Regular readers will know I have been a long-time critic of the fiscal rules that…
2012 becomes 1844 or thereabouts
I had a little reminisce today and took a mental journey back to the North of England where I studied for a time. Although this time (early 1980s) was just before the digital age, I have collected bits of information about the economic and social life of workers and capitalists in early industrial England. And, of-course, there are some wonderful accounts in the wider literature of what life was like in those days. These were times when there were no unions, no job security, no income support, no safety standards, and little or no sanitation of public health regulations in the urban areas where workers were sequestered by the ruling elites. While the rich industrialists erected open spaces and promenades to surround their luxury residential facilities, the workers mostly lived in filth and died dreadful deaths. There was a reason that this way of doing business was attacked by growing worker discontent throughout England and Europe in the late 1840s and beyond. There is a reason trade unions formed. There is a reason that governments were forced by popular pressure to introduce income support and labour market regulations. People can only be put down for so long and the capitalist system is built on a very small minority seeking to repress the rights and rewards of the vast majority. Once the greed pushes the balance too far to the minority – their hegemony is threatened. We might be in 2012 but the elites are once again driving us all back to 1844 or thereabouts. They will rue the day.
When the French aristrocrat Alexis de Tocqueville visited Manchester in 1835 he wrote in his subsequent account, Journeys to England and Ireland, ed., J. P. Mayer, 1958, Page 108:
The fetid, muddy waters, stained with a thousand colours by the factories they pass, of one of the streams I mentioned before, wander slowly round this refuge of poverty. They are nowhere kept in place by quays; houses are built haphazard on their banks. Often from the top of their steep banks one sees an attempt at a road opening out through the debris of earth, and the foundations of some houses or the recent ruins of others. It is the Styx of this new Hades.
Look up and all around this place you will see the huge palaces of industry. You will hear the noise of furnaces, the whistle of steam. These vast structures keep air and light out of the human habitations which they dominate; they envelop them in perpetual fog; here is the slave, there the master; there the wealth of some, here the poverty of most; there the organised effort of thousands produce, to the profit of one man, what society has not yet learnt to give. Here the weakness of the individual seems more feeble and helpless even than in the middle of a wilderness; here the effects, there the causes.
A sort of black smoke covers the city. The sun seen through it is a disc without rays. Under this half daylight 300,000 human beings are ceaselessly at work. Athousand noises disturb this damp, dark labyrinth, but they are not at all the ordinary sounds one hears in great cities.
The footsteps of a busy crowd, the crunching wheels of machinery, the shriek of steam from boilers, the regular beat of the looms, the heavy rumble of carts, those are the noises from which you can never escape in the sombre half-light of these streets. You will never hear the clatter of hoofs as the rich man drives back home or out on expeditions of pleasure. Never the gay shouts of people amusing themselves, or music heralding a holiday. You will never see smart folk strolling at leisure in the streets, or going out on innocent pleasure parties in the surrounding country. Crowds are ever hurrying this way and that in the Manchester streets, but their footsteps are brisk, their looks preoccupied, and their appearance sombre and harsh. Day and night the city echoes with street noises. But it is heavily loaded wagons lumbering slowly.
From this foul drain the greatest stream of human industry flows out to fertilise the whole world. From this filthy sewer pure gold flows. Here humanity attains its most complete development and its most brutish; here civilisation works its miracles, and civilised man is turned back almost into a savage.
A world where a scarce few but very wealthy capitalists supported by a small middle class ruled over hundreds of thousands of impoverished workers who were forced by circumstance to live in unhealthy neighbourhoods, devoid of sanitation where the child mortality rates were over 57 per cent.
The city developed in such a way to separate the slums from where the capitalists ensconced themselves.
I have a strong familiarity with this area. I studied at Manchester University (started my doctoral studies there) in the early 1980s at the height of Maggie Thatcher’s reign.
While I was there, apart from estimating Phillips curves and developing the concept of hysteresis, I spent a lot of time studying the industrial beginnings and reading as much as I could on the life of the classes. I learned that while the rich were building promenades and parks to surround their luxurious housing the workers were living in squalor – as described by de Tocqueville.
