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The legal foundations of capitalism are succinctly put forward thus:  “…people who own no property…not only have severely restricted rights but ought to have severely restricted rights…the common man could not be expected to be a free and responsible citizen. And what did responsibility mean? Then as now responsibility was first and foremost respect for property. A recurring fear of political scientists is that the rabble of the propertyless will be roused to seize or destroy the property of the rich and well born. As Adam Smith was among the first to observe, it is indeed a wonder that such arousal has not generally occurred. The rights that constituted physical property…have been extended to the new form of property, which is a share in a corporation. In effect, they have been extended to the corporation itself. Hence the corporation has the right to recruit people to work with its property and also the right to discharge the recruits at its convenience. The rights of property are sacrosanct. Employment is generally considered to be property of the employer rather than the employee. The rights to life, liberty, and the pursuit of happiness are subsidiary to the rights of property…Property, which is not and never has been alive, is more important in the eyes of the law than living men and women.” Thus, the requirement of responsibility to protect propertyless laboring people as a public moral code can be done away with.

In fact, this is what has already happened.  De jure or de facto, the whole world has drifted towards systematically dismantling the protective labour laws associated with social democratic capitalism that was there up until the onset of neoliberalistic globalization since the late 1980s. In the process, most workers have begun to live or die with the hire and fire system and the associated worker rights deficits.

For example, in New Zealand, the Employment Contract Act of 1991 has imposed a commercial contract on individual sellers of labour power. With the introduction of this Act, the union role has virtually vanished. In the Republic of Korea, the government has amended labour laws to permit mass layoffs and retrenchment. In Japan, the new Equal Employment Opportunity Law, 1997 has abolished protective provisions for women workers. In the new law, the limitation on overtime, prohibition of work on holidays, and no working at ‘night’ are no longer provided for women in Japan. A change like this one in Japan has already been brought out in India specially in order to facilitate the India-shining comparative advantage in the IT sector.

In the Organisation for Economic Cooperation and Development (OECD), which constitutes the developed world, and which boasts about itself as pursuing “better policies for better lives”, even social democratic parties and Stalinist left parties and their trade unions have embraced neoliberalism, willy-nilly or whole-heartedly.

A quintessential case study in this regard is the onset of “new labour laws” in Spain, which was repeated in country after country in Europe. In the latter half of 2010, the Spanish Socialist Workers Party government won parliamentary approval for new labour laws which are part of a most stringent austerity plan on society that includes a 5 per cent cut on civil service pay, cuts to pensions, an increase in the pensionable age and the slashing of government capital spending programmes. These brutal austerity measures are demanded by the international financial institutions offering ‘rescue packages’ against government debt and by the big business as well. According to the new labour laws, companies can now hire and fire at will. The International Monetary Fund has typically hailed this labour law reform as “absolutely crucial” for creating new jobs. However, the radical left in the country has attacked the Spanish government for imposing the cost of the economic crisis on workers and the Spanish trade unions for failing to prevent the destruction of their members’ jobs, pay, and social conditions. First, in light of the new labour laws, unemployment soared even as Spain suffered from depression levels of unemployment and social misery. Secondly, those new jobs that have been created are on temporary contracts, or “garbage contracts” as they are widely known. These indecent contracts allow employers to fire workers cheaply and quickly. One-third of the Spanish workforce is already on temporary, garbage contracts. Now the new labour laws make the other two-thirds just as vulnerable to dismissal. It will allow the employers to drive down wages and increase their profits. Employers can now cite potential future losses as a reason for making workers redundant. Workers have fewer legal avenues to challenge job losses. And redundancy payments have been slashed!

The Australian case is also very trend-setting. What has cleverly come out of the neoliberal economic way of thinking in Australia is the corporatization of labour laws, i.e. labour law has become a subset of corporate law. What does this mean? In the name of “workchoices legislation” as the new industrial relations law in Australia, this means apparently that the workers now have the right to bargain for whatever conditions and hours of work best suit them and their families. However, the term “workchoices” is largely a misnomer. The only choice lies with employers as they can choose to offer a collective or individual contract. Many workers, especially new and young ones, are likely to be offered only the individual contract, and due to their lack of bargaining power, often their only choice will be to take it or leave it and search for another job. The central point is that individual contracts are likely to offer inferior conditions of employment. The right-wing Liberal Party and big business were extremely pleased with this neoliberal labour law reform as conducive for economic growth in contrast to the countervailing view that it will undermine people’s rights at work; deliver a flexibility that in most cases is one way, favouring employers; do, at best, nothing to address work-family issues; have no direct impact on productivity; and disadvantage the individuals and groups already most marginalized in Australian society. Many workers hired as independent contractors, which is happening apace, will find that their incomes are more uncertain, their hours of work less predictable, access to paid annual leave non-existent and the threat of dismissal ever present.

