Cosatu and trade unions cartoon

Little Lerato cartoon about Trade Unions and Economic Growth

Trade Unions, Labour Law and Economic Growth

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?

  1. That without a defence against imports whose competitiveness is based on ultra cheap labour, local labour will be held to ransom;
  2. That without a state industrial policy that supports sectors threatened by dumping, a national economy loses all autonomy to external forces;
  3. 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.

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Related articles on COSATU, labour law and trade unions in South Africa:

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  1. A real convoluted look at economics

  2. I am a builder in a smallish town in the Western Cape. I quote to obtain building contracts. I sub-contract the labour-only work to competent artisans and I have assisted them to become fully equipped and through hands on training I have enhanced their skills. I have been labled a “labour broker” and am under threat of being forced to directly employ the people involved. I ensure that with a bit of hard work, the sub-contractors earn a good living. On top of that, at the end of the contract, after paying myself a small salary on a par with the sub-contractors personal income, I split the profits, 50% for me and 50% amongst the sub-contractors. Now the Unions want me to employ each worker permanently. What incentive will there be for them to continue to produce when they will earn the minimum rates and when the Building Bargaining Council will keep more than 20% of the annual income for a General Worker to create “benefits” for the worker, part of which is a compulsory trade union contribution. The paperwork alone that needs to be done is cause enough for me to rather opt out and close down, and change my business to a one man owner business with a smaller turnover and to specialise in utilising my skills to generate the same income without having to deal with the Builder Bargaining Council and the Builders Workers Union who are working hand in hand to destroy the building industry. All these regulations are doing is forcing us to employ less and look for alternate ways to earn a living. Then all our loyal people that we have been training and helping to grow in skills will be left without an income. This is what the ANC together with Cosatu are doing to SA.

  3. Trade unions are an EVIL,that is why Margeret Thatcher banned them. Kosatu Leaders are Super rich from the member Subscriptions and why they had to go and buy a luxury Building for there own pleasure and party`s instead of investing the huge Subs. Profits in upgrading and helping the UNEMPLOYED Masses,but NO, they rather fight for the employed and Fu@k the POOR and unemployed.
    There is enough jobs to accomodate the millions but the Union fights for exorbitant wages for the lucky few instead of fighting for lower wages so that more people can be employed. R!00.00 is better than R0.00. The Unions are the ENEMY of the JOBLESS black Population of South Africa and is as amatter of fact, the SABOTAGERS of the Economy of South Africa.

  4. a-maize-ingly-corny says

    Let’s face the truth – the biggest unions are all, if not controlled, at least dominated by “communist” (i.e. communist party) members largely because they shout the loudest and most populist rhetoric (whether they believe it or not). But here’s the “funny” part – In the Communist countries of the former Soviet bloc and in China (the last bastion of Marxist-Leninism) Trade Unions may be allowed but they are totally toothless because because all forms of strike or go-slow action are ILLEGAL.
    So in communist countries Trade Unions are useless because the laws allow them no powers and in Africa the Communist Trade Unionists are useless to the working class because they are self-serving and corrupt.
    Go figure.

  5. Not only in Africa are the trade unions self-serving. They are part of the reason for outsourcing (which creates unemployment) to places like China etc, because their demands from companies, especially smaller ones, are outrageous. They have a sense of entitlement to what is not theirs. Marxism is trying very hard to raise its ugly head in north and certain parts of central America.

  6. I meant south America. Central America is too poor for anything, because of corruption.

  7. a-maize-ingly-corny says

    @ OutofAfrica – too true. Unfortunately the excellent principle of those who have plenty providing for those who have insufficient (magnanimous benevolence) became (let me make up a word) extremised as “Take from those who have and give to those who have not” – pretty much like the folk hero Robin Hood.
    However, the new Marxists have become the new Robbin’ Hoods (as in Hoodlums) for they use only the first part of Marx’s words – “Take from those who have.” And though they mean it, they don’t actually say, “and to H*LL with those who have not ’cause I’m alright now Jack”
    Add to that, the communists in the communist countries encourage the communist Trade Unionists in the “capitalist” countries to make more and more outrageous demands because of the damage it does to the economies in those countries making their own backward philosophies look like they are the ones which provide (even if it be at a low level) enough of an income to survive. Then, when their activities have pushed unemployment in industrialised countries up to the point where large numbers take to the streets in protest, they point this out to their own citizens as the result of “capital exploitation” of the “down-trodden masses”.

    To correct a statement made by Boerkie – Maggie Thatcher could not and did not BAN the unions – she merely ground them down by refusing to listen to their demands.
    It certainly looks like the Kenyan Govt. ignored their own Nurses’ Union because when the nurses went on strike the govt. fired all 25000 of them.
    Maybe the bald one with the shower cap might take a hint from one of his colleagues.

  8. To sum it all up, Margaret Thatcher said, “The trouble with socialism is that eventually you run out of other people’s money”. And Winston Churchill said it best, “Socialism is a philosophy of failure, the creed of ignorance, the gospel of envy, its inherent virtue is the equal sharing of misery.”

  9. For those who are fortunate to have Top TV there is an excellent three part series analysing the the origins and failures of socialism on Top History. How do you reward some one who does not have the ability to be a Bill Gates or Steve Jobs?

  10. @madoba; could you clarify your last sentence please.
    I don’t understand why the need to be rewarded for not having the same abilities as Gates and Jobs!

  11. @ Outof. You will have to ask the comrades that. I don’t understand why the market can not be the sole determinant of that.


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