Saturday, February 14, 2015

Labour Reforms: A Marxian Relook

Satyaki Roy


We begin with two stylized facts related to labour and industrial growth in India: first, the share of wage cost in gross value of output has declined sharply from 9 per cent in 1973-74 to roughly 2 per cent in 2011-12. This simply reflects the fact that in organized manufacturing the relative costs of employing labour seem to have drastically declined over the years. The second important fact being that the workers working in labour intensive sectors account for a lower share of both total wages and output compared to those working in other sectors.  In other words the significance of labour intensive sectors in terms of providing wage income and producing manufacturing output is on the decline. It has been widely recognized as well that capital intensity in manufacturing has been increasing in India despite being a ‘cheap labour’ economy. And this is largely related to ‘compression of time and space’ in globalization that internalizes global competition in the ‘local’. The local-global dichotomy in terms of markets and competition is increasingly becoming blurred. Industries face global competition in the local space and as a result often adopt technologies developed in the West that are labour displacing. This is further triggered by the trajectory of growth in India which has been heavily dependent on profit income that favour consumption of luxuries and importables that also induce labour displacing technologies. Moreover there has been a relative cheapening of capital because of easy flow of finance that also favoured capital intensive technologies.

 Given these standard narratives on the declining importance of ‘living labour’ in production the moot point however is why it is so important to bother about labour cost and talk about labour reforms that anyway constitute a miniscule share of the production cost in today’s manufacturing? On the contrary the importance of such reforms which to a large extent are meant to destroy the legitimate rights of the working class, whatever little exists, appears to be so obvious that none of the mainstream media did ever debate these issues at any level of seriousness. It appears that a social sanction possibly has been arrived that one can choose to be ‘ethical’ and ‘humane’ to question the grand narrative of market but there is no point of being ‘ideological’ and ‘orthodox’ to question policies that lead to devaluing labour.

Let us recall once again the narrative of ‘competitiveness’ which is often assumed to be something beyond question in a market driven ‘enterprise society’. In the wake of global competition although concentration and centralization of large capital embodied in global monopolies increased but it has largely destroyed local monopolies that are no longer protected from external competition. As a result barring a handful of TNCs/MNCs in the global plane most of the producers in developing countries are ‘price takers’ and hence feel the pinch of competition. Excepting some niche areas it is largely a competition based on costs and therefore efforts to bring down production costs seems to be a legitimate move for an individual capitalist. As Marx characterized long back that competition in capitalism is war like, it is a ‘do or die’ for individual capitalist and one can hardly come across the silence and serenity in such competition as depicted in general equilibrium models pursued in mainstream economics. And the most important point that old Marx taught us is that all other inputs except labour power that the capitalists purchase enter into the value of the final product as it is, they reproduce exactly the same value to the final product. Given the dominance of capital over labour, it is only the labour power out of all that has the unique character of producing more value than itself, and it is the source of capital’s surplus value that gets realized in the form of profit (Capital vol. I). Therefore capitalist competition, other factors remaining unchanged, is all about ways and means to reduce the absolute or relative value of the labour power. Therefore whatever be the component of ‘living labour’ in the production process it is the only source of surplus value that gives rise to capitalist’s profits.

Moreover in the context of globalization uncertainty in global demand has increased, parameters of corporate performances are increasingly linked to shareholder returns and finance dominated parametric structures make the demand more volatile. Hence to ride over the swings of global market capital demands more flexibility to handle the labour at their disposal, avoid permanent nature of jobs that involve addition to fixed costs rather prefer an ‘as and when’ kind of arrangement. The advantage of this kind of arrangement is that it relieves the capitalist class from the social burden of treating workers as human beings. And once relieved from such costs, to the capitalist labour becomes very similar to any inanimate input, coal or electricity, wood or plastic, easy to buy and throw, without the moral hazard of providing a living to a human being or bear the costs of their institutionalized rights. Individual capitalist is always keen to reduce the exchange value of labour power, pay lesser wages to workers or relatively reduce their claim in the total value produced. In other words a capitalist would always be happy to reduce real wages paid to workers but s/he would also be happy if real wage increases but the gap between labour productivity and real wages widens faster. Making the worker more vulnerable helps the capitalist reducing wages as it increases competition between workers. On the other hand weakening institutions that protect claims of workers makes it easier to reduce the claim of workers out of what they produce.

