Labor Econ 12: Wallace, Lenin, Stalin, Mao

No, no, no. Peter Wallace does not advocate the same things as Vladimir Lenin, Joseph Stalin and Mao Tse Tung. Peter of the Wallace Business Forum, is an Australian businessman and consultant who has lived in the Philippines for nearly four decades now, has a Filipino wife and kids, and advocates market-oriented reforms in the economy. 

I did not feel like writing another paper on Labor Day yesterday as I have written several papers on labor economics already. So I am reposting Peter's article in the Inquirer today. I share his ideas on this subject.

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Like It Is

May Day

By Peter Wallace
Philippine Daily Inquirer

7:57 pm | Wednesday, May 1st, 2013

The trouble I find in writing a column is that I tend to repeat myself—because the things I complain about are still there, or worse (in my biased view), are still there after I’ve offered a solution.

So here I go again for my Labor Day piece. Let me start with the one I think most needs to be changed: job security. And let me do so by emphasizing the repetitiveness of what I’ve said before by quoting what I’ve said before:

“The security of tenure is probably one of the worst pro-labor laws you can imagine. If there’s one thing it’s not, it’s security of tenure. It deters, instead of [encourages], job creation. You think twice, thrice before hiring anyone because of the huge cost and difficulty of terminating. Or you hire for five months, and then kick the employee out in the most hurtful fashion.

“If a job is necessary, when you fire someone, you just hire someone in his place. There’s no reduction in the available job statistics. Someone lost, someone else gained. The ‘loser’ works harder next time to ensure he retains the job, the ‘winner’ works harder to ensure he keeps it. Productivity goes up, cost goes down.”

This is so blindingly obvious to me that I can’t for the life of me see why it hasn’t been changed. Only the simplest of minds would think protecting an employee regardless of performance or corporate need is desirable. Maybe a century ago, when you didn’t have to compete with the world, may such a concept have been tenable, but not today. Today, in the global community, the Philippines ranks a miserable 65th among 144 countries. (Mind you, it’s an improvement from 85th in 2010, but the Philippines must aspire to be in the top 25 percent of economies surveyed.)

The next thing is minimum wage, and here’s what I said before, too, on it:

Labor groups argue for higher wages on very reasonable grounds that P456 ($11.12) per day is not a decent living wage. I agree. But zero, which is what close to 3 million Filipinos (or 10.1 million—a more realistic and, sadly, more believable figure, based on SWS’ latest survey) get is even less acceptable. They get zero because they have no jobs. They have no jobs because businessmen aren’t investing here. Foreign businessmen aren’t investing here because they can get cheaper labor in China, Vietnam and Cambodia. Even in Thailand and Indonesia.

Our daily minimum wage is $11; it’s $9.75 in Thailand, $8 in China, $5.30 in Indonesia, and $3.20 in Vietnam. The Philippines gives twice or thrice more than Indonesia and Vietnam, respectively.

Now look at the foreign direct investments over the past six years: China, $1,047 billion; Indonesia, $58 billion; Thailand, $51 billion; Vietnam, $41.7 billion; and the Philippines, $13.6 billion.

Do you see the link? High minimum wage isn’t the only factor that is driving foreign investors away from the Philippines, although all surveys and anecdotal discussions indicate it’s a major one. Do you want a low-paying job or a no-paying no-job?

Instead of getting P456 in daily wage, around 10.1 million Filipinos who want a job get nothing. In the informal sector in the provinces, a daily wage of P230-P280 is common, and people there somehow live on that. Now I’m not suggesting that’s an acceptable wage; it’s not. But what I am saying is that people can survive on far less than P456. But they can’t survive on nothing.

Don’t get me wrong: I’m very supportive of labor, I want everyone to have a decent, well-paying job. I believe that the two issues I mentioned are the reasons people don’t have decent, well-paying jobs because they cause investors, the ones who provide jobs, to look elsewhere, to where they are not constrained like this.

Globalization has changed the game, and we’d better learn how to play it to win. What high wages and restrictive conditions also do is encourage many businessmen to work outside the system.

It was good that the law was changed to allow night-time work for women, but take it further. Allow flexible working hours as long as these total no more than 40 in a week. The world is changing, and we must, too.

If the labor unions truly cared for workers, they’d be arguing on behalf of these people. Arguing, not for uncompetitively high wage rates, but that all companies, formal and informal, pay the SSS, PhilHealth and Home Development (Pag-Ibig) contributions that every Filipino should be given….

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What caught my attention in the Labor Day rallies yesterday was this photo, posted by several friends in facebook.

Of course it is horrible to see photos of Stalin and Mao in a labor demonstration. But the good thing is that at least their believers are getting more transparent in their advocacies, that they express their pinions and ideological leaning via public demonstration and not via armed violence. 

