One of the enduring conflicts of our times pits the impulse to be humane against the necessity to be mean-spirited. This tension pervades economic and political life and, indeed, marks the turbulent juncture where they met and clash.
In a democracy, political man inclines toward compromise and conciliation. He prefers reward to punishment. At his best, he aspires to lighten the load of life's miseries. He dispense favors as naturally as he breaths. The more that people become dependent on him for advice, handouts or a sense of dentity, the better and more secure - he feels.
Economic life is an altogether different beast. In its rawest form, it emerges as that infrequent phenomenon, the "free market". The "free market" is intolerant. It does not compromise. It ethic is: crush or be crushed. The winners are the fittest, the shrewdest or the luckiest. The losers are at their absolute mercy.
A large part of the story of the 20th century has been political man's quest to dull the sharpest edges of capitalism and "free market" economics. That impulse fostered the welfare state and legitimized the idea that the state - as the expression of a society's political will - must always retain the right to overrule the market's impersonal decisions.
Life would be very much easier if this were a simple struggle of good against ill. Unfortunately, it isn't. If government is often an active - and beneficial - agent for economic change, it is just as often a bulwark of the status quo: a refuge to which beleaguered industries and unions can run.
There is no easy way to reconcile the ethical issues that arise from such cases. If many groups have legitimate grievances, helping them may ultimately turn out to be self-defeating. By such repeated assistance, society gradually erodes the competitive checks that are necessary for price stability and a healthy economy. Should we be kind today, knowing that we may suffer for our actions tomorrow? More than ever, the inability to resolve this troublesome question explains the inflationary trap in which all western economies seem caught.
Look closely at the steel and textile industries, and you find good examples of the process at work.
Both industries, have entered a long-term eclipse. America's steelmaking capacity has barely increased in the past decade (though many of the plants have been modernized). Textile and apparel employment - 2.3 million - is actually below its peak. Imports increasingly fulfill domestic needs; last year, imports supplied 18 per cent of domestic steel use, 10 per cent of textile use and 15 per cent of apparel consumption.
This economic erosion reflects the labor intensity of these industries and the worldwide availability of the basic technology. Time can only intensify these pressures. As more and more economies mature, they will create their own basic industries - with potential surpluses for export. Their equipment will be advanced, and their wages are likely to remain well below those in the United States and Europe.
Left alone, these changes would bring both pain and pleasure. Severe competition from imports would force both industries to keep prices down or face sales losses and possible bankruptcy. In turn, these pressures would compel firms to resist wage increases, a major component of costs and, therefore, of inflation.
The moral of this is simple: competition frustrates inflation. And the textile and apparel industry is the rare example of genuine competition that proves the point. It has a multitude of firms, requires only modest initial investment and struggles fiercely against unionization. In the past decade, according to a report by the Council on Wage and Price Stability, wholesale apparel prices have risen 47 per cent, against a 95 per cent increase for all industrial prices. During the same period, wages for apparel workers rose 78 per cent, against a 99 per cent average increase for all manufacturing workers.
The corollary is also often true: absence of competition breeds inflation. Just coincidentally, steel is an apt example. Dominated by a few big firms and most universally unionized, the inudstry has raised prices more than the national average, and its salary increases have far exceeded the average.
For both these industries, though imports now represent an added element of competition that they seek to muffle through government action. The textile industry wants to be exempted from tariff cuts at the current mulilateral trade negotiations, and the steel industry wants a workable mechanism to reduce steel imports to 14 per cent or 15 per cent consumption in the United States.
Government handles these demands poorly. It wants to restrain inflation, but individual Senators and House Members hop to aid their constituents, too. Caught between conflicting pressures, the usual response is to split the difference. The Administration, for example, has given both textile and steel industries some protection, but not nearly as much as they want.
Nor is it easy to do anything else. The textile and apparel industries may have lagged behind inflation, but they hardly present a picture of social and economic utopia. Labor-management tension is rife, and the average wage (for apparel) was $3.75 last year, well below the $5.88 average for manufacturing. Politicians cannot easily point to this as a model for other industries to emulate. Likewise, the steel industry makes a plausible-sounding - if highly exaggerated - case that itis the victim of "unfair" international trading practices. (See NJ, 6/24/78, p. 1022).
Once politicians involve themselves in such issues, their fate is to be branded either as patsies for special interests or as mean-spirited Neanderthals. What they need most is a convenient (and accepted) dividing line between the responsibilities of the market - where impersonal, often cruel forces should be allowed to prevail - and the responsibilities of government, where intervention is considered correct and helpful.
But no one agrees where that line is, or even if its exists. Government cannot serve all masters at once, but neither can it make up its mind which it wants to serve. Not surprisingly, it ends up serving most poorly.