There was one area that I used to run through each day at lunch-times, sometimes during the Winter in snow but usually in just the damp, muddy grime that was typical of Manchester at that time. I used to do 10-15 kms along the canals out to Queen’s Park and surrounds.
The specific area I am referring to used to be called – Angel Meadow – and lies just to the north of the City Centre not far from the main station.
Friedrich Engels described this area as “Hell upon Earth” in his wonderful work – The Condition of the Working-Class in England – published in 1844. If you haven’t already read it then I urge you to do so. He said “Such is the Old Town of Manchester … and the frightful condition of this Hell upon Earth. Everything here arouses horror and indignation”.
The area was notorious during the early days of the industrialisation and for the next hundred years as a squalor. I used to run past what were the cholera pits (at the park adjacent to the now demolished St Michael’s Church in Angel Street), in which many thousands of impoverished workers and their families were buried without dignity or care – as the industrial and human waste poisoned them.
On Page 292 of The Condition of the Working-Class in England, Engels wrote of the area:
In Manchester, the pauper burial-ground lies opposite to the Old Town, along the Irk: this, too, is a rough, desolate place. About two years ago a railroad was carried through it. If it had been a respectable cemetery, how the bourgeoisie and the clergy would have shrieked over the desecration! But it was a pauper burial-ground, the resting-place of the outcast and superfluous, so no one concerned himself about the matter. It was not even thought worth while to convey the partially decayed bodies to the other side of the cemetery; they were heaped up just as it happened, and piles were driven into newly-made graves, so that the water oozed out of the swampy ground, pregnant with putrefying matter, and filled the neighbourhood with the most revolting and injurious gases. The disgusting brutality which accompanied this work I cannot describe in further detail.
There is a very informative historical brochure – St Michael’s Flags and Angel-Meadow – put out by the Friends of Angel-Meadow, which you might find interesting. The reference to the flags were to the Act of Parliament that flagged over the burial ground in 1855 because the poverty drove locals to digging up the soil for manure to sell to the local farmers. This BBC article on Angel Meadow is also interesting.
Moving on to 2012
What qualifications do you think this character – the one in the Aston Martin with that cultivated look of disdain that Tory millionaire elites tend to acquire early in life – has to write detailed reports analysing the labour market?
This chap is described as a “venture capitalist” and a prominent and very large donor to the Conservative Party in the UK. He gained his university education in Physics and did an MBA at Harvard. So hardly trained in the nuances of labour markets.
This Mirror article (May 24, 2012) – The Aston Martin fanatic fatcat who is driving workers to ruin – provides a brief history of Beecroft.
They say that his businesses will “make even more money if his plans to slash employment red tape become law”. The Mirror says that:
Britain already has the weakest workplace protections in Europe but that’s not enough for the private equity multi-millionaire … A paper he has produced for Prime Minister David Cameron’s office suggests it should become law that bosses should be able to sack staff at will.
The OECD publish their Indicators of Employment Protection on a regular basis.
The following graph is taken from the latest data available (2008) and shows that the Anglo nations (including the UK) are down near the bottom. The least protection is 0 and the most 6.
The Mirror traces some earlier dealings that “a consortium led by Beecroft’s private equity firm Apax partners” had with workers. In 2005, the private equity firm bought a large retail chain and shed 8000 jobs and cut wages. The point they make that was all done within the current legal framework. Now Beecroft wants to make it even easier.
The supermarket chain was sold 3 years later for a huge profit to the private equity group.
Beecroft’s latest venture is Dawn Capital, which owns Wonga – described on their home page as “a ground-breaking online lender based in London … The mission is to provide consumers with instant money whenever they need it – cash on demand”. We also know these firms as payday lenders which extort huge interest payments on workers who are desperate for short-term cash.
The Mirror notes that Wonga lends “to struggling families at eye-watering interest rates of up to 4,200% APR”.
In general, Beecroft is described by the Mirror as being involved in companies that “have been compared to vultures, buying up companies then cutting costs, sacking staff, slashing wages – all in order to sell for a fast buck”.
So an all-round nice guy!
But his huge donations to the Tories have curried influence and apparently the Prime Minister’s “policy guru” asked Beecroft to tell them how best to undermine what is left of the workers’ legal protections in the UK labour market.
