The view that strong trade unions and comprehensive labour laws inhibit economic growth is a fond mantrum of neo-liberal thinking. It is based on the assumption that human rights in the work place and effective worker organisations are hostile to wealth creation. As such, it argues that giving employers untrammelled opportunities to extract high profits will result in reinvestment of these profits which in turn will generate economic growth for the whole of society.
The past twenty years have seen this prescription for growth adopted world-wide. Certainly in some economically stagnant societies with large peasant populations now unleashed to enter the world of Euro-American consumer products, this approach to industrialisation has generated a wave of capital accumulation of staggering proportions – China, Taiwan, South Korea, India, Turkey and Brazil being good examples. Key actors in this process were corporations in industrialised countries who shifted productive capacity to these very low cost economies. Following from this, the cheap products created were imported by the industrialised world.
Over a ten year period a massive trade imbalance occurred as these imports began to cause balance of payment problems as well as unemployment caused by the denuding of local productive capacity. Moreover, in transferring productive capacity, the new post-industrial economies became based on the financial and service sectors. These sectors enjoyed a massive expansion, but have, for different reasons, led to a general lowering of living standards for the middle and working classes and the unprecedented enrichment of a small elite at the apex of the financial sector, as well as those in the top echelons of big business.
In South African terms we have had jobless growth – apart from certain areas of mining, financial services and retail/hospitality, the productive base of our economy has been reduced. Instead of a surge in manufacturing led by beneficiation of raw materials/minerals, and massive growth in exports to Africa, we have experienced substantial job losses because of cheap imports. In the mining sector mechanisation led to similar job losses.
Let us take the clothing sector in Newcastle, KZN, a small mining town with high unemployment, as a case study. The majority of factories are owned by Chinese nationals who are currently facing prosecution by the local Bargaining Council for not paying the statutory minimum wage of R447 per week (about US$60 per week); they are paying R100 less, which means that for a 5 day week workers are earning R70 per day. The current minimum wage for unskilled farm labourers is more or less R50 per day; as such, semi-skilled cutters and machinists are expected to accept that 20% more than a farm labourer is fair remuneration for their skills without getting the housing and other benefits that farm workers enjoy.
The Chinese owners have threatened to close down their factories if they are forced to meet the Bargaining Council minimum. They argue that such rates will bankrupt them as wage levels in China are far lower and thus render their South African operations uncompetitive.
What are the lessons to be extracted from this situation?
- That without a defence against imports whose competitiveness is based on ultra cheap labour, local labour will be held to ransom;
- That without a state industrial policy that supports sectors threatened by dumping, a national economy loses all autonomy to external forces;
- That a global war of “all against all” based on super exploitation is a return to the worst features of industrialisation (a la nineteenth century Britain) and its attendant human misery.
Having noted these features of an economy at the mercy of unlegislated “market forces”, the question remains: what can stimulate growth that benefits greater society rather than just a small elite – viz. the managers of capital flow and the owners of the means of production? The answer is a productive labour force that shares meaningfully in the fruits of production and has a say in the productive process, as is the case in a social democracy with a mixed economy. Such a system is perhaps an ideal but one worth pursuing on not just moral grounds but also in terms of building social cohesion and stability as well as in facilitating creativity and inventiveness.