Print edition : November 27, 1999

While non-competitive and decaying industries in Western countries cry for universal labour standard, more buoyant Western industries looking for new areas of operation seek the dilution of labour laws.

THE first official Commission, established in 1895, to inquire into the conditions of workers in the Indian jute industry, was inspired by the industry's global rivals, the jute textile industry of Britain, located in Dundee, Scotland.1 The ma nagement of both was in the hands of the British, more specifically Scottish, but the managements were sworn enemies. The Indian industry was seen by its Scottish rivals as an intruder in a field that they looked upon as their exclusive preserve. The int erest they took in the labour conditions in the Indian jute industry was prompted less by their concern for the low wages and poor working conditions of the Indian proletariat than by the fear that the Dundee industry would be swamped by products from th is cheap source and its survival would be threatened.

THE issue of "labour standard", which the rich countries are pushing for acceptance at the World Trade Organisation (WTO) ministerial conference in Seattle, to begin on November 30, is prompted by the same capitalist desire to keep away competition from cheap sources. The rich countries are proposing a set of global rules that would standardise labour market behaviour and establish some parity in terms of the wages paid and the conditions under which they operate. The argument in support of such standa rdisation is that low wages are conferring on the poor countries a differential advantage in global trade and that such differential is unfair and is threatening many industries of the rich countries.

Such a partisan view ignores what is obvious. The wage level of a country cannot be independent of the overall state of its economy and its per capita gross national product (GNP). There can be no mechanical parity of wages between, say, Japan and India when the former's per capita income is one hundred times more than India's. To demand that the wages paid in India should be made comparable with those paid in rich countries would amount to driving Indian exports out of the world market.

It can also be argued that poor countries like India, having little capital, technology and management resources, enjoy an advantage over the rich countries only in terms of the prevailing low wages. To force them to adopt Western wage levels would ruin their industries and take away whatever little chance they still have in making some of their products competitive in the world market. It might also be asked why the rich countries should grudge this very small advantage the poor countries have over the m when they dominate world trade comprehensively and ruthlessly. The share of poor countries in global trade is pitifully small and is getting ever smaller. The terms of trade are consistently against poor countries as they keep on producing and exportin g more to earn less. Activities that are ancillary to trade, such as shipping and insurance, are under the near-absolute control of the rich countries, while multinational companies (MNCs) decide, in the case of most poor countries, what to produce and w hat to sell.

The criticism of rich countries for their attempt to impose "labour standard" on poor countries does not take away the fact that the conditions in which Indian workers work are appalling. Many of the issues the Dundee competitors raised in the 1890s rega rding conditions of work in the Indian jute industry were undeniable, nor was there anything wrong in the support, monetary and otherwise, their trade unions gave to their Indian counterparts. The management has always been reluctant to share the profit with those who toil on the floor, while the unpardonable crime of employment of child labour continues. But the analysis above serves the purpose of providing a global perspective. The International Labour Organisation (ILO) rightly takes the view that t he provision of social insurance and social protection are basic human rights.2

The criticism of rich countries for their attempt to impose "labour standard" on poor countries does not take away from the fact that the working conditions of Indian workers are sometimes appalling.-K. PICHUMANI

THE controversy over labour standards is yet another manifestation of two current global tendencies, both emanating from the rich countries and harmful to the interests of the poor countries. The first is the tendency to universalise and standardise eve rything in terms of a set of global rules that are framed mainly by the rich countries with the interests of their own MNCs in focus. Whether it is patents, investment, competition policy, labour or the environment, an obsessive and vulgar desire to bind the world with a uniform set of rules is evident. Such an attempt at standardisation ignores the wide divergence that exists between countries in terms of the level of development, resource endowment, human resource, historical background, and what not. Such standardisation is also opposed to the spirit of the 1993 Convention on Biodiversity, which followed the Rio Earth Summit and emphasised on diversity (and not conformity) as something essential for the sustenance of life on this planet.

