Thursday, 1 July 2010

Labour versus capital

Labour versus capital

Strikes are back! It came as an unwelcome shock, like a ghost from the past, when British Airways cabin crews began their long running militant dispute at the beginning of this year (2010). The political scene throughout the sixties and seventies was dominated by confrontation between labour and management till Thatcherism in the mid-eighties put an end to strikes. There was of course legislation concerning strikes, ballots, pickets, etc.; but maybe there was also a changed mood in the country, an acceptance that strikes were either unnecessary, or counter-productive. However, we see once again militant labour confronting recalcitrant capital in an attempt to preserve wages and privileges, to the considerable detriment of all concerned, including the general public. 

When industrial battle-lines are drawn, the Conservative party naturally supports capital and Labour traditionally supports labour. It was the inability of the Liberals to take sides in the nineteen twenties and thirties that led to the decline of the Liberal party [1]. I hope the same will not happen again to the detriment of centre-party politics. Surely the intellectually correct position is to occupy the middle ground, to see the strengths of both positions, and to resolve the issue rationally.

Of course it is perfectly rational to establish the true value of labour by conflict in a 'free market', but there is conflict that is damaging and conflict that is non-damaging. We do not now practice 'trial by combat'; on the other hand we do determine the value of a manufacturing firm by the free operation of the stock market. The essence of resolving disputes must surely be to ensure that each side can see the true situation of the other side, and trust each other. If management says there is no money for wages, but increases share dividends and management bonuses, then labour is justified in protesting. Such management will ruin a company, and deserves to be sacked. If labour claim privileges that equivalent workers in parallel companies do not have, they must be shown the weakness of their position. A strike leader in such a position will bankrupt his union.

I am surprised that the German concept of Mitbestimmung (Co-determination) has not been taken up more widely. In 1974 it became a legal requirement in West Germany that every firm employing more that 500 workers have worker representation on the supervisory and management boards. A similar law was passed in Sweden in 1976. A white paper studying the idea was prepared for the Wilson government but shelved in the "winter of discontent" and forgotten in the subsequent Thatcher regime.There seems to be some objective evidence that co-determination does indeed lead to improved worker-management relations and productivity [2]; though it may simply be that sensible people produce sensible laws, rather than the other way about — sensible laws producing sensible people. 

There seems a clear rationale for determining approximately what relative strengths capital and labour should have on the board; simply examine the cost of each (per annum, or per unit of production). Suppose a factory producing goods can be rented for £10,000 per week, requiring a work force costing £5,000 per week and material of £2,000 per week to produce items worth £17,000 - £20,000 per week.  The relative value of labour versus capital is 5:10. Or take a power station  for which the capital costs M£9 per year, labour M£6 and fuel M£5 per year. The relative value of labour versus capital is here 6:9. In both these (rather typical) cases it would be ridiculous for labour to be left out of discussions concerning the running of the companies. Their stake is considerable, and their contribution should approach that of capital.

[1]  D. W. Runciman, London Review of Books, 25th May 2010

[2] See also: http://www.theglobalist.com/storyid.aspx?StoryId=8239

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