The Mirror says that:
The result was so controversial that it was shelved for six months and eight pages of the most radical plans were removed – including ditching parental flexible working and even a proposal to allow small firms to hire children.
Here is a link to the Official version of the Report – Report on Employment Law – published October 24, 2012.
As noted there was an earlier version of the Report. The BBC reported (May 22, 2012) – Adrian Beecroft work report not doctored, No 10 says – that:
The report by Adrian Beecroft was published early after an initial draft had been leaked to the Daily Telegraph … The Telegraph published a draft of the report by the venture capitalist, which was dated 12 October last year.
In it there were three ideas that were not contained in the final report published by the government on Monday, which was dated 24 October.
The proposals called for a delay to plans to introduce flexible working for parents, to abandon proposals to allow all workers to request flexible working, and to remove regulations surrounding the employment of children.
I thought the funniest (tragic funny that is) part of the leak then release was the reaction to the response by the UK Business secretary Vince Cable, one of those totally compromised Liberal Democrat politicians who did the dirty deed with the Tories just to get their hands on power.
Cable told the BBC:
I don’t see the role for that … Britain has already got a very flexible, cooperative labour force. We don’t need to scare the wits out of workers with threats to dismiss them. It’s completely the wrong approach.
He was backing up his boss (Clegg) who said it would lead to “industrial scale insecurity amongst millions of workers”.
The response by Beecroft reported in the Independent article (May 23, 2012) – Adrian Beecroft criticises ‘socialist’ Vince Cable – was classic.
The Independent quotes Beecroft’s reaction to Cable:
I think he is a socialist who found a home in the Lib Dems, so he’s one of the left … I think people find it very odd that he’s in charge of business and yet appears to do very little to support business.
I think the Tories are learning from the Americans. Anyone who disagrees with what the neo-liberals suggest are immediately labelled a Socialist and then, upon further scrutiny (not much I can assure you) are re-labelled a dangerous Communist.
Many Americans think that the Job Guarantee proposal (a logical part of Modern Monetary Theory), which aims to provide income security and meaningful public sector work to a small percentage of workers at any point in time, is a socialist plot. Some think it is the thin end of the wedge where the US government will employ all workers under conditions of coercive slavery.
One cannot help it I suppose if the public education system has failed them. Such views are pitiful to say the least.
If you bother to read the Beecroft Report released this week you will be immediately taken by the lack of referencing to extant research. Saying there is a lack implies there is some. In fact, there is none. When some scant evidence is asserted there is no citation for us to check the context etc.
From the outset you get the message. The first section on unfair dismissal says that policy should be changed to perhaps “extend the time period during which an employer can dismiss an underperforming employee from one year to two years”.
But while that is said to be “a step in the right direction”, in the next paragraph we learn that is not enough and the “the period within which an employee can be dismissed without being able to claim unfair dismissal could be extended beyond two years”.
Policy should also:
1. Reduce the “burden of proof on the employer … making it harder for the employee to claim to a tribunal that the … [dismissal] … process was flawed”.
2. Impose “fees for employees starting the employment tribunal process” to discourage workers seeking legal recourse.
3. The “greater use of cost orders” against workers who go to tribunals.
His preference – “if it is felt to be politically unacceptable to simply do away with the concept of unfair dismissal” is an “approach which allows an employer to dismiss anyone without giving a reason provided they make an enhanced leaving payment” limited to “a maximum of £12,000” for long-term employees.
The approach – where industrial matters are forced into contract type law and costly processes were necessary before a worker could mount their cases – was introduced by the previous conservative Australian government under the despised WorkChoices legislation. It effectively precluded legal defence by workers because they could not afford to take the action and if they did they might lose everything (their houses etc).
Beecroft claims that his approach would then mean that:
… the onus would then be squarely on the employee to perform well enough for the employer to value them as an employee. It would no longer be possible to coast along, underperforming in a way that is damaging to the enterprise concerned but not bad enough for the employer to want to undertake the whole rigmarole of the unfair dismissal process with its attendant threats of tribunals and discrimination charges.
As I said – an all-round nice guy.
There are some real gems.
