In a globalized economy, there are two paths that countries can take: a low road and a high road.
Too frequently in recent decades, the United States has taken the low road, embracing so-called “free-trade” agreements and encouraging domestic “competition” between the states that encourages a race to the bottom when it comes to wages, benefits, environmental rules and consumer protections. The evidence of the failure of this choice is evident nationwide, from the shuttered appliance plants of Iowa to the shuttered steel mills of Indiana to the shuttered textile mills of the Carolinas.
Other countries chose a different route: the high road. In Germany, for instance, a combination of industrial policies and innovative workplace agreements helped traditional industries to modernize and remain dominant players on the global stage. Indeed, as the Great Recession took hold, it was the strength and resilience of the German economy that provided a measure of stability for Europe.
One of the reasons why Germany has adapted with such agility to the changing economic and structural demands of the globalized economy is the respect that German corporations accord workers. The country has strong unions. And its factories also have “works councils,” elected bodies that represent the workers and help management make decisions on issues ranging from the hours a plant operates to the training workers might receive. “It is no accident that [German] workforces have a reputation for being highly skilled,” notes Thomas Geoghegan, the veteran labor lawyer and author.
Experts on “works councils,” such as University of Illinois law professor Matthew Finkin, a member of the governing board of the Institute for Labor Law and Labor Relations in the European Union in Trier, Germany, and Thomas A. Kochan, the co-director of the Institute for Work and Employment Research at the MIT Sloan School of Management, argue that they are “one of the best, most innovative features of Germany’s labor relations system.”
“They have been shown,” Finkin and Kochan note, “to enhance efficiency, adoptability and cooperation. By supporting the use of work sharing (agreeing to reduce everyone’s hours rather than laying some people off), for example, these councils helped Germany experience less unemployment during the Great Recession and a faster, more robust, recovery since then.”