Will the Real Mr. Jaithirth Rao, Please Stand Up!

October 28, 2012

Maya John

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In its 8 September 2012 issue the Tehelka Magazine carried an article by a distinguished right-wing economist, Jaithirth Rao. It was titled ‘No Law for Workers’ Rights’ and was part of his special monthly column in the Tehelka. The article was, needless to say, disturbing and warranted a proper reply. As expected, the Tehelka declined to publish a critique of the article. Reproduced below is the critique of Rao’s article on the state of labour laws in India.

In his article Jaithirth Rao attributes India’s current economic condition, in particular, the condition of the manufacturing sector, to “misplaced concessions” granted to unionized workers through so-called pro-labour laws which successive governments have formulated. According to Rao, these “misplaced concessions”, namely, the denial of the right to lay-off workers without government ‘approval’ and the restriction on the use of contract labour for regular work, have prevented the growth of a flexible labour market in India. Unable to fire workers depending on fluctuations in the market, Rao argues that the existing laws discourage capitalists from hiring large numbers of workers even if they require a large workforce. As a result, employment generation is minimal. Moreover, since these ‘unreasonable’ laws are applicable on larger enterprises which employ more workers, capitalists have been compelled to float small, “uneconomic units” as a viable alternative to large factories. To explain how such labour legislation persists despite the ‘un-competitiveness’ and unemployment it generates, Rao highlights the relationship of “mutual protection between select unions, their leaders and the state”. According to Rao, this “patron-client” relationship which exists between governments and unions has led to the growth of an “overpaid, underworked, unionized aristocracy” that “tacitly” agrees to sidestep the rights of non-unionized workers.

Expectedly for Rao the only solution to this unfortunate situation is liberalization of existing laws so that a flexible labour market can emerge and the manufacturing industry can finally “take off”. He contends that the removal of protective legislation will motivate capitalists to construct large and more competitive manufacturing units which provide greater employment. Unafraid of being able to fire at their absolute discretion, capitalists will apparently hire more workers without any hesitation.

Clearly, Rao likes to play with images and assumptions instead of addressing the actual condition prevailing in the manufacturing sector. He would rather project rapid mechanization and replacement of labour-intensive production as the current condition of the manufacturing sector than show his readers the actual conditions prevailing inside production units today, wherein, cheap labour slaves away for more than the stipulated 8 hours a day. Similarly, Rao would equate gainful employment with fluctuating jobs rather than stable, permanent employment. Having created sufficient panic within the average reader by projecting India’s growth as sluggish vis-à-vis the booming economy of its ‘aggressive’ neighbour, China, Rao in an ingenious move projects the particular interest of capital, i.e. relaxation of labour laws, as the general interest of the working class. First he posits that the particular interest of unionized, permanent workers does not benefit the class of workers per se. He then proceeds to argue that since the particular interests of unionized workers clash with the general interests of the class, working class interests are best protected if ‘archaic’ laws favouring unionized workers are repealed. Hence, on proceeding to his second point, which is that liberalization of laws benefits the working class as a whole, Rao cannot but help reveal his true colours, i.e. his pro-capital bias.

In reality, Rao is consciously misleading his readers by concealing the fact that a relatively flexible labour market already exists in India as most workers remain un-unionized, and therefore, incapable of resisting lay-off and contractual employment in regular work. Backed by successive governments, industry has enjoyed several benefits over the years, amongst which is relaxation of labour laws in several industrial centres and special economic zones. Indeed, due to persistent pressure from industrial lobbies, the Indian state has obliged industry by releasing several executive orders under the aegis of state governments—a practice which has created ample space for continuous evasion of several labour laws by employers. For example, the Haryana government’s Labour Department has gradually withdrawn itself from activities like regular inspection of factories, only to replace something as important as factory inspection with the system of voluntary admissions of health and safety standards by managements. Leaving aside executive orders of state governments, the central government itself has tabled and implemented several damaging amendments to labour legislation. The government, for example, has made continuous attempts to amend existing labour legislation in a manner which redefines ‘small establishments’ to the detriment of workers—a fact clearly brought out in the formulation of the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Amendment and Miscellaneous Provisions Bill, 2005.

