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Just wages, a key issue

A Response To Boladavui Uluitavuki By Fr Kevin Barr
Friday, November 23, 2012

IN his article "The Price of Labour" in The Fiji Times (November 10) Boladavui Uluitavuki condescendingly dismisses me and others who fight for just wages as "well intentioned social workers" and implied that I was ignorant of economics.

He promoted his ideas on low wages as being based on sound economic theory.

However I too have studied economics but fortunately have also studied other disciplines such as sociology, philosophy and ethics which help me keep economic theories and policies in a more balanced perspective.

His reprimand from Murray Rothbard needs to be seen against that of the celebrated economist, Kenneth Galbraith who, in his book A History of Economics (1989), attached those economists who claimed no responsibility for the social consequences of their theories.

They justified themselves by claiming that their principles and theories had independent "scientific" validity and had nothing to do with moral principles or ethical questions.

Galbraith writes: "The detachment and the justifying commitment to scientific validity as opposed to social concern are especially influential in our own time. When acting in his professional role, the economist does not contend with the justice or the benignity of classical or neo-classical economics. To proclaim economic injustice or failure is, scientifically speaking, off limits. … The pretension of economics that it is a science is rooted in the need for an escape from blame for the inadequacies and injustices of the system."

A low wage economy could make some sense as long as those wages are pegged above the basic needs poverty line for that society.

Otherwise it would contribute to increasing poverty. As a number of studies have pointed out, just wages are a key issue in the alleviation of poverty.

Unfortunately, the neo-liberal free market capitalist system we are following is creating more poverty and inequality around the world and is the root cause of much of the exploitation of workers.

The current economic system, based on economic rationalism, has a fanatical fundamentalism about it.

It encourages not just legitimate profit but excessive greed and individualism. It seeks to produce ever more money for those with the most wealth —with no limits or regulations.

Powerful and wealthy elites are able to use their power and wealth to structure the economic system for their own narrow self-interest.

Individual greed and corporate profit rules the world of business.

Governments (often to their own political advantage) bow to the powerful lobbies of big corporations and rich elites.

In such a society the poor get left behind unless governments deliberately recognize the demands for social justice and set in place policies which will moderate extreme capitalism and make sure that economic growth is redistributed so that all benefit —not just a few.

After the recent economic recession, a number of renowned economists from Joseph Stiglitz to Alan Greenspan admitted publicly the failures of free-market capitalist thinking.

All neo-liberal free-market economists would do well to remember the words of Alan Greenspan —the great US economic guru of neo-liberalism.

When questioned before the US House Government Oversight and Reform Committee on the 23rd October 2008, he admitted a "flaw" in his ideology of "market forces".

He confessed that his faith in deregulation was shaken and said he was in "a state of shocked disbelief".

In effect Greenspan admitted that the "market" sees only the need for continual increased profits for individual businessmen or corporations but does not respond to the needs of the people, social justice and the common good.

At Davos in 2009 David Cameron, the British PM, called for "moral capitalism". He said that neo-liberal capitalism needed to be overhauled and given a conscience - a moral framework to repair the damage done by decades of reckless greed.

He contrasted the super-rich with the marginalised poor and said that markets need to be bound by clearer rules and that wealth needs to be redistributed more fairly. Neo-liberal economists tell us that the benefits of economic growth will "trickle down" to the people.

But nobody believes this myth anymore.

The normal means of redistribution are through just wages (whereby workers can meet the current cost of their basic needs) and progressive taxation (whereby those with wealth are made to contribute to the needs of a nation).

Yet we are seeing 60 per cent of our workers paid wages below the basic needs poverty line and being required to pay indirect tax (VAT) while those with wealth receive huge tax deductions and millions of dollars in "incentives".

Years ago the sociologist Ian Robertson expressed in very clear terms why there is so much opposition to reducing poverty and inequality in Fiji and elsewhere: "Poverty exists because our society is an unequal one, and there are overwhelming political pressures to keep it that way.

Any attempts to redistribute wealth and income will inevitably be opposed by powerful middle and upper class interests. People can be relatively rich only if others are relatively poor, and since power is concentrated in the hands of the rich, public policies will continue to reflect their interests rather than those of the poor."

Neo-liberalism supports the profits of employers over the basic needs of workers. This is very short-sighted even in economic terms because:

* The poverty which is created becomes a financial burden on the nation in terms of health-care, education, police and security, courts and prisons;

* A poorly fed, poorly housed, and poorly educated and unhealthy population cannot be expected to be productive when they come to work. If you want to improve productivity a just living wage needs to be provided; and

* In a low wage economy the more qualified and experienced workers will migrate overseas in search of better wages and conditions of work.

Thus the quality and expertise of the workforce declines.

Strangely, Mr Uluitavuki suggests that wages (and increases thereof) are a form of taxation on an employer. But wages are simply part of the cost of doing business and a matter of justice.

Of course the payment of just wages will limit company profits but just wages are the right of workers.

Business may be the engine of growth but workers are the ones who keep the engine turning.

The author also suggests that an increase in wages will prevent some unskilled workers gaining employment; consequently the demand for just wages can be counterproductive in terms of increased employment.

This is an old argument and has some merit depending on a number of variables —in particular the demands on the labour market.

Unfortunately a number of our economists in Fiji have been trained by the Asian Development Bank, the World Bank or the IMF —all of whom have been labelled "the Poverty Brokers" despite their nice words about poverty alleviation. They think only in terms of neo-liberal free-market economics which is the root cause of so much poverty and inequality worldwide.

nFr Kevin Barr is a consultant at People's Community Network. The views are his and not of this newspaper.

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