Opinion Sur
Facing a crisis, it is a big mistake to use employment as an adjustment variable for ethical, economical, social and political reasons. However, in a huge segment of companies and public organizations of almost all the world, the first, not the last, answer has been to cut down on employment. Other more effective and less destructive ways of facing a crisis and adjusting the course to a more sustainable development are needed. To brutally cut down on employment in order to cope with a crisis generates an extremely high social cost. At the family level there is the tremendous hardship of those who find themselves without a job in the middle of a crisis, right when welfare services tend to weaken. From the perspective of society as a whole, social cohesion breaks and produces political instability, tends to increase insecurity and affects democratic governability.
But cutting down on employment in critical times is also a mistake from the economic point of view. Only a partial and short-term vision can lead companies and the public sector to adjust their accounts by cutting down on employment. Every economic actor and even the public sector turn to this kind of measures believing their situation will improve by relieving costs. What no individual actor considers is that when numerous companies and the public sector adopt this ‘solution’ the domestic market is affected, reducing the aggregate demand and generating the reflux of new recessive waves, which ends up enhancing the crisis. Companies’ incomes decrease but tax revenues also suffer, reproducing the public deficit to a lower level of activity. If the crisis becomes global and reaches a great number of countries, the situation becomes even more serious: each threatened country’s financial system tries to manage the growing risk by traumatically restricting credit; the alternative of enhancing exportations to compensate for the domestic market’s fall becomes unviable (everyone wants to export while few or none want to import); the domino effect accelerates (losses in one market drag others down) raising country risks which increases the financial cost of new debts and aggravates the whole situation that may, in certain cases, generate the conditions for an eventual default and a forced restructuring of the sovereign debt.
In that unstable context in which individual ‘defense strategies’ do not do anything but aggravate the crisis, the interests of those who profit from others’ difficulties operate; they are speculators and vulture funds indifferent to pain and to the losses suffered by the vulnerable majorities. While panic and uncertainty prevail, speculators make a fortune.
Hegemonic thinking states that there are no other paths when facing a crisis, but this is not true. There are other options, not easy ones and all fraught with imponderables, but they are much more promising. With a not less significant plus: alternative solutions do not only aim to put out fires and restore the pre-crisis order, but instead they seek to transform the concentrating dynamic that generates inequality, which lies in the origin of the crisis.
In order to move forward in a new direction and choose innovative sustainable development paths that are more effective and less painful to our people, it is indispensable to build a firm basis of social and political backing. In fact, it will be necessary to realign all the available economic and social politic instruments according to the new goals, as to make a vigorous productive apparatus converge with the strengthening of social cohesion and distributive justice.
Responses at the economic policy level
A first and critical performance level takes place at a macroeconomic level. If there were ever any doubts, it is clear today that markets [[Markets are not only composed by the speculative financial macrocephaly that is now heard over everything else, that decides and imposes its destabilizing interests. A key aspect of alternative solutions is to break that domination that subordinates the non financial real economy’s micro, small, medium and large producers.]]are not capable of preventing or solving crises by themselves. While markets are capable of facing small economic imbalances, there are no self-regulatory mechanisms within them to put a hold on or transform a dynamic that is out of control and overflows, such as the current income and asset accelerated concentration, which generates unsustainable inequalities and systemic dysfunction [[There are diverse texts that explain this, including Opinion Sur Collection’s [Adjusting the course, getting out of the crisis towards sustainable development->http://opinionsur.org.ar/INTRODUCTORY-OFFER-Adjusting-the] and [Los hilos del desorden, primeras trayectorias geopolíticas del siglo XXI->http://opinionsur.org.ar/Los-hilos-del-desorden-Primeras]. ]] It is from Politics that the necessary leadership in order to adjust the course and the way of working can be put into practice, so economic, social and environmental sustainability is insured.
We are not short of instruments for achieving these results and, even if we were, others can be created. It will be necessary to deploy a set of strategic measures that affect existing privileges, including transforming public expenditure allocation, reforming regressive tax systems, establishing monetary and credit policies that channel national savings into productive and social investments, confronting speculation and concentration derived privileges. In order to achieve a vigorous sustainable development, we will have to pave the way to a new accumulation dynamic, no longer a concentrating type such as it is nowadays, but a decentralized accumulation that leads to an increasing social justice and a better systemic functioning instead [[Opinión Sur published the book [Un país para todos->http://opinionsur.org.ar/Un-pais-para-todos-Hacia-un] (A country for all ) on this subject.]]. In this new context it is possible to win over a great part of the social energy that is currently occupied in antagonisms and conflicts for stability and growth.
To preserve employment level, a right balance between regulations that sort out the market and the capacity to create and preserve decent jobs must be found. There are those that argue that if companies would maintain jobs that were no longer required due to circumstances in the global economy, serious rigidities would be introduced in the labor market, which would produce falls in productivity and competitiveness. This argument is sustained in a context in which it is pretended not to affect (or to affect to the least possible degree) other variables that are involved in the functioning dynamic and costs structure of companies and the public sector. However, if the corporate and public organisms’ adjustment would prioritize other dimensions and variables, leaving cutting down on employment as a last resort, other kind of more sustainable solutions to preserve productivities and competitiveness would emerge.