Karl Marx and Friedrich Engels  invented a rigorous critique of capitalism then. Vladimir I. Lenin invented the idea of a revolutionary party to capture state power, and led the Russian Bolshevik revolution. Stalin succeeded Lenin and invented dictatorship of the (Russian) dictators. Mao invented the idea of peasant revolution, led the Chinese communist revolution and the succeeding dictatorship and massacres for nearly three decades. Without revisionism by Deng Xiaoping and succeeding leaders, China would be a bigger version of North Korea by now -- destitute, terribly poor and isolated.

My usual advice to labor activists and their leaders is simple: Get out being a worker. Be an artist like Gary Granada, be a taxi or jeepney driver, put up a barber shop or barbeque stall or a carinderia or sari sari store, etc etc. No one puts a gun on people to become employees forever.

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See also:

Labor Econ 9: On 4-months Maternity Leave, June 14, 2012

Fat-Free Econ 38: Jobless Growth vs. Jobless Non-Growth, February 12, 2013 

Labor Econ 10: Voluntary and Involuntary Unemployment, February 18, 2013 

Labor Econ 11: Employees Forever vs. Entrepreneurship, April 27, 2013

Pilipinas Forum 26: On State-Party Relations

Although I have stopped being a Marxist-socialist by early 90s, somehow I still have some "hang-over" on some Marxist concepts until early 2000s. Here's one such discussion a decade ago, on the relationship between a political party and the state. This is 7 pages long, enjoy.
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State-Party Relations

January 2001

Nonoy, et al, Sometime ago I curiously read an article about certain communist intellectuals (not identified) talking about the time when there will be "separation of Party and state" ... just as the separation of church and state in capitalist countries.

They'd mean that the Party would just exert ideological influence and persuasion, not state or police power, to groups of individuals vying for public office over state policies and welfare.

If such were to happen and together with a genuine Bill of Rights, such socialist countries like Vietnam and China would not only catch up but even outdistance western countries. By then there would be a global convergence: social democracy (of the east) = democratic capitalism (of the west).

- Roy Picart

Roy, My understanding of state-party relations is:

(Pol.) Party - defines & explains the policies to the people, must aim to capture state power to implement said policies;

State - implements policies of the victorious pol. party. Though often in multi-party countries, the victorious pol. party enters into alliances with other smaller pol. parties to get majority seats in the legislature and to broaden its mass base and support. But in one-party states like China, Vietnam, N. Korea and Cuba, no need for party alliances as the opposition is always weak.

So in this definition, party-state separation of function is inherent in multi-party states. Such separation of function is also possible in one-party, communist governments. In slowly-democratizing communist govts. like China and Vietnam, state leaders and bureaucrats are not entirely accountable to their respective communist parties but to the general population, majority of whom are not party members. State leaders are striking a balance between their party (which is generally allergic to drastic reforms) and the general public (who want fast, wide-ranging economic liberalization and political democratization).

On social democracy, these are essentially the democratic capitalist states of the west at the moment. Specifically, the welfare states of Scandinavian and Western European countries. These capitalist countries sometimes turn off capitalist enterprises because of the high taxes which their govts. collect to give to the jobless (sometimes encouraging laziness), the sick, to subsidize their farmers, etc.

The convergence that you mention is actually happening now: capitalist countries that act like socialist states, and socialist countries that allow predominance of capitalist enterprises. Vietnam is a socialist country, but the streets of Hanoi, Saigon, Hue, etc. are full of tens of thousands of capitalist enterprises. China is a socialist country but Shanghai, Shenzen, even Beijing, are full of capitalist shops and firms.

Someday, ideologies will become good academic subjects in the schools worldwide, but they will lose their original spirits. They will soon converge with one basic ingredient that unifies their aspirations: information. Information will uplift world economies, substantially reduce poverty as we know it today. But information will never be made perfect for everyone. Just as the next guy has discovered his neighbor's "trade secrets", this neighbor has already developed a new product or service that is far superior to the one that was discovered by his competitor.

- nonoy

Dear Noy and Roy and All:

State-Party Relations:

Classical Marxism situates the relations between state and party within the framework of socialism as the class rule of the proletariat, and socialism as a transitional phase before society could progress to classless and stateless communism. State and party relations also relate to the conept of the "withering away of the state." The classics, in fact, may provide signposts in understanding the remaining socialist experiments.

The basic theoretical postulates on this matter may be outlined as follows:

a) Capitalism is an arrangement of social classes with the bourgeoisie exercising political hegemony over all the others, through the capitalist state;

b) The socialist revolution destroys this hegemony and transfers state power to the proletariat. Hence, Lenin defines socialism as "the dictatorship of the proletariat" or "the proletariat organized as the ruling class";

c) The immediate function of the socialist state is to preserve the dominance of the proletariat, and to serve as the coercive instrument of the the working class. This coercive role means defending the Communist Party and defeating its class enemies, since the CP is the repository of the will of the ruling class (the proletariat). Note that the socialist state, as with all other states, remains a coercive organ of power, existing within society but also above it;