Sunday, June 14, 2020

Re-organizing production in a new model of public-private partnerships

In his latest column, Dani Rodrik goes beyond the emerging consensus that post_COVID reforms must incorporate a more progressive taxation, education and protection policies, stronger anti-trust enforcement for technological multinationals and more determination against climate change. Although all these efforts would be welcome, Rodrik misses an additional key component to reforms, namely changes in the way production is organized.
The organization of production creates positive and negative externalities. For example, good and stable jobs have an impact on more cohesive communities. Rodrik's objectives would be directly met by a substantial expansion of cooperatives and other worker-owned firms, but also by conventional corporations that embrace a broader mission than maximizing shareholder value.
Rodrik's words are the introduction of an ambitious program of a new model of public-private partnerships, with implications for industrial policy, the fight against inequality and the mitigation of climate change. Perhaps the Next Generation reconstruction program of the European Union could incorporate these ideas in the mechanisms that it will promote. In Rodrik's words:
Economic insecurity and inequality today are structural problems. Secular trends in technology and globalization are hollowing out the middle of the employment distribution. The result is more bad jobs that do not offer stability, sufficient pay, and career progression, and permanently depressed labor markets outside major metropolitan centers.
Addressing these problems requires a different strategy that tackles the creation of good jobs directly. The onus should be on firms to internalize the economic and social spillovers they cause. Hence, the productive sector must be at the heart of the new strategy.
Put bluntly, we must change what we produce, how we produce it, and who gets a say in these decisions. This requires not just new policies, but also the reconfiguration of existing ones.
Active labor-market policies designed to increase skills and employability should be broadened into partnerships with firms and explicitly target the creation of good jobs. Industrial and regional policies that currently center on tax incentives and investment subsidies must be replaced by customized business services and amenities to facilitate maximum employment creation.

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