On Pensions, the so-called “new Automatic Enrolment system” requires that firms ensure workers are in superannuation schemes (following the Australian model) under certain criteria.
Beecroft writes that “there is no general resistance to the scheme as a whole among employers or employers’ representative bodies” and that “75% of individuals support the scheme, a figure which is expected, based on Australian experience, to rise after the scheme is introduced”.
So both sides of the labour market support the scheme. But Beecroft recommends small firms be exempted and other changes made to limit the benefits available.
The reality is that the Australian experiment has not been a success. It has forced workers to hand over their savings to superannuation funds which charge exhorbitant management fees and then lose money is speculative portfolios. A worker in Australia would on average have been better off investing their savings in fixed-term cash deposits than having them locked up in these super funds.
Please read my blog – Eliminating the great superannuation rip off – for more discussion on this point.
I will leave it to you to read the rest although I don’t recommend it. The general point is enough to grasp.
I have previously examined the evidence relating to impact on employment protection rules and other labour market regulations on growth and employment.
For example, please read my blog – Minimum wages 101 and The unemployed cannot find jobs that are not there! – for more discussion on this point.
It was a popular pastime for conservative labour economists in the 1990s to try to establish the empirical veracity of the neoclassical relationship between unemployment and real wages and workplace protections and to evaluate the effectiveness of active labour market program spending.
This has been a particularly European and English obsession. There has been a bevy of research material coming out of the OECD itself, the European Central Bank, various national agencies such as the Centraal Planning Bureau in the Netherlands, in addition to academic studies.
The overwhelming conclusion to be drawn from this literature is that there is no conclusion. These various econometric studies, which constructed their analyses in ways that were most favourable to finding the null that the orthodox line of reasoning (that wage rises destroy jobs) is valid, provided no consensus view as Baker et al (2004) show convincingly.
In the period leading up to the crisis, partly in response to the reality that active labour market policies did not solve unemployment and instead created problems of poverty and urban inequality, some notable shifts in perspectives became evident among those who had wholly supported (and motivated) the orthodox approach (exemplified in the 1994 OECD Jobs Study).
In the face of the mounting criticism and empirical argument, the OECD began to back away from its hard-line Jobs Study position. In the 2004 Employment Outlook, the OECD (2004: 81, 165) admitted that “the evidence of the role played by employment protection legislation on aggregate employment and unemployment remains mixed” and that the evidence supporting their Jobs Study view that high real wages cause unemployment “is somewhat fragile.”
The winds of change strengthened in the 2006 OECD Employment Outlook entitled Boosting Jobs and Incomes, which presented a comprehensive econometric analysis of employment outcomes across 20 OECD countries between 1983 and 2003. The sample included those who have adopted the Jobs Study as a policy template and those who resisted labour market deregulation.
The report provided an assessment of the Jobs Study strategy to date and reveals significant shifts in the OECD position. OECD (2006) finds that:
- There is no significant correlation between unemployment and employment protection legislation;
- The level of the minimum wage has no significant direct impact on unemployment; and
- Highly centralised wage bargaining significantly reduces unemployment.
I wonder if Mr Beecroft has taken the time out from racing his Aston Martin and signing dismissal notices that his private equity company delivers to workers in firms it pillages to read the evidence.
Then he would know as we know that his intervention is ideological not economic (Note: he claimed that Vince Cables objections were ideological not economic).
And all of this when the British Office of National Statistics published the revised National Accounts data for the March-quarter 2012 which shows the double-dip recession in the UK is worse than previously thought!
Conclusion
It is clear that the thrust of austerity, while being dressed up in the language of fiscal consolidation and saving governments which cannot go bankrupt from bankruptcy, the insidious and underlying agenda is to continue the neo-liberal demolition of labour market protections, income support provisions and more general social security that the majority of us enjoy and have prospered from.
It is clear that they want – to take us back as close to 1844 as they possibly can.
But there is a reason that trade unions formed and eventually advanced nations introduced comprehensive systems of income support, health and safety regulations, and industrial rules protecting workers’ jobs and rights. There is a reason why the Welfare State became central.
These characters haven’t understood history. It will come back to haunt them.
