Tuesday, January 11, 2011

A bit rich

This week's edition of the Economist newspaper features a sadly imbalanced and ignorant attack on public sector unions. Membership of these workers' groups have remained relatively high as unions in the private sector have fallen over the last twenty years. This fact throws up two questions: why is the public sector still heavily unionised and why are membership densities in the private sector down. The first question assumes that there is some sort of unwritten number that represents the ideal level of union membership that the public sector is unhealthily above. That is the question that the Economist pursues instead of asking why private sector unions are below a healthy level. In fact, there is plenty of evidence that the more unionised a national workforce is the higher the standard of living is.

The central argument of the article is that the public sector unions are facing a challenge as governments in many countries impose financial cuts on their respective public sectors. Up to quite recently German school history text books were infamous for treating the Third Reich as something akin to a natural disaster that was unfortunately visited on the population. Now the Economist is doing the same with the current economic crisis. It writes that 'Governments almost everywhere — particularly in the rich world — are being forced to cut back public spending' with the result that public employees are being asked to carry the can. The article omits to mention by who or what the governments are being forced. Presumable some sort of unavoidable natural disaster like the arrival of Nazism in Germany. In fact what is behind the difficulties of governments are the failings of the banks and financial sector. The article makes no attempt to explain why public sector employees should be asked to rescue the banks when they are the last who were responsible for the financial debacle.

This is not a question of pinning the blame. But it is very hard to learn from mistakes when the analysis is blind to the real cause. The disastrous state of public finances in Greece, Ireland, the UK and the USA is due to the enormous mistakes of private sector banks, not public sector employees and their unions.

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