THE AGE
Why Reith's reforms are out of this world
By KENNETH DAVIDSON
Monday 5 June 2000
Peter Reith is determined to reintroduce the master-servant relationship
into industrial relations by making it illegal for unions to organise
collective bargaining with employers on behalf of their members.
Reith apparently yearns for the return of the anti-combination laws that
kept workers in their place, until the extension of the franchise in the
United Kingdom in 1867 by the Disraeli Tory government, which was quickly
followed in 1871 and 1875 by legislation that recognised and legally
protected trade unions.
Ironically, 1871 was also the year of Karl Marx's Das Capital in which he
developed his theory of working-class exploitation, leading to bigger and
bigger economic crises and eventual revolution.
More than anything else, it was the extension of the franchise and the
legitimation of collective bargaining by trade unions that invalidated
Marx's prediction that capitalism would be destroyed by its own
contradictions and lead to communism, because governments of all stripes
were coerced by the power of the ballot box to deal seriously with issues
relating to equality.
It may be difficult for those with no sense of the historical foundations
and superstructure that maintains the reality of democracy behind the
glitzy facade of modern politics, to see that free trade unions are part of
the substance of democracy and economic stability.
The anti-combination laws that Reith is determined to reintroduce only make
sense in the context of the neo-classical conception of the firm. According
to Hugh McBride (in the winter issue of Dissent), who draws on the 1991
Nobel lecture of R.H. Coase, the neo-classical theory of the firm has no
empirical basis - it is a system that lives in the minds of economists but
not on earth.
Coase notes that the "invisible hand" proposition of perfectly competitive
markets raises the question as to why the centrally planned and coordinated
mini-economy called the firm actually exists.
Under the neo-classical theory of the firm, price is the sole determinant
of competitiveness, but because prices are outside the control of
management, the object of profit maximisation amounts to cost minimisation.
According to McBride: "For the neo-classicists, the management prerogative
is sacrosanct, a matter of holy economic writ. It is difficult if not
impossible for them to rationalise unions as being anything other than a
potential monopoly of that vital commodity called labor. Conceptually there
is no real legitimate role for unions in the affairs of the neo-classical
firm."
For McBride, the central problem for Australian firms with a neo-classical
mind-set is they can't compete internationally unless they have some
special advantage such as access to bountiful natural resources, cheap
labor, low taxes and minimal safety and environmental standards. (These are
also the attributes of Third World economies.)
But what about the real world in which successful, globalised companies
compete on the basis of the uniqueness and reliability of their product,
service or process? In short, such enterprises require empowered workers
who can be entrusted to interfere responsibly in the production process to
ensure that the work is done efficiently, that the output meets the
requirements of the customer, who may be another worker within the same firm.
Writes McBride, "it is very immature to expect a productive working
relationship between management and empowered workers if power is the glue
being used to hold the firm together. A relationship of cooperation and
accommodation cannot be obtained by the force of law."
A study of 1600 US firms over a six-year period based on productivity data
collected by the US Bureau of Census, quoted by McBride, showed that
unionised factories (i.e. closed shops) had significantly higher
productivity rates than non-unionised plants, even where non-unionised
workplaces adopted profit sharing and organised work into self-managed
teams, like the best unionised plants.
The lesson is that international best practice aimed at quality rather than
cheap output is more likely to be achieved when workers are well led by
union leaders, feel secure, have some control over the way their jobs are
structured, and can deal with management on a basis of equality, not fear.
Reith's latest attempt to legislate to prevent collective bargaining -
unprecedented among free nations - is not only a threat to democracy, but a
barrier to serious micro-economic reform as well.
Staff writer Kenneth Davidson is co-editor of Dissent. [EMAIL PROTECTED]
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