Saturday Quiz
The Saturday Quiz will be back sometime tomorrow. I have made the questions relatively straightforward (-:
That is enough for today!
It seems that in the US Mr. Beecroft would make an excellent candidate for president.
” the one in the Aston Martin with that cultivated look of disdain that Tory millionaire elites tend to acquire early in life”
Brilliant line.
“upon further scrutiny (not much I can assure you) are re-labelled a dangerous Communist.”
ROFL.
Bill’s on form today!
That is certainly the plan, and why I’ve come to view the job guarantee as the most radical element of macroeconomic reality. It’s the complete antithesis of ‘supply side reforms’ all those esconced in institutional sinecures so energetically promote, a dagger at its heart.
The very idea that that ‘wealth creators’ should have to compete for workers at a modest level is indeed a terrifying prospect.
Its also (at least and perhaps more) as challenging as the sectoral/taxation aspect to contemplate in the stagnant waters of mainstream economics.
This attachment to the discipline of insecurity certainly runs deep.
A deeply satisfying schism by the mmr group illustrated this pretty well, and made me wonder why the frequently cited Zimbabwe is not teeming with entrepreneur-bloggers.
Wonderful article.
I am ploughing through Marx’s Capital Vol III at the moment and came across another apposite Victorian example from the North of England- this time Blackburn, Lancashire. In Chapter 6 ‘The effects of changes in price’, Marx highlights the public works schemes employed by the bourgeoisie and relief committees during a slump in cotton manufacture:
“Wages were miserable, even where work was full time. The cotton workers willingly offered themselves for all public works such as drainage, road-building, stone-breaking and street-paving, in which they were employed, to get their keep from the authorities (although this practically amounted to assistance to the manufacturer. The whole bourgeoisie stood guard over the labourers. Were the worst dog’s wages offered, and a labourer refused to accept them, the Relief Committee would strike him from its lists. It was in a way a golden age for the manufacturers, for the labourers had either to starve or work at a price most profitable for the bourgeois. The Relief Committees acted as watch-dogs….
…Mr. Henderson, president of the committee in Blackburn, wrote with reference to this to factory inspector Redgrave:
“Nothing in my experience, during the present period of suffering and distress, has struck me more forcibly or given me more satisfaction, than the cheerful alacrity with which the unemployed operatives of this district have accepted of the work offered to them through the adoption of the Public Works Act, by the Corporation of Blackburn. A greater contrast than that presented between the cotton spinner as a skilled workman in a factory, and as a labourer in a sewer 14 or 18 feet deep, can scarcely be conceived.”
Is this not the Victorian version of Ian Duncan Smith and the policy to make the unemployed and benefit claimants work for their benefits or starve? For the benefit of the multinationals who stand to gain maximum surplus value from the claimants?
plus ca change, plus c’est la même chose.
Serious question (which I hope won’t mean that I am labelled a dangerous Capitalist).
Once you have the Job Guarantee in place (at a fair minimum wage), do you still need extensive employment protection legislation? It always strikes me that once a relationship between an employer and employed has broken down it is best to terminate that relationship with the minimum amount of fuss possible.
I was wondering whether something simple like a straight pay off would do? Say three months salary and that’s that.
I would think the ability to say “stuff your poxy wages and working conditions, I’m off to the labour exchange” would be extremely empowering, and an extremely disruptive technology.
Great article.
Dear Bill
There is only one way to reduce the dependence of political parties on rich donors and that is public financing of political parties. In Canada, the government of Jean Chrétien introduced a scheme which entitled a political party to receive 1.75 dollar per year for every vote that it received in the previous election. The Conservative government of Harper has abolished it because Conservatives are much better at fund-raising than their rivals, not because they have so many rich donors but because they have more diehard supporters.
Public financing of political parties of course favors existing parties, but they already enjoy a huge advantage anyway, especially in countries like Britain and Canada, which don’t have proportional representation.
Whether we like it or not, political parties are no longer mass organizations. Everywhere party membership is down. On the morrow of WWII, the Conservative party in Britain had more than 3 million members, but today it has fewer than 300 thousand. In Germany, a country with over 80 milion people, the 2 largest parties have fewer than 500 thousand members each and the average age of the members is over 55 for both parties. People may be reluctant to join a political party, but without political parties a democracy can’t function. It is therefore quite reasonable to force them to subsidize political parties through their taxes. It is certainly more democratic than to make parties dependent on a few wealthy donors.