The second tendency is to subordinate the United Nations and its affiliated bodies to agencies promoted by Group of Seven (G-7) countries and the powerful global trinity of the World Bank, the International Monetary Fund (IMF) and the WTO, organisations which are effectively owned/controlled by the former and which share a market-oriented economic philosophy. The WTO now deals with matters such as investment, patents, agriculture, the environment and labour, which should have been left to specialised U. N. institutions that were created in response to specific needs - for instance, the United Nations Industrial Development Organisation (UNIDO), the World Intellectual Property Organisation (WIPO), the Food and Agriculture Organisation (FAO), the United N ations Environment Programme (UNEP) and the ILO. Almost all these U.N.-affiliated organisations had for a long time opposed the various aspects of globalisation sponsored by the trinity, though, over the past few years, with intense pressure from G-7 cou ntries, almost all of them have been brought in line with the economic philosophy of the trinity. While, in the original format of 1944, the World Bank and the IMF were supposed to report their activities to the Economic and Social Council of the United Nations (ECOSOC), this was never done. The agenda of various U.N. bodies has been hijacked by the institutions patronised by G-7 countries, so much so that today people hardly know of the ECOSOC, but, whether they love it or hate it, the trinity influenc es their lives. The G-7's preference for the trinity over the United Nations and their active financial and political patronage of the former in comparison with the latter is understandable because by their voting power and otherwise they control the tri nity more easily.3

THE trinity's concern for free trade and global mobility of capital, inputs and products does not mean support for a free flow of labour power across national frontiers. If anything, over the past three decades, immigration laws in the rich countries hav e become more rigid and their implementation more severe against labour exports from poor countries. Unlike capital and products that are supposed to move from anywhere to anywhere in response to demand, movement of people from labour-surplus areas to la bour-deficit ones is actively discouraged. Obviously, what is desirable in terms of the philosophy of free trade in the case of capital, one major factor of production, does not apply to labour, another and no less important a factor. To complete the arg ument one should add that land, the third major factor of production, is incapable of moving across frontiers.

If capital is to be given "national treatment" and freed from discrimination in favour of local enterprises under TRIMs (Trade-Related aspects of Investment Measures), why should labour, irrespective of its source, not enjoy a similar "national treatment " and protection from discrimination? The argument that unrestricted flow of labour would adversely affect the local population and their culture in rich countries is analogous to the "local content requirement" argument that was used by many countries, including India and East Asian countries, during the pre-1991 period (it is banned by the WTO now) against foreign capital, asking the foreign investor to give priority to local manpower and materials. It cannot be that "local content requirement" is bad for capital and good for labour, while "national treatment" is good for capital but bad for labour. Obviously, the global trinity's love for free trade is confined to the factor the rich countries have in plenty, that is, capital, and does not extend to labour, which the poor countries have in plenty.

THERE is, however, a serious conflict between two types of views on labour use, which are yet to be reconciled - again both emanating from the rich countries. For the purpose of this article, they can be described as "protectionist" and "liberal" views. While "labour standard" is essentially a protectionist argument to ensure the survival of many of the inefficient and non-viable industries in rich countries, particularly leather and textile industries, there are other western industries that are strong er and are keen to enter the markets of poor countries. The latter, in fact, argue for a completely different set of labour policies in the poor countries, that is, for the dilution of existing labour laws that protect the interests of workers, for insta nce, laws on minimum wages, job security against lay-offs and closures, the right for better working conditions, compensation in case of injuries, provident funds, and trade union rights. The objective here is to ensure that MNC investments are not hinde red by restrictive labour laws. This is more in line with the orthodox view on liberalisation, which is by its very nature anti-trade union. These industries argue that the existing labour laws do not allow flexibility in the operation of an enterprise, that is, they do not allow wages to fall or the workers to be sacked, as and when needed, in order to balance demand with supply.

How to resolve this contradiction, between those who favour a universal labour standard that can be brought about by elaborate labour legislation, and those who seek as much dilution of labour laws as possible, and between the non-competitive, non-viable , decaying Western industries gasping for breath and the more buoyant Western ones searching for new markets, is a matter to be pondered over by the G-7 countries. However, it is in the interest of the poor countries to point out this contradiction.