Such relaxation of labour laws has amounted to extremely long working hours, stringent rules with respect to leave, denial of minimum wages, unpaid overtime, unregulated hiring and firing practices, denial of job cards/written contracts, etc. It has also encouraged the growth of a black labour market, whereby a large force of migrant labour is employed as contract labour; over whom private capital has complete sway because of the lack of regulation on such labour recruitment. Apart from these features, the manufacturing sector is also characterized by the industry’s continuous assault on unionization. Several recent industrial disputes, including the dispute at Maruti Suzuki’s Manesar plant, reflect industry’s intolerance for workers’ attempts to unionize and to challenge puppet unions or company unions. Indeed, union busting has become the norm with capitalists as well as the state making conscious attempts to break strikes and intimidate unions. This is precisely why growing contractualization of labour contracts, hiring of paramilitary groups and goons on company pay rolls, black-listing of workers, plant-relocation, firing of striking workers on baseless criminal charges, and police brutalities are common practices.

It is perhaps best to elucidate the validity of these observations with an appropriate example. If we look at the construction industry which is one of the biggest industries in India, we find that many protective labour laws are violated openly. Comprising mostly of migrant labour this industry thrives on employing its entire workforce on contract basis. Construction workers are denied everything from stable work contracts, job cards (on the basis of which they can prove their employment status with a construction firm), paid overtime to minimum wages. In fact, they are often denied their entire wages because many contractors vamoose with their wages, and principal employers refuse to compensate in such unfortunate circumstances. The situation is no different in the big factories that employ large numbers of workers. Violating the Contract Labour Regulation Act, most of such manufacturing units employ nearly 90 per cent of their workforce as contract labour. Undeniably, with such massive contractualization of work, employers are easily laying off workers even as Rao writes about the need for labour market flexibility. With so many workers that are unaccounted for, how are law enforcing agencies to regulate if employers are following procedures laid down in the provisions of the Industrial Disputes Act? And are our law enforcing agencies and state even interested in putting protective legislation into practice?!

In this context of how India’s manufacturing sector actually functions, it is impossible not to question the logic behind many of the arguments presented by Rao. For example, doesn’t the removal of (the remaining corpus of) protective legislation mean that workers would carry (or rather—continue to carry) the entire burden of the vagaries of capitalist labour market? Isn’t Rao suggesting that workers should believe they are exploited for their own good when they are denied stable jobs, and hence, the ability to unionise? In smaller enterprises or in industries (like the construction industry) where many such laws do not prevail and market flexibility exists, is employment generation high? And is it not possible that Rao is acting as an agent of the capitalist class—a class which constantly seeks to conceal its selfish interests behind the garb of “national” interest or general interest of workers? Undeniably, when the particular interests of capitalists need to be generalised there can really be no better way than to project such interests as the interest of the majority, i.e. the labouring masses.

It is easy for Rao to conflate the interests of workers with that of their employers because, as is typical of bourgeois economists, he has deceived himself on the true nature and origin of profit. He overlooks the fact that profit accrued by capitalists is based on surplus value created by workers and not on the mere sale and purchase of commodities. In other words, higher profit means greater surplus value creation, and hence, enhanced exploitation of workers. He is evidently trapped in the fetish of capital, wherein profit appears not as surplus value created by workers but as proportion of the advanced capital, or basically, a product of the exchange of commodities in accordance with production costs. In this fetishized form, capital then appears as a self-perpetuating force in itself and not in its relation to the subordination of labour.

While Rao would have us all see capital in isolation from labour, the intrinsic relation between capital and workers’ exploitation is difficult to refute when we consider how profit generation is disrupted whenever workers resist appropriation of their labour power. Since labour power is the only commodity sold and purchased in the capitalist economy which resists its appropriation, capitalists constantly seek means to prevent workers from organizing, and to crush working class resistance. Hence, it is due to their fear of workers’ collective action that capitalists have resorted to the post-Fordist system of dispersed production, whereby small, “unproductive” units have increasingly become part of the manufacturing sector. Indeed, by consciously employing workers in a manner which keeps them outside the ambit of prescribed labour laws, employers not only steer clear of protective legislation but also succeed in isolating workers from the rest of their class. The latter is achieved by simply bringing down the number of workers employed per enterprise and by dispersing the production process to the extent that workers of the same industry find it difficult to unite.

