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José Luis Álvarez, Professor of Economics, University of Navarra, School

A bad argument

Sat, 05 Jun 2010 09:21:41 +0000 Published in Expansion (Madrid)

The various economic policy measures that the Spanish government has been announcing, suggesting or studying in response to the crisis have caused discontent among those sectors of the population that have been most directly affected by the government's decisions. This has been the case of pensioners, civil servants and workers, affected by the cuts in various items of the public expense or by the possible delay in the retirement age.

The trade unions have also shown their displeasure, not only with these measures, but also with any possible reform of the labor market. They have done so, moreover, repeatedly wielding the same well-known argument: it is not fair that those who did not cause the crisis should be the ones who end up paying the price.

We all undoubtedly sympathize with those who suffer most from the consequences of the current situation. And I am convinced that, in order to overcome our problems, we need efforts and sacrifices shared by society as a whole. But this does not validate the above argument, nor does it mean that it is applicable in a generic way and without any discussion. On the contrary, it seems to me that many nuances are necessary, even if the measures on the table are not the best.

The first concerns the culprits of the crisis: who caused the disaster, only financial speculators, whoever they may be? Whether we like it or not, the fact is that, in some way, we have all contributed to the problems that afflict us today. Of course, the people who have governed us over the last decade bear the greatest responsibility, insofar as they were unable to act to prevent the imbalances that now place us in such a delicate position from continuing to accumulate. But we all - companies, citizens, workers -, to a greater or lesser extent, happily joined the party and enjoyed it, helping to prolong it too much and without worrying about foreseeing the tremendous hangover it was going to provoke.

Opportunity cost

Secondly, there would be much to discuss about the opportunity cost of not implementing the measures for those who suffer from them and for others. If policies are not put in place to curb excesses and redirect our Economics towards healthier growth, we will all pay a very high invoice and for a long time to come. In fact, we will end up passing on our problems to the next generations, who, of course, we can safely say have no responsibility for the excesses of the past. The third objection is also substantial: why does a labor reform harm workers? Is the reform necessarily a cutback in their rights? It does not seem so. A comprehensive reform of the work market will essentially benefit workers, provided it is done ambitiously and coherently with other structural reforms, since it will mean greater dynamism, the creation of more employment, a boost to productivity and, therefore, higher wages.

Moreover, we must think that the core topic for this comprehensive reform is worker protection. Protection against the harmful effects of duality with the creation of a single contract, whose termination costs are higher than those of current temporary contracts and lower than those of temporary contracts; protection against unemployment with more efficient active - and passive - policies of employment , which truly increase the employability of the unemployed and facilitate a better adjustment of demand and supply of work; Finally, protection against the current harmful rigidities, through a decentralization of collective bargaining that brings the conditions agreed upon closer to the needs and possibilities of both companies and workers.

Those who oppose reforms on the grounds discussed here would do well to review their position. Probably, if they devote enough time to this reflection, they will come to the conclusion that, in reality, the weakest and most defenseless will end up paying a really high price if serious reforms are not undertaken. Unfortunately, as long as this change of mentality does not take place, the necessary reforms will find it more difficult to find space in the political diary .