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THE BIG PICTURE: Labour’s pain

Ralph Jemmott

THE BIG PICTURE: Labour’s pain

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I ONCE WROTE a two-part article in which I argued that in Barbados, the historic struggle between capital and labour was outdated and that the time had come to strike a bargain between two competing legitimacies. Capital, often invested at tremendous risk, has a legitimate right to a fair return on investment. Labour, a key factor of production, has an equally legitimate right to a fair, living wage and should not be forced to sell itself at increasingly marginal rates while capital earns supernormal profits.
The basis of this thesis is a fundamental belief in capitalism as the best way of ordering economic relations in human society. I also believe that free market capitalism is the economic corollary of free liberal democracy in the political sphere. There will be those who will disagree vehemently, but we have to work within the existing global socio-economic parameters, which are capitalist. We cannot say, “Stop the world, I want to get off.”
Since I penned the article referred to above, the balance between labour and capital has shifted exponentially in favour of capital. What has emerged is a kind of predatory capitalism that has sought to exploit labour in no uncertain terms. Even in the midst of a persistent slowdown, the Economist opines that: “American corporate profits seem to have defied gravity.” Analysts are forecasting that companies in the S&P 500 will achieve a further 10.9 per cent growth in earnings per share in 2014.
According to the writer, “The most common explanation for the strength of profits is that economic power has moved in favour of capital and away from labour”. It used to be assumed by economists that the quantum of income accruing to labour, on the one hand, and to capital, on the other, was more or less fixed. However, since the 1980s, workers in most of the capitalist world have copped progressively less of the proceeds of economic growth. Productivity gains no longer translate into broad pay increases for workers. One of the defining characteristics of the United States economy today and for some time has been wage stagnation. In 2014 the average minimum wage in real terms is still what it was in 1964.   
One corollary of this is the decline in the numerical strength and bargaining power of trade unions. Part of the fall-off in union enrolment is a consequence of the diminished role of manufacturing in the economy of many Western states. Manufacturing, heavy industry, used to be the base of union membership.
In the 1960s manufacturing was the engine of Britain’s economic growth, constituting one-third of the economy and employing some six and a half million people. In 2011 it was just one-tenth and employed a mere two million. In Canada Jerry Dias of the Canadian Autoworkers Union (CAW) noted that in the last ten years his union had lost about 600 000 jobs. 
The diminished power of labour in many Western countries has been caused by a number of factors. Firstly, there are the perverse effects of the myth of globalization and trade liberalization, in particular the outsourcing of labour to cheap foreign sources. Foxconn’s China plant churns out a number of electronic devices for Apple and other brands, employing some 1.5 million persons in China. While the returns accruing to capital has increased, American labour has captured less of the proceeds of that growth. An American firm recently threatened that if its US workers insisted on unionization, it would move its operations to Mexico.
Secondly, there is the effect of mass migration, which tends to reduce wages for the lowest paid workers. Technology also accounts for the decline in labour. The Organisation for Economic Cooperation and Development estimates that technology accounts for roughly 80 per cent of the drop in the labour share among its members. That situation may very well get worse as robotics becomes more in evidence. Foxconn is expected to add some one million robots to its factories in 2014.
Thirdly, there is the simple fact of capitalist greed that is flagrantly exploitative of workers. Historically, there has always been an element of greed in capitalism. If “Greed is good”, then anything is possible. Child labour in the mines in Victorian England; sweat shops in early industrial America. Unsafe textile plants in Bangladesh or Duke Energy’s contamination of the ground water system in North Carolina to save money and increase profits from coal production.
Historically, labour unions have been one of the key factors in legitimising liberal democracy based on the capitalist mode of production. In forcing capital to recognise its social responsibilities, unionisation mollified the more exploitative aspects of capital by affording some degree of socio-economic equity-fairness and social mobility. If trade unions are permanently weakened and labour’s share of economic growth continues to decline, this could undermine the moral legitimacy of liberal democracy, which I believe most of us cherish.    
Ralph Jemmott is a retired educator and social commentator; email [email protected]