Anthony de Jasay: Workable Alternatives, in: The Wall Street Journal Europe, August 6-8, 2004

Just a few weeks ago, German or French workers accepting to work longer hours for the same pay, forgoing pay rises already agreed to and conceding flexible work practices would have been but a delirious vision. All the news flow went the other way, and has been going the other way for decades. Shorter hours, higher pay, more “co-determination”, more workers, “rights” and fewer prerogatives for management seemed an inexorable trend. It demarcated the “European social model” from such deviations as the Thatcher reforms, the Dutch sobering-up or the Swedish attenuation of their welfare state. The “model” entailed chronically high unemployment, which governments and unions took as a good reason for imposing still shorter hours to share the available work – and so the merry-go-round kept going round.

All of a sudden, the business scene is swarming with deals, concluded, under negotiation or tentatively floated at board level, in which Tabor makes concessions in exchange for management forgoing job cuts or – the ultimate threat – moving operations and leaving the employees behind. Everyone in Paris, plus a vocal minority in Berlin, now indignantly cries “blackmail.” Is it?

Strictly speaking, a threat meant to extort a concession from someone is blackmail only if the threatened act is a tort. Making employees redundant or moving production from Baden Württemberg to South Africa is not a tort. Nor is it, until further notice, unlawful. Any attempt to make it so would entail an ever-lengthening string of other controls to shore it up, leading to massive evasion, a speeding up of the euro-zone’s economic decline, or both.

However, while deals in which Tabor won all the concessions used to pass muster with public opinion the deals management have recently been winning seem to create concerns for justice. For in a loose, colloquial sense there is indeed an element of blackmail in these novel agreements. They have the ring of blackmail because they have posed such drastic choices. It is as well to say, though, that anything less drastic would have failed to reverse the long-established trend of less work for the same pay.

The sophisticated case for the blackmail argument is that our choices are free when we have no or only a slight preference for one alternative and the next-worse one, but that the choice becomes progressively less free as the next-worse alternative gets worse and worse. With full employment, saying no to the boss and looking for other work is hardly worse than accepting his terms. With grim job prospects and unemployment at the French or German level, however, the next-worse alternative to accepting the bosses’ terms is bad indeed. The workers, as the saying goes, have “no alternative.” They are being blackmailed.

One might well ask: and whose fault is that? Who caused the loss of French and German economic vigor since the mid-1970s and its concomitant unemployment? Who dreamed up the “European social model,” who built it up by relentless tinkering, who is “struggling” for job creation and who is resisting any timid attempt to let loose the normal forces of normal job creation?

Government apologists who boast of a relatively high level of inward foreign investment as proof that their economies are not as unhealthy and unattractive as all that, should look instead at the dismal trends in business investment from domestic sources. Across all industries, returns on capital in the Franco-German “core” of Europe are mediocre. Where the average is mediocre, too many individual branches and firms have sunk or fear soon to sink below the breakeven point. The threat to relocate unless more work comes forth for no greater pay is an obvious enough escape route. Once a few bold spirits have shown the way by braving the political signposts that signalled “no entry,” “no through road,” the rush to cut costs by putting drastic choices before labor has quickened and broadened.

What of the near-term future? “Blackmail” is widely resented, but will not be easily resisted. Despite its obligatory “social” overtones, German discourse still regards the employer-employee relation as a matter of contract and not the reserved domain of public law. Moreover, after several decades of asking water to flow upwards, it is recognized that its natural inclination is to flow downwards. Most Germans have some respect for economic realities and major new legislative attempts to suspend them are on balance not very likely.

The French case could hardly be more different. President Jacques Chirac has resolutely vetoed attempts to repeal the 35-hour workweek, which he deems a “social right,” and calls tampering with it a “slippery slope.” His premier, Jean-Pierre Raffarin, has condemned the use of unequal bargaining power and declared that he will “not accept blackmail” of Tabor. On June 28, the official government spokesman promised measures in 2005 to “control the relocation of enterprise,” with a preliminary “social dialogue” to start next September. If this is what a government that calls itself center-right proposes to do, how would a government that called itself Socialist go about it? Some would answer that in France you could not tell the difference.

In any event, it is hard to see how the French, or any other, government can in practice “not accept” the purported blackmail of wage-earners. It can hardly make firing them any more difficult than it already is. It could, as a last resort, try and stop employers from escaping their own hard-to-fire employees by relocating abroad. Pushed to its logical limit, the remedy would be to take existing enterprises hostage within the national jurisdiction – never mind that there would thereafter hardly be any new ones. The suggestion is cloud-cuckoo silly. No logic, except possibly the renowned Cartesian one, could seriously advance it.