The value of labour power as Marx conceived is given by the value of goods and services required by the worker to live and be in the labour force. But what is required for the worker is not determined by some physical attributes but by what society considers necessary and that is time and space dependent. For instance, societies for whatever reasons if collectively agree that a worker should have a decent living, get access to good health and safe drinking water, their children should go to school, and should have provisions to a minimum cultural life, at least one television set and so on, valuing of labour power should factor in those as requirements. A society which considers that for the sake of some defined efficiency and competitiveness labour should not claim a human living, why should their children think of going to school? or have the luxury to play,  then the sanctioned value for the labour power gets reduced. The crucial point however is what determines the attribute ‘socially necessary’ and the way Marx understood it is that the value of this crucial variable is determined by the class struggle. Therefore the calculus of the value of labour power or the amount of total labour value that society agrees to spend on maintaining the workforce is determined by none other than the struggle between the capitalist and the working class. When the workers  of the world as a class gained some strength with increased bargaining power in the presence of the socialist bloc, capitalism responded with models of ‘social contract’ and ‘welfare state’ agreeing to the idea of living wage. While in the past three decades the workers of the world experienced a setback vis-a-vis capital and capitalism henceforth gave up notions of ‘living/family wage’ rather adhered crude norms of market to determine wages of workers.

The irony however is that even if it seems to be ‘rational’ for an individual capitalist pursue de-valuing the labour power but the capitalist class as a whole also requires the social reproduction of these problematic people called ‘workers’. Therefore the capitalist state as a representative of the capitalist class as a whole put a check on the individual capitalist’s motive to reduce the value of labour power. Historically the enactment of Factories Act or the Minimum Wages Act are some of the acts which the capitalist state was forced to institute as a response to working class struggles in order to at least set some minimum workplace norms and a floor to restrict the free fall of wages. In the neo liberal regime however unshackling the ‘enterprise’ is the social goal and competition is the mode of organizing societies. Therefore wherever and whenever possible the institutions that protect the rights of workers are taken to be causing unfreedom to capital and hence needed to be dismantled. But the social reproduction of the working class has to be maintained as well. And as a response to this contradiction the state comes in rescue sharing some burden of social security and welfare schemes that act as surrogate safety net in the context of state being largely withdrawn from the realm of production. Therefore the cost of rearing the future stream of workers goes to the state while the freedom to exploit this workforce lies to the capitalist. And since it is not the capitalists who alone pay taxes rather the larger part of the revenue would be coming from taxes direct and indirect paid by people other than the capitalists; the onus of maintaining the future stream of workforce is partly shifted to the society at large while the right to appropriate the fruits of using this workforce remains to private capitalists. Therefore society in a sense provides a continuous supply of workforce ready to be exploited by the capitalist class at their whims. This change is being embedded in a shift in public discourse as well and the way it goes is the following. Individual capitalists should be relieved from the pains of paying their workers’ legitimate claims, they should get the freedom to hire and fire instead of maintaining the future stream of workers but should share some ‘corporate social responsibility’ in roadside gardening or maintaining a park within the locality. The  advantage of shifting the whole discourse from ‘workers’ and their rights to that of ‘consumers’ or ‘citizens’ is precisely this. The worker, capitalist, middleman, merchant, clerk, teacher, student all are equal citizens and consumers and this apparent equality of rights as citizens and consumers help concealing the underlying class process reducing social contestations to a ‘governance’ discourse premised on ‘state-citizen’ conflicts.