Some of those who take this second, liberal view and seek the dilution of labour laws even prescribe a complete overhauling of the labour market, with "labour power" rather than the "labourer" as the focus. They argue for the replacement of regular labou rers who work for a scheduled number of hours in a day and for a scheduled number of days in a week by "flexi-time workers", whose contribution would be measured by "hours" and who would not be required to stick to a given time format. This, they claim, would improve efficiency as it would no longer be necessary for an enterprise to carry permanent workers on the pay roll even when the demand for its product declines.4 Those who advocate a competitive labour market, with completely flexible m ovement of wages, both upward and downward, in response to demand, mainly seek the right to hire and fire and to close down non-viable units.5

Those who are opposed to such radical change in the pattern of labour use point to the Japanese example, where a person is recruited for life, and seniority, rather than merit, determines the grant of promotion. The Japanese model, based on a stable and regular workforce, has cemented the bond between the worker and the management, while no such loyalty is expected from flexi-time workers, they argue.6 It is also established that governments, which are otherwise keen to carry out labour marke t reform in line with the "structural adjustment" package of the Bretton Woods twins often find it politically risky to implement a radical change.7

ONE major impact of globalisation on labour use and the labour market that has serious implications for a country like India is rarely, if ever, discussed. This relates to the distorting impact of MNC salaries on the wage structure for the country as a w hole. With the entry of the multinationals, the pay structure for the higher levels of management has been catapulted to a very high level. Although not on a par with salaries for the same jobs in the rich countries, these are now high enough to make the ablest of the skilled workforce to gravitate towards them in the poor countries. This is forcing non-MNC companies, in their turn, to raise the salaries of their own management staff to MNC levels, realising that not to do so in this age of globalisatio n would mean losing them to MNCs.

Two major consequences follow from these. First, the economy is divided clearly into those enterprises which can offer MNC-level salaries to their professionals and managers and those who cannot. Secondly, the disparity between the highest paid and the l owest paid within the same enterprise is widening alarmingly. The company's balance sheet, while capable of offering astronomical salaries to a few, would not allow similar increases in the salaries and wages of other employees. While the ratio between t he highest paid and the lowest paid is around 30:1 in the rich countries and 10:1 in East Asia, it is around 100:1 in many Indian enterprises. Such gross inequality is not sustainable and is bound to lead to widespread industrial unrest. The Indian compa nies are thus facing a serious dilemma as it is not easy to reduce this disparity - either by raising the wages of the lower order, given their vast number, or by restraining wage increases at higher level, in view of the global competition.

Biplab Dasgupta is an economist and a CPI(M) member of the Rajya Sabha.

1. Daniel Houston Buchanan, The Development of Capitalistic Enterprise in India, Frank Cass & Co, London, 1966 (first edition 1934), p. 421.

2. Roger Plant, Labour Standards & Structural Adjustment, ILO, Geneva, 1994, p.57.

3. Biplab Dasgupta, Structural Adjustment, Global Trade and the New Political Economy of Development, Sage (Delhi) and Zed Books (London), 1998, Chapter IV on Structural Adjustment.

4. Development Committee, Development Committee, 47th meeting, September 1993, World Bank, Washington DC, 1993.

5. Mancur Olson, 1982, The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities, Yale University Press, New Haven and London, 1982.

6. Vittorio Corbo and Stanley Fischer, "Adjustment Programmes and Bank Support - Rationale and Main Results", in Vittorio Corbo, Stanley Fischer & Steven B Webb (eds.), Adjustment Lending Revisited - policies to restore growth, A World Bank Sympos ium, World Bank, 1992, pp. 7-20, p.20.

7. Corbo and Fischer, op.cit. p. 11; Steven B. Webb & Karim Shariff, "Designing and Implementing Adjustment Programs", in Corbo et al (eds.), pp. 69-98, p.78.

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