"When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals.
We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues"

( JM Keynes, "Economic Possibilities for our Granchildren" 1930 )

Sunday, February 27, 2011

And Stress for All

Public institutions tend to emphasize the importance of financial stability. It is not just a matter of intentions but a regular use of huge public resources to guarantee the stability of the system. And since the “markets” are considered as the main reflection of the true state of financial business, the stabilization of the financial markets became a top priority of policy makers.

A few examples can show the magnitude of that policy: Ultra light interest policy rates, modified accounting rules to prevent a full disclosure of the real situation of the financial system, purchase of financial assets (“QE2”) above their market prices, design and financing of bailout deals etc. etc. We are told that the reason behind such deep intervention is that the financial markets are the blood stream of the economy as the main transfer mechanism of resources between individuals and companies. As such, they need stability in order to permit their normal functioning and to guarantee that investors willingness to take risks.

As a matter of fact, the stability is just anther good deal for the finance markets since in such mechanism they share the risk with the rest of the citizens but enjoying the benefits of profits.Well, if that privilege was conceded to any citizen I wouldn´t comment about it. However, the way the other production factor “labour”, is being treated in a 180 degrees opposed way to the above stability: Stress.. Stress and more Stress. You can hear about it all over the world: In Wisconsin (US) the administration is engaged in cutting social right and benefits, a measure applauded by “pundits” as the first step to install private sector norms in the public service( i.e. less union and less rights). Or the ECB Chairman ( and who handles Billions of Euros per moths to bankrupt banks) declaring that wage increase in Europe would be “madness”… or Spain´s labour reform aimed to reduce social rights,…. Or UK budget cuts and massive layoffs.

With just a few examples we´ve seen that there is a basic dichotomy in the way Capital and Labour are treated by the institutions, although there is no real apparent reason for that different treatment, at least not from Economic theory point of view. Moreover, a different treatment create distortions that tend to reinforce themselves up to a point that they are not sustainable anymore. What is the reason for the different treatment? Since the the basic foundation of any fair social system is equality, that very important question should be rendered to a second place. If the first step toward justice and equality is “Stress for all”… so be it.

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