Published in Social Europe Journal
Three of the most powerful democracies may soon be led by women, with former Secretary of State Hillary Clinton perhaps joining German Chancellor Angela Merkel and British Prime Minister Theresa May. May is casting herself in the mold of Merkel on economic issues and therein lies a powerful lesson for candidate Clinton.
May confronts an economy with stagnant wages and weak corporate governance – executive suites characterized by American-style short-termism, more interested in suppressing investment, R&D and wages to bolster quarterly profits than in new investment or R&D. She looks enviously at the powerful German economy, unemployment today at a 25-year low, job offshoring rare and real wages repeatedly scoring new annual highs. May proposed economic reforms this week that center on making British corporations as competitive as those in Germany, while sharing the gains from growth more equitably than the status quo. Because of a focus on corporate governance reforms, she calls it Responsible Capitalism.
Secretary Clinton should do likewise: the relative American situation is equally dire. Direct pay in the capstone manufacturing sector is $10.71 per hour higher in Germany than in the U.S. according to the Conference Board. Thanks in part to implementation of a uniform minimum wage, the average 2.5 percent real wage gains reported by the Federal Statistics Office for German workers in 2015 alone matched the cumulative rise in median real American weekly wages since 1979. These results are similar across northern Europe. Burger King employees in Denmark earn $20 per hour (versus $9 in the U.S.), receive five weeks of paid vacation annually, overtime bonus pay, national health insurance, paid maternity and paternity leave and a pension plan. And Americans will be startled to learn that a higher proportion of European men in the key cohort of 25-54 year-olds – central to middle class family prosperity – work than in America. The data from the U.S. Council of Economic Advisors is unequivocal. Some 12 percent of 25-54 year old American men were neither seeking work nor employed in 2014. That figure was only 7 percent in France and Spain and 4 percent in Japan.
May’s reforms are designed to replace the cozy, Randian British executive suite culture with one prioritizing corporate competitiveness and responsibility, a direct reaction to the angst and frustration evident in Brexit. “Big business needs to change,” she declared July 10, in order to nurture “a country that works for everyone, not just the privileged few.” Importantly, May’s corporate governance reforms go beyond say-on-pay to enterprise adoption of codetermination, supported with some intensity by the British Institute of Directors. The German evidence is powerful that worker representatives on corporate boards result in less job offshoring and more robust investment, wages and job creation at home. Shareholders benefit as well. Indeed, American economists have documented how financial markets grant such firms a higher Tobin’s Q.
The gains on offer to Clinton from advocating codetermination are even more dramatic in light of her political exigencies. The Republican candidate Donald Trump is seizing advantage from the persistent export of valuable jobs by American corporations – a rare event in Germany by contrast. The enhanced competitiveness of firms adopting codetermination has made it the global gold standard for democracies, including 19 EU nations and counting. Prime Minister May has created a potent opportunity for Secretary Clinton to champion a proven but unfamiliar (to Americans anyway) seminal reform able to excite frustrated middle class voters forming the heart of the Trump constituency.
The irony is that both Chancellor Merkel and Prime Minister May are right-wing political figures. Can Secretary Clinton prove sufficiently bold to match the policy prescriptions of a British Tory?
American Democrats should hope so.