Tuesday, 22 September, 2009

Why not collective security?

If you lose your job in France, and want to get a degree before going back to the workforce, the state will pay for your and your family’s upkeep.

The Americans may hate that, but an Indian like me can only wish our government did that. More so, because the state subsidised my education almost entirely before I entered the job market for the first time: It makes no sense to have me rot jobless, and pay no taxes, if I am willing to upgrade, so that I can go back to paying taxes, at a higher rate.

However, one question bothers me. Does the French government give employers easy loans or even straight aid so that they won’t have to layoff people, especially during a widespread downturn, when the employers’ altered circumstances cannot be easily blamed on their misdeeds? Or does that become communism?

Or do you have to be an American bank to have the government take you over – with a guarantee that fat bonuses will be left untouched - once you have ruined the world’s economy (yet again).

Not all employees are willing to retool, though all will have to be taken care of by the state till they get back to their own feet. So the state’s (society’s) expenses don’t (necessarily) change if they keep companies running at full-employment during recessions.

In other words, if French citizens can have social security, why not French companies?

Would that muddle economic signals? Not necessarily. There isn’t much you can learn about running your business form an universal downturn, except that perhaps you should have made more provisions for the rainy day.

(Could you have done that? Keeping aside a nest egg means lowering present spends, i.e., less investment in growth and, more importantly, lower salaries. Both are bound to hurt the present health of your business, unless all your competitors join you in doing exactly what you are doing. In which case, you only lower standards throughout your industry, and do no-one any good.)      

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