One may argue that the declining share of the labour component in the value of output actually allows little space to squeeze surplus value out of that. And why control on the labour process is so important to the capitalist class given the declining importance of labour as input in production?  Samir Amin (1975) once argued “there is no economic ‘rationality’ that can be placed above the class struggle” (Rule of Capitalism in Agriculture). Now if it is a struggle in the realm of production, the determination of wages and prices needs to be analysed in the process itself, meaning how capital as a whole confront labour and the way wages and prices are influenced by this conflict. For this one has to depend on Marx whose method of analyses was distinctive. It puts forth the dialectical methodology that the conflict between capital and labour as a whole sets the limits of concrete determination of rate of profit and prices realized by individual capitalists. Therefore the labour process has to be viewed in its entirety rather than looking into the tip of the iceberg which is the organized manufacturing sector. One needs to look at how layers of capital interact and confront with each other and the way capital as a whole take advantage and negotiate with labour strata having different degrees of vulnerability. One has to recognize the fact that the spontaneous nature of capitalism entails an underlying contradiction and that is labour process unleashed by an individual capitalist confronts the social division of labour that is accepted by the capitalist system at a given concrete time and space. In other words an individual capital can introduce a higher technology that raises labour productivity or can employ labour at precarious work processes with extended hours of work, but the amount of profit that would be realized by the individual capitalist is not an autonomous process rather co-determined by the average capital that employs certain average technical composition (Capital vol. III). This simply means that the surplus value generated by exploiting labour by an individual capital would not generally be equal to the amount of profit that particular capital would realize rather it depends on the average level of technology in that industry and where does that particular capital stand in reference to that average. Hence surplus value is only potential profit and the actual profit realized by the individual capital is determined by the complex interaction between individual process of production and the general level of production processes at a given point of time. This is precisely the reason why control over the entire production process is so important to the capitalist class as a whole. An individual capitalist might agree to pay fair wage to his workers and can provide facilities which are not given by others. If s/he uses improved technology and skilled labour and can get back from the worker much above the expenses on wages, s/he would not mind raising wages because the widening gap between labour productivity and wages would increase the relative surplus-value even though the real wage increases. But this individual capitalist would not indulge in protecting rights of workers because the entire production process influences returns to individuals. High tech global assemblers of various products starting from shoes, automobiles or i-pads involve subcontracting arrangements with firms located in developing countries where the labour process includes lower wages, longer hours of work and extreme vulnerability. The return realized by high end tips of the icebergs depend on sub-human exploitation of labour dispersed across the world and hence it is important for the whole capitalist class to maintain its class control over the entire labour process even if at an individual level one might agree to pay a ‘living wage’ depending on the returns.

 Finally in the context of globalization countries are getting integrated to a global production network. Now in a particular industry the average rate of profit is driven by the regulating capital who are sort of leaders in terms of innovation and technology but the average rate of profit is the rate of profit realized by the average capital that matches with the scale needed to set in motion the socially normal methods of production. Now each individual capitalist can realize a level of profit which is in proportion to their share in aggregate capital. Given the average rate of profit in a specific industry the amount of profit that enters in the calculation of prices over and above the capital advanced in materials, machines and labour is the product of the average rate and the capital advanced by that particular capitalist. Once industries in the developing world are getting integrated to global production network the scale of operation at which they operate might be well below the social normal scale of operation in that specific industry and as a result such firms can survive in the chain only by accepting a below average rate of profit.  With increasing concentration and centralization of capital at the global level and with rising average scale in most of the industries the firms in developing countries face further threat of profit squeeze. In this milieu what is needed for the capitalist class in countries such as India is to depend on segments that provide a cushion at the end of the vertical chain. The smaller capitals survival strategy is to compare present returns with potential interest earnings attainable by liquidating its productive assets. Therefore they survive at the margin while others who are at the middle of the value chain take advantage of heightened competition between input suppliers and can get a buffer facing a squeeze in return from above. Therefore the labour in the lowest rung has to be brought under greater control of capital. The recent moves to increase the threshold limit of number of workers from 10 to 20 (with power) and 20 to 40 (without power) for Factories Act to be applicable is in this line only . This means that roughly 12.6 lakh workers in the organized manufacturing sector who are employed in factories comprising a large share of 65 per cent of the total number of factories in India that employ less than 40 workers would be out of the purview of labour laws governed by the Factories Act. Furthermore the proposal to raise the threshold limit of number of workers from 100 to 300 for factories that require prior permission from the government to retrench workers under Industrial Disputes Act implies that about 93 per cent of the factories in India can retrench workers without seeking any permission from the government. The tranquillity at the tip would be maintained by the turmoil at the bottom, the world underneath. And the silence in mainstream media and the society at large on the denial of rights of this huge number of workers simply expresses the futility in invoking fancy norms such as ‘rationality’ and ‘distributive justice’. It is a class war at the end of the day.

The author is Associate Professor at ISID, New Delhi.

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