Measuring common responsibility
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By Antti Blåfield
The recession of the previous decade taught us that the impact of marginalising people extends far, even into the next generation.
Perhaps the most serious indictment of the government of Esko Aho , which struggled with recession in the 1990s, was that it allowed unemployment to grow.
The response to that argument is that the foreign indebtedness of the national economy had grown to an unsustainable degree, and that Finland could not afford stimulus. Decision-makers at the time were afraid that Finland’s creditworthiness would collapse, and that the country would descend into a crisis that was worse than before.
The recession of the previous decade was a Finnish crisis in all of its significant aspects.
A banking crisis had been caused by the country’s own economic and financial policy, which led to thousands of bankruptcies. The collapse of the Soviet Union made the self-inflicted collapse even worse. Rising out of the morass required two consecutive devaluations, which enhanced the competitiveness of our export industry.
The present economic crisis is substantively different. Economic growth is coming to a halt, either because growth is slowing down in all key markets, or because the economies themselves are actually shrinking.
The crisis is not caused by our own failures, and it is not possible to get out of this one on our own.
No turnaround will come until demand starts up again in world trade.
But even though this crisis is different in character from the recession of the previous decade, the lessons from that recession are topical and meaningful.
If, for instance, we allow unemployment to spiral out of control, the consequences for individual people, families, and society will be lengthy and heavy.
The recession of the 1990s led to the permanent marginalisation of perhaps about 100,000 people (nobody knows the numbers for sure), and had negative effects on the lives of their friends and family, and on their possibilities for success in society.
Some of these marginalised people are still unemployed, but there are even more indirect victims of the recession: second-generation jobless, school dropouts, people living in the margins of society - that is, people for whom talk about "sharing responsibility" is a bad joke.
Standing in the front line of the recession are corporate directors, who see the slowdown in growth as lost and cancelled sales.
As a result of the rapid decline in orders, several companies have started to enact temporary and permanent layoffs. Nobody can estimate how long the decline in world trade will last.
So how is this surge of layoffs and job-cuts caused by the financial crisis to be stopped?
This is when the social responsibility of companies will be measured. How much will corporate owners be willing to cut back on their profits for the benefit of their employees?
In private companies, decision-making is simpler than in listed companies, where it is necessary to evaluate the impact of the actions on share prices, and by extension, on the market value of the company.
Market value is like a protective wall. If the market value of a company falls, the ability of a company to defend itself from hostile takeover bids will grow weaker.
On the other hand, rewarding shareholders with dividends that are as large as those of years gone by is hard to justify, once the company has fallen into a crisis.
Also not without significance is how companies reward their leaders. The board of directors of a company that operates in a wise manner will take heed of the events that led to this crisis. Excessive and short-sighted bonuses for executives were one reason for the emergence and expansion of the bubble economy.
However, there are limits to the capacity of companies to withstand recession. That is why possibilities for flexibility are also needed.
Now the significance of local agreement on terms of employment arises. At the local level, in companies, is where it is easiest to assess what adaptive means are appropriate to each company.
Companies should have as much freedom as possible to react to the crisis in such a way that job-losses can be averted. This includes the possibility of deviating from the terms of a generally binding labour contract.
Nevertheless it is also possible for an employer to become unreasonably strong when things are left to local agreement; the scope for an employer to implement outright blackmail can actually grow.
Genuine agreement requires reciprocity: both employers and employees compromising on their interests to the benefit of the company. Concessions by the employees can also be paid back with interest when things get better. That is how shareholders are treated in any case.
The government of Matti Vanhanen assures us that it has learned from the recession of the previous decade.
There are no plans for lists of what to cut, or tax increases.
The government can stimulate in many ways. The state can enter the corporate financial market to support the finances of companies. Employment can be supported by implementing investments that are nationally important, such as investments in transport routes and their construction.
Positive things can also be learned from the policies of the Aho government: the operational preconditions of companies are worth strengthening, and research and product development should be supported.
Finland has always made its living from the forests. What will the next treasure be that is found in the forest?
The development of energy production that spares the environment is one of the possibilities for the future.
Another weighty legacy of this slump might also be a deeper split of the labour market into two castes: those with permanent jobs, and those who have fixed term positions, or who do temp work.
It means that the prospects that different groups of people doing the same work have to protect their interests and to build their lives are drifting apart from each other, with the consequence that people’s possibilities to safeguard their interests in general are set to weaken.
If nothing is done to change this development, then society will become more sharply divided, and polarisation will become more intense.
The shadow of that rupture will be a long one.
Helsingin Sanomat / First published in print 7.1.2009
ANTTI BLÅFIELD / Helsingin Sanomat
antti.blafield@hs.fi
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| 13.1.2009 - THIS WEEK |
 Measuring common responsibility |
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