Since usually economic actor’s individual behavior is first guided by their own interest and only subsidiary by the collective interest, it is the State’s role to take action on this ‘shift in the adjustment paradigm’ with regulations that will defend employment level when a crisis bursts; it should particularly adopt restrictive measures to cutting back on employment and compensate with credit and tax facilities to those who preserve human capital. The goal is for companies, workers, the scientific and technological community and the public sector to become associated in order to face the crisis without affecting employment level, or affecting it to the least extent possible.
Responses at the mesoeconomic and company level
With the aforementioned and a more long-term vision, the corporate strategy of facing crisis’ circumstances should not rush against employment but it should instead review all the dimensions of their economic endeavor. Instead of overreacting by cutting down on employment as a first self-preserving measure, they would do better to reassess the role that labor fulfills in relation to the rest of the productive factors.
For one thing, before taking any other measure it would be primary to analyze firstly if there is room to improve corporate management, which in the pre-crisis situation may not have required the effectiveness that the burst imposes. Management deficiencies that may exist should not be unloaded upon the workers but be faced and eliminated; this is the most effective way to strengthen competitiveness and sustain markets without affecting jobs.
In a company’s cost structure there are numerous non-labor areas that should be polished before considering cutting down on employment; among others, inputs and commercialization where there is much to be improved.
Managers and owners’ compensations should also be revised, especially in those companies that may have accumulated substantial profits before the burst of the crisis. Preserving human capital is not only an act of justice (it was a key factor to obtain the results that were built up), but it also constitutes a way to ensure that when the recovery starts more seasoned human capital will be available.
These and other measures try to (i) maintain employment while going through the crisis and (ii) arrive to calmer times with all the corporate potential almost intact so as to take advantage of the opportunities that usually open when exiting a crisis.
The corporate strategy in order not to cut down on jobs should not be restricted to each company’s internal measures but it should also take the impact their own decisions may have on other actors in their production chain into consideration. This is what we call corporate mesoeconomic responsibility and, particularly, of those companies that are production chains’ leaders. Faced with more than one option to accomplish a certain corporate goal, a company should weigh the differential impact of each option regarding the employment of all the other actors that constitute their value chain. That is to say, to prioritize the option that protects both the leading company’s employment level and the one of its whole production chain.
Defending employment in a crisis situation demands to reinforce the collaboration between employers and workers; this is not restricted to wage issues but also includes them. Ways to moderate eventual wage adjustments can be worked upon in exchange of ensuring a righteous participation in the results once the crisis can be overcome. Accepting sacrifices can not be demanded today without ensuring that tomorrow they will be compensated with justice.
Thus, it is worth saying that, at all times but much more in times of crisis, companies should make an effort to face their difficulties not by resorting firstly to cutting down on employment. At the same time, production chain’s leading companies should also consider the impact of their decisions on the rest of their value chain’s employment level. It would not come as a surprise to anyone that, in general, every individual company will try to avoid their share of responsibility within the collective effort to face the crisis. This attitude could be understood, although not accepted, if a company’s effort a company would contrast with many others evading their responsibilities. It is therefore that the public sector’s involvement through new policies, regulatory measures and an effective control over compliance becomes indispensable as to prevent that some may displace their share of contribution to the collective effort upon others.
There are also other actions that companies, associated to the public sector and development organizations, can take on to preserve the general employment level: helping create self-employment.
Self-employment can absorb considerable segments of those who watch their jobs fall. But beware: it is not about generating employment in units and sectors without a future but in medium scale productive ventures established in promising sectors instead. Generating very low productivity jobs with incomes that hardly cover family subsistence takes place with almost no help; they fulfill their role of mitigating the crisis’ most dramatic effects and, in that sense, we have no right to discredit them. They constitute a family support in a critical phase of social emergency although it is necessary to state explicitly that they are not part of the strategy to transform the prevailing concentrating dynamic.
What is proposed here aims to the establishment of productive ventures that, using the already available business engineering (franchise systems, commercialization and export consortia, cooperatives’ conglomerates, locomotive agro-businesses and others), will be able to articulate small scattered or unemployed producers with strategic partners that will bring management and knowledge of the business world to the table. This two kind of actors come together with others from the public sector, the civil society and the scientific and technological community that contribute with capital, contacts, knowledge and ensure a rightful distribution of the effort and the results that may be obtained. These ventures we call inclusive are capable of accessing a higher opportunity threshold than small and micro isolated producers may reach; however, they do not rise spontaneously. Hence we encourage the establishment of teams specialized in forming and supporting this particular kind of productive units: inclusive venture developers [[See a description in the article [Inclusive venture developers->http://opinionsur.org.ar/Inclusive-Venture-Developers?var_recherche=inclusive%20ventures%20capital].]]
To sum up, facing a crisis without using employment as the first adjustment variable is not only possible but also indispensable to find sustainable solutions that will help transform the pre-crisis dynamic. And, as it almost always happens when it comes to true transformations, the approach and treatment should be guided by a systemic vision that will see beyond the juncture without letting itself get caught in the panic certain interests promote. It is in this direction that the strategic thinking’s development should be oriented same as policies and concrete measures.