Regards. James
In Canada, people are fired or get laid off all the time. What this has to do with the wretched conditions faced by workers in 1844 is beyond me. Austerity is a step backwards, and workers will suffer, but lets be reasonable. A return to 1844 is not in the offing.
The elites may rue their forced retirement from the reigns of power, but I suspect they will do just fine in continuing to enjoy the good life. The days of losing your head to the local peasantry are over, thanks to modern transportation and a global economy.
@Bill ~ Wonderful article. Seeing as to how the history of economics is being purged from “serious” academia, feel free to chime in on it anytime. In order to slay the giants, we must first remove the myths they use to enslave us. This is why we study history, and why our enslavers endeavour so purposely to rewrite it.
@Neil ~ I’ve had similar thoughts regarding the minimum wage. It would seem unneeded were there a job guarantee. (People could choose to work for less if they felt otherwise better compensated, but no one would be forced to.) Also, unemployment comp could perhaps be reduced by the guaranteed wage, with the max benefit period extended to compensate for this.
On the other hand, I’m sure some primitive capitalist (like Adrian Beecroft) would figure out a way to game this. It takes so few bad actors to overcome mountains of good intention.
I’m struck by B@L’s “few bad actors” reference. It seems to me too common to institute rules to catch these ‘few’ which punish everyone. I’ve seen this so many times. I think this flows into Neil Wilson’s comments about micro/aggregation. I hear so many comments along the line of “I know someone who……” and “I worked hard and made it…..”. We seem to have lost the ability to think about the big picture and to think critically. I’m an optimist, so I won’t say this was a plan all along, just a happy coincidence I suppose.
Dr. Mitchell,
First, I love your work and have learned a lot from you. My wholehearted thanks! Please continue and may the Lord bless you.
But (you knew it was coming?) why have a gauranteed jobs program? Why not a Negative Income Tax instead if the goal is to get vertical money into the economy? And what about a universal bailout ala Steve Keen?
@Michael ~ I’m sympathic to your commplaint, and have thought about this also. The problem is that our “rules” for writing laws do not allow us to specifically identify these bad actors, but instead force us to identifying them merely by their “class”. The only solution I’ve come up with is to directly appeal to those classes to self-police their members, warning them in advance that should they not, we will be forced into acting against the whole class. As you suggest, our “broader nets” will sweep up innocents too, but what is the slternative? The “few bad actors” are simply toxic, and ruin things for everyone. There is a point at which society in toto is threathened by these people.
In a similar vein, Christine Lagarde expresses her lack of sympathy for the Greek people, including their children:
http://www.guardian.co.uk/world/2012/may/25/payback-time-lagarde-greeks
What an absolutely delightful human-being.
Robert,I suspect that you write from a position of comfort and some degree of ignorance about what is going on in the world at present. A “return to 1844” may not be in the offing but is certainly possible and maybe probable if the working class doesn’t get their resistance act together.
As for losing your head to the local peasantry, make sure you guard yours well by using what is in it to good effect.
The problem is capitalism itself. Leaving aside, for a moment, the problem of Capitalism’s internal contradictions, there is the problem of Capitalism’s contradiction with physical and ecological reality. Endless growth capitalism (the only type) is impossible in a finite world. In the end (and that end is soon), capitalism must be overthrown in its entirety and replaced by steady state, sustainable, worker cooperative socialism. The alternative is the total collapse of world civilization and human extinction. Those are the real stakes.
Bill’s essay seems prophetic alongside the overnight announcement by the Australian government that it will allow Gina Rinehart (uber-wealthy mining magnate) to fly in foreign workers to establish an iron ore mine in Western Australia, against a backdrop of 12.5% under-utilisation of domestic labour resources.
1844 was indeed a long time ago, but raw capitalism’s DNA does not seem to have undergone any evolutionary changes since those awful times. As dangerous as ever to the interests of the common man.
“The alternative is the total collapse of world civilization and human extinction.”
