The central challenge of the new Information Age social contract is to destroy less-productive jobs and less-productive businesses, without destroying lives and livelihoods. There are two sides to this challenge: the need of America's employees for greater security in the new economy, and the need of America's employers for greater flexibility in the new economy. A failure to meet either side of this challenge will ultimately hurt all parties involved. That is, if reliable and flexible safety net program do not make it easy for workers to move from one job to another or one sector to another, without devastating losses in income or gaps in insurance coverage, then voters will pressure politicians to preserve outmoded jobs and antiquated industries, thereby threatening the very engine of our prosperity. Likewise, if our social contract does not afford modern corporations the increased speed and flexibility they so need to succeed in the new economy, then our engine of prosperity will suffer just as seriously.
(Halstead & Lind: p. 63)
Certainly, as our economies have become more open and global in nature, the need for flexibility has increased. It is simply not possible to run businesses the way they were run during the heyday of the large corporation back in the 1950s and 1960s. The post World War II era was truly unique on two counts: first of all, it created solid, stable and comprehensive institutions that made it possible to organize and channel the collective interests of the citizens (trade unions, employers' organizations, political parties...), providing stability to society as a whole along the way (well, at least to the most advanced societies); and, second, it also strengthened the importance of the nation state as a consequence of the Cold War alliances. It was the combination of these two factors that made it possible to build a new social contract based on political consensus, collective bargaining and the type of welfare policies that brought about the longest period of economic and social development ever seen. But there was also a price we had to pay for all that. We built some humongous, hiper-bureaucratic institutions that could get out of control at any time. Our societies became too sclerotic, too used to the excess of red tape and overregulation. Our companies (and all other institutions) were simply too slow moving, too big to adapt to rapid changes. As long as these didn't happen, there was no problem. However, as it ought to happen, more and more social and political changes started mounting in the 1960s and by the late 1970s they had reached such a proportion that it was patently obvious how the old system didn't work anymore. Things had to change, and that's precisely what Margaret Thatcher and Ronald Reagan promised to bring about. Change.
Now, after a few decades of neoliberal economic policies, it has become clear to us that while we managed to streamline our economies, the same has not happened in the political field, where our institutions still expect the sort of large collective action of yesteryear. Worse yet, liberal de-regulation has widened the social divide back to what it was during the pre-war years, undoing a good part of what was done by the New Deal. Needless to say, all this has increased the amount of instability in the world as well as in our own developed countries, where we have witnessed a rise of populism without precedent since the 1930s. To a great extent, both the anti-globalization and the anti-immigration movements are a direct consequence of this.
So, here we are in a situation where, on the one hand, we have to provide the amount of flexibility that our businesses need in order to stay competitive in a global economy and, at the same time, we also have to respond to the clear need the citizens have for a minimum amount of job security that guarantees a decent standard of life. In other words, we have to find the way to provide the competitiveness of the 1980s and 1990s together with the job security and social policies of the 1950s and 1960s. Halstead and Lind have clearly reached this conclusion, as did millions of other people who felt comfortable with the levels of social, economic and political development we reached in the post-war era (i.e., all those who felt represented in the social contract reached by Christian-Democrats, Social-Democrats and social liberals in the 1940s and 1950s). They are not discovering anything new. We are all familiar with the main outline of the analysis. The problem, of course, is to offer a workable solution to the dilemma, and that's where Halstead and Lind definitely fail short for they offer little else than the overall generalities quoted above.
So, is there any solution? How do we square the circle? How do we provide, at the same time, flexibility to our businesses and security to our workers? Sometime ago the Danish came up with something they call flexicurity, a combination of pro-active labor market policies that allows for easy hiring and firing as well as high benefits for the unemployed. While the policy has worked marvellously in Denmark (their current unemployment rate is 2.8% as of the end of 2008), it is not clear yet to what extent it can be applied to other countries. In any case, it relies on a the previous existence of a highly educated working force (as is the case in Denmark, of course) as well as a solid and dynamic education system capable to train those who lose their employment. The high benefits for the unemployed, therefore, are not limited just to financial support. Rather training is understood as a right and a duty of the unemployed. Obviously, as we just mentioned, this assumes the previous existence of a dynamic education system that is capable of taking on this task at a decent cost.
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