This brings us to the question of where exactly the general interests of workers lie. In sharp contrast to what Rao would have us believe, the interests of this country’s majority, i.e. its working class, lies in what employers are most resistant to—employment for all. Indeed, if Rao would genuinely like to see greater employment generation, perhaps he should answer à la Shah Rukh Khan ‘kya aap paachvi class pass hai’ question. If two workers are made to perform 12 hour shifts each, how many workers can perform the same work in 8 hour shifts? The answer is obviously three workers. Thus, shorter working hours amount to higher employment and prevent over-exploitation of employed workers. Basically then, it is not enhanced mechanization or problematic labour laws that create unemployment and over-exploitation within the manufacturing sector, but the capitalist desire to extract more work from fewer workers in the interest of more profit.

Of course, Jaithirth Rao would not support the shortening of work hours as a solution as this would amount to reduced profits for capitalists who would need to pay for the additional labour they recruit. Evidently, the working class can only free itself from the yoke of over-exploitation and unemployment if working hours are reduced and overtime is made illegal. It is only then that more jobs will be created. In the same vein, equal pay for contract and permanent workers, i.e. equal pay for equal work, is essential for the realization of workers’ general interests. No matter what Rao says, in no way can the so-called need for a competitive industry and flexible labour market justify the practice of unequal wages for the same skill and work.

So, why don’t we just call a spade, a spade and accept the fact that the labouring masses will never get their fair share under the rule of capital. As long as fashionable theories like labour market flexibility prevail, both, India and China will continue with ample economic growth based on enhanced exploitation of their working class. After all, a large supply of cheap labour is what lies at the core of all booming, competitive economies. China is no exception, and hence, cannot be a model of growth we can emulate.

The author is an activist and Ph.D. Research Scholar working on labour laws in India.

Image Source: tehelka.com

5 Comments »

5 Responses to “Will the Real Mr. Jaithirth Rao, Please Stand Up!”

  1. kk Says:
    October 30th, 2012 at 11:22 am

    A good response. Only a small clarification – it is doubtful that anyone even in the right wing economics fraternity considers Jerry as “a distinguished right-wing economist”.

  2. Kunal Says:
    November 2nd, 2012 at 12:51 am

    Perhaps the author of the above piece should consider taking an Economics 101 class.

  3. Ajit Says:
    November 5th, 2012 at 2:52 pm

    Perhaps the right wing fanatic who wrote the second comment should explain the problems with the above article , instead of snidely suggesting the author should consider taking Economics 101.

    And we all know what the so called experts who teach Economics 101 to others did in recent history. Not a single Economic expert , all right wing fanatics like the above commenter, could predict the 2008 economic crisis.

  4. Kunal Says:
    November 9th, 2012 at 12:24 pm

    I did not explain the problems with the above article, because there are too many, and I currently lack the time necessary for rebuttals.

    And I am not a right wing fanatic, but you sure sound like you are suffering from left wing delusions. Keeping that in mind, please refrain from criticizing good people like Jaithirth Rao who are trying to create a better nation.

  5. andy Says:
    October 11th, 2013 at 4:11 am

    I find these leftists ridiculous, what will it take for them to understand reality ? Look at West Bengal , look at what you clowns have done to that state. Your conspiracy theories , the evil “seth” and other dreamy nonsense have hurt the poor the most .You obliviously will get a PHD while you are at it, their lives , their poverty and lack of opportunity is but of an academic interest to you . Bad education , poor sanitation , crumbling infrastructure are what the Government should be paying attention to , not how to force a company not to downsize if the economy is in such a state.
    Anyway , i would end with this “A great deal of intelligence can be invested in ignorance when the need for illusion is deep. Saul Bellow

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