Alas, the more likely alternative, Ikonoclast.
@Ikonoclast
I think there’s just too much civilisational inertia for us to avoid the iceberg we’re headed towards. The atomising nature of the system has created networks of dependence that leave us vulnerable to shocks on a global level like never before. The drive for efficiency has produced growth at the cost of resilience. The majority of us are now so dependent on the system that we will likely cling to it for dear life as it drags us into oblivion.
According to Marx and Engels the transition from capitalism to the dictatorship of the proletariat to the withering away of the state is inevitable. Why would we have to worry about it? If it’s inevitable no one can stop it. Might as well just relax and wait for it to happen. . And there’s no hastening it either, the conditions have to be right. Might as well just watch it occur. Even reading or studying Marx is pointless, like studying the Bible, it would make Marxism a religion rather than a science.
@John Armour
Why was it ok for the white South African migration to Western Australia post-apartheid? Many bigots from South Africa migrated to Australia as they did not prefer to serve under ANC regime. They were given almost (the land was very cheap then) free land to settle in WA and other states of Australia. Many of these South African migrants have been working in Perth since 1990’s.
And now, why is not ok for Chinese workers to establish an iron ore mine in Western Australia?
Why do you have double standards ?
Cheers,
Sriram
Sriaram,
The salient point in my comment was “against a backdrop of 12.5% under-utilisation of domestic labour resources.”
You seem to have missed it.
The nationality of the imported workers was the farthest thing from my mind, let alone some conflicted principles about waves of white South African immigration some 20 years ago.
I wonder whether there’s an impression that time is running out since this is coming out of Germany:
“SPIEGEL has learned that the German government has developed a proposal calling for special economic zones to be created in crisis-plagued countries at the periphery of the euro zone. Under the plans, foreign investors could be attracted to those zones through tax incentives and looser regulations.
The proposal is part of a six-point plan the German government plans to introduce into the discussion on measures to stimulate economic growth taking place in the European Union. The proposal also calls for the countries to set up trusts similar to the Treuhand trust created in Germany at the time of reunification that then sold old off most of former East Germany’s state-owned enterprises in order to divest those countries’ numerous government-owned companies.”
…
“The plan recommends that countries with high unemployment also adopt reforms undertaken by Germany, including a loosening of provisions that make it difficult to fire permanent employees and to create employment relationships with lower tax burdens and social security contributions.”
http://www.spiegel.de/international/europe/german-government-wants-to-create-special-economic-zones-in-europe-a-835224.html
There was an interesting piece a couple of years ago by Eric S. Reinert, which suggested that we are moving to an 1848 world: “The Terrible Simplifers: Common Origins of Financial Crises and Persistent
Poverty in Economic Theory and the new ‘1848 Moment’.” I don’t agree with everything in it, but it’s well worth considering. I am going to try to reproduce a table in text below (probably make a mess of it). Anyway, see http://www.un.org/esa/desa/papers/2009/wp88_2009.pdf
Table 1: The Coming Shift in Economic Focus: Before and after the 1848 Moment
Pre-Financial Crisis Focus Post-Financial Crisis Focus
Capital Technology and entrepreneurship
Financial economy Real economy
International trade National production
Economic models Economic facts and their contexts
Distribute capital (‘aid’) to eradicate poverty Distribute production to eradicate poverty
Perfect competition Poverty eradication needs high wages and capital formation
that only dynamic imperfect competition creates
Economics strongly ideologically biased. Separation of analysis and ideology, ‘technocratic’ analysis
Economic activities qualitatively alike Economic activities qualitatively different
Gross national product per capita Real wages
Economics as a science defined by Economists’ toolbox extended to any relevant
the use of certain tools approach.
The market as an ideological goal The market as a tool for wealth creation
It will be interesting (in a bad way) to see just how close to 1844 we can get. On the one hand, from the present state of things, the distance may seem too long to be realistic. On the other hand when the “common man” starts to sing the same song in unison with the capitalist, I start to worry.