Under the neoliberal labour law reform, there is evidence to the effect that wages and benefits of many Australian workers have declined. Given that the right of employees to choose to bargain collectively and to require employers to recognize this choice is not protected in Australia, employees are forced to take individual agreements and denied access to collective agreements which deliver better wages, better employee ‘voice’ in the workplace and better working conditions than individual agreements. This is not all. Under the new regime, the right to strike or to take almost any other direct action that interferes with the employers’ operations is illegal and attracts very heavy fines except in the designated bargaining period after an enterprise agreement has finished. Even then, withholding of labour is only permitted if supported by a majority of workers in a secret postal vote, organized over some weeks by the Australian Electoral Commission. Even after the vote, either the employer or government can request that the Australian Industrial Relations Commission hear the dispute in the hope that it will rule that due to social disruption the bargaining and therefore striking period be stopped, thereby forcing workers to return to work. Furthermore, it is illegal for unions to strike in sympathy with any other union. There are restrictions on the right of union officials to enter their members’ workplaces. It is also illegal to engage in “pattern bargaining” (i.e. the attempt of unions to achieve essentially the same terms and conditions for their members in a particular industry no matter which firm employs them). There is now no legal protection for workers from being unfairly dismissed. Consequently, temping has increased rapidly, with even more worsening of the terms and conditions of employment. In some cases, workers on collective agreements are dismissed and retaken on individual agreements.

The above neoliberal labour law reform was more or less intact, with a few modifications in favour of labour, even after the Labour Party defeated the Liberal Party in the 2007 Australian elections that became world famous because with them for the first time the role of the state in industrial relations became a central issue in an election in an English-speaking first-world nation. That the Labour Party is in power, does not make much difference to labour, though. Left is Right and Right is Left, so to say.  For, the absurdity and tragedy of this reform continues even as there is mounting evidence, contrary to the prediction of neoclassical economics, to the effect that reducing wages does not necessarily increase employment, and increasing minimum wages does not necessarily reduce employment; and that free market, right-wing policies skew the distribution of income, in the process of economic growth, disproportionately in favour of the upper classes, i.e. the rich get richer.

In America, i.e. the US,  not only employers, but also unions, political parties, the supreme court and civil society organizations have come together to mercilessly ravage on unprotected labour.

In India, the truth is that the Indian labour market is by and large completely unregulated now. The so-called labour market reform requirement via contractualising and casualising the workforce without social security benefits and smashing unions and nipping union formation possibilities in the bud applies to only 3 per cent of the Indian workforce in the organized sector, and in this connection what is in store for the ‘workmen’ by the old law is articulated unabashedly by the largest temp firm called TeamLease, much to the delight of the corporates in India and abroad and the intellectuals serving the cause of the Twin Sisters—the long-term World Bank and the short-term IMF. Moreover,  the Supreme Court of India’s  2003 judgement that “there is no fundamental right to go on strike”, “there is no legal/statutory right to go on strike” and “there is no moral or equitable justification to go on strike” is nothing but “part of a trend represented in a catena of verdicts of the highest court that appears to have fallen in line with the neoliberal economic theory that thinks, albeit mistakenly, that trade unions distort labour market and even create unemployment and hamper growth. From the ban on bandh and general hartal to the ban on rallies during working hours the fundamental right to freedom of speech is being smothered out. Neoliberal ideology has apparently gripped the intellectuals including judges of the country to become a material force”.

Thus the right to strike which had overwhelmingly acquired the status of fundamental right in democratic countries, especially during the postwar period of “golden age of capitalism” is now deemed illegal and criminal which is reminiscent of the Combination Acts of the State in Britain in early 19th century that made combining to raise wages and improve working conditions a criminal offence. The basic problem with the lawyers and judges is the basic problem with the neoclassical economists which is that “they cannot but think of ‘contract of employment’ like any other contract between equal and free possessors of property rights. While the direct relation between workers and individual capitals, that is industrial relations, may have the form of a contract between free and equal parties, the contract of employment is, in fact, an act of submission in the beginning and act of subordination in execution as noted long ago by Otto Kahn-Freund, former labour judge of Weimar Republic….The failure of the judiciary to understand the contract of employment as relationship of subordination makes them apply instinctively an inadequate individualist philosophy to the collective class realities of industrial relations. Recent spurt of individualistic human rights discourse has only reinforced the judicial instinct to ignore class contents of industrial relations and treat capital and labour as equals”.

This kind of judicial activism in tune with the legal foundations of capitalism, also takes undue liberties to pontificate that the employees should be more duty-conscious in order to do more work honestly, diligently and efficiently even as it  absolves implicitly the militant employers of their ethical corrosion resulting in workplace misdemeanours and misdeeds on their part. The latter with governments as their agents have, therefore, no qualms in imposing ‘integrity pledges’ or ‘good conduct undertakings’ and the like on their employees deemed as ‘work-thieves’ (kaam-chor). Don’t question the ravenous appetite of the ‘robber barons’ in consuming the ‘ragged trousered philanthropists’!

The legal concept of employment and the attendant labour laws reform and judicial activism on the above lines also suggest explicitly or implicitly that permanent labour is less productive than unprotected labour. Whether employers can get and sustain greater and greater world class productivity and quality of work from insecure and fearful labour is a moot question to be researched, though.



By Annavajhula J.C. Bose

Department of Economics, SRCC





Extracted and adapted from Bose, Annavajhula J.C. 2012. Libertarian Labour Laws: A Thumbnail Discussion. Indian Streams Research Journal. 2 (9). October.

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