The shekel drops The harm foolish workers' committees can cause
Surveys in Greece found that most people support the local unions' protests against the austerity plan, news agencies reported this week.
The polls found that 53% to 68% of Greeks oppose the austerity plan, believe that the unions' protests are justified, and have considered joining the demonstrations themselves. Support for the demonstrations remains high even after three employees were killed when protesters torched a bank.
The mood reflected by the surveys matches remarks by union leaders, who announced they would not agree to the government's austerity plan, which includes a broad cut to public-sector wages and pensions. The unions are blaming politicians for the economic crisis and want them to pay the price.
You have to admit that the Greek workers are right. The politicians have reduced Greece to the brink of disaster because they are either unqualified, corrupt, or both. There is no doubt that Greece's politicians are to blame for the crisis and there is no question that they should pay for their failure.
But even though the workers have a point, their shortsightedness is appalling. Suppose tomorrow they burn down parliament and hang all the politicians. Then what? Will that solve Greece's debt crisis?
Greece cannot overcome the crisis unless it starts paying its debts. And Greece won't be able to pay unless it starts spending less and producing more. And Greece can't start spending less and producing more unless its workers agree to pay cuts. If they do not, Greece (and possibly the rest of Europe ) will be lost. In their refusal to agree to this - out of stupidity and shortsightedness - the unions will bring disaster upon themselves and their country.
Greece's workers aren't the only ones who have faced this hard choice - agree to a significantly lower standard of living to save their economy. Other unions have faced similar dilemmas and responded differently. In 1987, Ireland, then one of the weakest countries in Europe, underwent a similar scenario. The country was deep in recession and the government proposed an austerity plan including pay freezes, mass public-sector layoffs and higher taxes. The plan was launched with the full agreement of the country's unions.
A year later, in 1988, the New York Times reported on the results - government expenditures were down 4.5%, 10,000 public-sector workers had been laid off, hospitals had closed, and class sizes were ballooning due to teacher layoffs. Unemployment had climbed to 19%.
Yet within a year, Ireland made the transition from recession to growth. Exports shot up, hundreds of foreign companies had moved there or moved production there, and the national debt had shrunk. Opinion polls showed the prime minister's popularity at an all-time high because the public accepted that the cutbacks were crucial to save the country from economic crisis.
Twenty years later, in 2008, Ireland again found itself in a deep recession due to the global financial crisis. But this time it was entering a crisis as the world's fifth richest economy, following 20 years of strong growth. Based on precedent, Ireland will probably overcome this crisis, too.
It is a foolish union that refuses short-term sacrifices in exchange for long-term gains. This apparently makes the difference when considering whether a modern country can extricate itself from economic crises.
The lessons or Ireland and Greece should be applied to Israel, too. Over the last decade, Histadrut labor federation head Ofer Eini led Israel's unions with great sophistication, agreeing to de facto public-sector wage freezes during the second intifada. His advanced attitude helped the country overcome the economic crisis of 2002-2003, caused by the intifada and the high-tech meltdown. He can claim some credit for the strength Israel showed in the latest crisis
It remains to be seen whether Eini will continue to show wisdom as Israel faces its latest economic challenges. We'll see whether he agrees with the government that the structure of public-sector wages needs to change and that wages should be flexible.
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