I mean, sure, the the possibility of losing a job etc. is indeed scary but I just don´t get why, say, the idea of lowering wages is popular – to me it seems – among those who will ultimately suffer from it. The end result of a race to the bottom is slavery. And if lowering wages will not have that effect in entirety, the politico-industrialist class can always find ways to reinstate it. There are already indirect/partial cases of this, for instance, by “employing” prisoners and taking care of a steady stream of new ones, “trainees” instead of proper employees; making unemployed to work full hours for the measly “benefits” and so on.
It is incomprehensible even from the capitalist side (as a whole) as well, since, ultimately, things and services are produced so that someone would buy them. However if that someone´s buying power is slashed, the less things and services are bought which will put pressure to lower prices and, hence, the cost of production -> another round of lowering wages. But I suppose that when one is behind the steering wheel of an Aston Martin (as an owner) everything is fine and if there is a problem, it’s the worker’s fault.
By the way, I propose a new way of settling the soundness of economic theories: if you own an Aston Martin, your theories are correct. Appeal to ownership, like in the good old 1844…
@ F. Beard
Long time no “read”. The internet is, after all, a small place indeed…
«A world where a scarce few but very wealthy capitalists supported by a small middle class ruled over hundreds of thousands of impoverished workers»
That’s exactly the goal for most voters in most anglo countries (USA, UK, Australia, …), as proposed by the neoliberal elites. It is what I call the plantation economy.
Because most “anglo” voters are persuaded that they are entitled to comfortable 30-40 year retirements in the style of lords of the manors, and they think that they will be part of the small middle class living off the hard work of immigrants (mexicans in the USA, easteuropeans in the UK, …), and off the massive tax-free capital gains on their houses and their share accounts.
They vote for more asset price bubbles, lower capital gain taxes, higher subsidies to older retirees and lower welfare to young worker,
In the UK they have voted strenuously to “invest” the oil export money into more asset price speculation, but that story is at an end as the UK is now a net oil importer:
http://mazamascience.com/OilExport/output_en/Exports_BP_2011_oil_mtoe_GB_MZM_NONE_auto__.png
Of course the majoriry of voters, the rentier middle/upper class middle/older aged boomers (largely female) don’t realize that they are the marks in this con, not the accomplices.
David Frum has summarised the politics very nicely:
http://nymag.com/news/politics/conservatives-david-frum-2011-11/index4.html
«Rather than workable solutions, my party is offering low taxes for the currently rich and high spending for the currently old, to be followed by who-knows-what and who-the-hell-cares.
This isn’t conservatism; it’s a going-out-of-business sale for the baby-boom generation.»
If the financial system had crashed, the industrialized countries would be in recovery by now. We would not have returned to 1844 or thereabouts. Austerity is just a longer, drawn out version of what would have happened absent the bailouts. It is also inevitable, absent MMT insights in managing another way out of this crisis. Re-igniting another bubble would just bring us back to 2007 or thereabouts.
I think the chances of regressing to the mid 19th century are nil, given that the energy crisis is not turning out to be as much of a crisis as had been feared. As a consequence, ‘growth’ based economics are not yet a relic of the past. In the real world (in my case, Canada) most people are getting on with their lives. The glass may not be full, but it is far from being even half empty.
Economists are said to have successfully predicted 9 of the last 4 recessions. It appears the same is true for doomsayers.
Good article.
Couple points. The OECD chart on labour protection threw up a surprise, Turkey in lead place. I can remember in the late 1980s reading an article about how the Thatcher government’s extension to two years of the period a worker can be dismissed without an employment tribunal claim was worse than Turkey’s, then a byword for bad labour regulations after the military dictatorship. The New Labour government reduced the period to one year and now the Tories and Lib Dems have put it back again to two. The progress of Turkey on workers’ rights (about which I know nothing) shows that things can change in a progressive way under neo-liberalism.
Has anyone seen Beecroft’s idea on child labour? Beecroft is indeed evil but Lagarde latest outburst in the London Guardian struck me as pretty obscene. The IMF, World Bank, OECD and governments are united in using the crisis to drive down living standards and take more for themselves. They have been gunning for pensions and welfare spending in most reports over the past few years.
The lack of opposition means that the only comfort I have is that Marx (and Smith and Ricardo) was pretty clear that luxury spending if left unchecked would undermine accumulation.