faces enormous disadvantages.
By the end of the 1960s America's economy was in trouble. The main forces for change were technology and increased international competition, which combined to weaken the mass-production system and alter dramatically the conditions for economic success.
In this more competitive world, dominated by knowledge-intensive technology, the keys to economic success became human resources and more effective production systems, not natural resources and domestic economies of scale.
National governments exercise less control over their economies. National companies wield less influence over their markets. Unions hold less authority with respect to negotiating working conditions.
Employment problems are exacerbated by the absence of a global ``engine of growth,'' a role played by the United States and expanding global markets during the three decades after World War II.
The United States can no longer be this engine, and the absence of policy coordination - especially among the United States, Germany and Japan - hampers global growth and stability.
In addition, obsolete world economic institutions and policies make it difficult to provide the investment, development programs and markets needed to raise demand in Third World countries and stimulate the global economy.
Today countries, companies and people must yield to the demands of global competition.
The most basic imperative is that we can compete in only two ways: by reducing wages and incomes or by increasing productivity and product quality.
We can no longer rely on natural resources and the economies of scale sustained by oligopolistic firms in domestic markets insulated from global competition.
Most high-income industrialized countries, and some of the top-performing developing countries in Asia, have either implicitly or explicitly rejected the low-wage option because it implies more unequal incomes - exactly what most American workers have experienced in the last 20 years.
Such nations see that lower, less equal incomes threaten their political, social and economic health. They see that the only way to raise incomes under this old system is to work longer and harder.
By contrast, because technological change is essentially the substitution of ideas, skills and knowledge for physical resources, the high-performance option can create steep learning and earning curves, and rapidly increase personal, organizational and national advancement.
For example, because agriculture has become more knowledge-intensive, farmers have greatly improved output with less land, labor and physical capital.
Economic and political analyst Peter Drucker provides another illustration of this process.
The seminal product of the 1920s was the automobile, which was 60 percent energy and raw materials and 40 percent skills and knowledge. The seminal product of the 1990s is the computer chip, which is 2 percent energy and raw materials and 98 percent ideas, skills and knowledge.
What must we do to pursue the high-performance option?
Global experience suggests that countries first must develop national consensus and then fashion policies and strategies to achieve the high-performance option.
Under modern conditions, competitive market forces alone will produce low-wage outcomes and global stagnation. So national policies should urge companies to organize for high performance and discourage the low-wage alternative.
High-performance organizations stress quality, productivity and flexibility rather than economies of scale and fragmented production processes that require most workers to exercise limited thinking skills.
High-performance organizations develop lean, governing structures that decentralize decision-making, have positive reward systems, use leading-edge technologies and stress continuing education and training for all workers.
Unfortunately, far fewer American companies have organized for high performance than have European and Japanese firms.
Most American firms pursue low-wage strategies that maximize short-run company objectives yet hurt workers and communities by contributing to joblessness and polarized incomes.
Yet economists will continue to debate what has caused the world's unemployment problems and how to restore fairly shared global growth.
Ray Marshall was U.S. secretary of labor under Jimmy Carter. He is the Audre and Bernard Rapport Centennial Chair professor of economics and public affairs at the University of Texas at Austin.
by CNB