People's Democracy

The Vice-Chancellor of JNU Professor Bhattacharya,

The President of ISLE Professor Papola,

The Conference President Professor Patnaik,

Delegates, Guests, Ladies and Gentlemen,

I have great pleasure in inaugurating the 47th Annual Conference of the Indian Society of Labour Economics, an academic body founded by the late V V Giri, who later became the President of India. I knew Shri Giri well. He was a reputed trade unionist who was deeply committed to the cause of the labouring men and women of this country. I am glad that the Society he founded has been consistently trying to use its academic resources to work for an improvement in the conditions of the labouring population.

As a trade unionist myself I can vouch for the fact that the working class needs the academic support of bodies such as this. They do not have to be overtly partisan in any sense. All they have to do is honest academic work, and objective scientific research free of prejudices. Scientific honesty is an ally of the working class, while false theories, advanced either owing to erroneous conceptions, or owing to ignorance or prejudice or with the deliberate intent of promoting the interests of the employers, have been great practical hindrances to the amelioration of the suffering of the workers. History is replete with examples of such theories. I shall cite only three examples to clarify my point.

The Industrial Revolution in England brought great suffering in the early years to the working people, a large proportion of which consisted of women and children. They had to toil for long hours in inhuman conditions in mines and factories to earn just a pittance. The Factory Inspectors’ reports to which Marx made copious references in Das Kapital, his magnum opus, as well as F Engels’ study, The Condition of the Working Class in England, are full of heart-rending accounts of the abysmal conditions under which the working people were exploited. It is in this context that several reformers, drawn mainly from the landed aristocracy, sought to improve these working conditions through appropriate legislation in the early decades of the nineteenth century. Reducing the hours of work was one important object of the reformers’ efforts, and what came to be known as ‘The 10 Hours Bill’ was a significant step in this direction – the maximum legal limit was 11 hours up to then.

Precisely at this time however, Nassau Senior, the first Professor of political economy at the University of Oxford, advanced the theory that all profits were made by the capitalists only during the last hour of work in a full working day, and that the remaining hours of work devoted to value addition merely recouped what was spent on the workers’ subsistence. This proposition was clearly meant to thwart any reduction in the number of working hours, since it followed that any such reduction, even by an hour, would result in the complete elimination of profits. This would make the enterprises where the workers were employed unviable, and hence bring even greater misery to the working class through unemployment. This proposition was strongly attacked by Marx and the phrase he used, ‘Senior’s last hour’ has become synonymous with wrong theory serving a ruling class interest.

This was a classic case of a false theory standing in the way of an amelioration of the workers’ condition, arguing that it is better from workers’ own point of view to do nothing about their miserable working conditions. The theory is false because the "one hour" mentioned by Nassau Senior is a figment of his own imagination, an arbitrary figure pulled out of the hat to prevent legislation for reducing hours of work. If eleven hours of work represented the value added per worker, which is rather a conservative figure for those times (since the actual hours were longer), then to say that profits were made only in the last hour amounts to postulating a rate of surplus value of 1/10, or a share of profits in value added of only 9 percent which is far lower than what any actual capitalist country has ever witnessed. Thankfully, Senior’s theory was not taken seriously enough to stand in the way of the proposed reduction in hours of work.

My second example relates to John Stuart Mill’s theory that trade union action can never succeed in raising the share of wages. Now, Mill of course was an outstanding intellectual figure of the nineteenth century, and his views cannot be attributed to any ulterior motive or dishonest purpose. And yet his "wage fund" theory which stated that at any point of time in an economy there was a wage fund which was divided among the entire body of workers, and that any gain on the part of one group of workers through trade union activity must therefore come at the expense of some other group, was clearly an erroneous one, which could only discourage trade unionism among the workers. To be sure, in any real situation the capitalists may so arrange matters that they recoup what they yield to one group of workers, through the imposition of additional burdens on some other group, which is a very common occurrence. But this is very different from Mill’s theoretical conclusion that workers as a whole can never gain at the expense of the capitalists through organised trade union action.

This conclusion which was put forward by a follower of J S Mill, Citizen Weston, at a meeting of working men in London, was attacked by Marx in a well-known pamphlet Wages, Prices and Profit, where he showed that trade union action can raise wages of all workers by lowering the rate of profit. If indeed J S Mill had been correct and trade union action was incapable of making any difference to the rate of profit, then the question "Why do capitalists so strenuously oppose trade union action?", whose pertinence is obvious, would have become unanswerable. But if Mill’s theory had been taken seriously, which it might have been had it gone unchallenged, especially given Mill’s intellectual standing, then the trade union movement would have suffered a serious setback.

My third example relates to the proposition put forward by David Ricardo that the introduction of machinery does not give rise to any displacement of labour. Ricardo himself of course changed his views on the subject, but this change went only to the extent of recognising that the introduction of machinery was harmful for employment in the short run; in the long run it gave rise to higher growth in the economy, and hence also higher growth of employment, which would absorb many more than those who were initially displaced. Ricardo again, as Marx pointed out repeatedly, was a scrupulous economist, but this theory was nonetheless an erroneous one and was sharply criticised by Marx. The error consisted in the fact that he was looking only at a one-shot introduction of machinery, and that too in a situation where labour displacement had no effect on the level of overall demand in the economy.

The correctness of Marx’s critique is not only evident, but is, implicitly, widely accepted today in so far as the concept of "jobless growth" enjoys such wide currency. The fact that high growth, if accompanied by rapid technological progress, i.e. a steady stream of introduction of labour displacing machinery, can create no new additions to labour demand, is today taken for granted, but is incompatible with Ricardo’s theory. Here again we have an example of a theory that went directly against the activities of the workers’ movement of the time, and that could potentially stand in the way of workers ever organising themselves against labour displacement through the use of machinery.

My purpose in giving these examples is to underline the importance of correct theory for the workers’ movement. And since correct theory can emerge only through intense scientific discussion, the importance of forums like the Indian Society of Labour Economics, that provide opportunities for such discussion, for the workers’ movement cannot be exaggerated.

The need for such discussion in India at the moment is particularly great, since the working class is facing a severe onslaught, supported by a set of what I consider entirely wrong, unscientific and erroneous propositions. The government for instance is keen on introducing what is called "labour market flexibility", which includes the complete freedom on the part of employers to "hire and fire" their workers. The overall effect of "labour market flexibility", it would be readily recognised, is to raise the rate of surplus value in the economy, to shift income distribution in short from wages to profits. Now, if a higher rate of profit ipso facto meant a higher rate of growth of the economy, and if this in turn translated itself into a higher rate of growth in labour demand than would have prevailed otherwise, then there could be a case, similar to the one Ricardo had made for the introduction of machinery, for introducing such flexibility. But neither of these assumptions is valid.

We have already seen, from our experience of "jobless growth", that a higher rate of output growth does not translate itself into a higher rate of growth in labour demand. In addition, a shift from wages to profits, far from giving rise to higher output growth, has the opposite effect of reducing demand in the economy and therefore lowering the growth rate. Of course the proponents of "labour market flexibility" claim that such a shift from wages to profits, by making it possible for capitalists to compete more effectively in the international market (through an increase in their capacity to lower prices), will boost exports. But the determinants of exports are more complex, and the wage rate, compared to efficiency of the workers, is by no means a decisive factor. Indeed had it been such a decisive factor, or even a major factor, determining export performance, then countries like India would have out-competed the advanced capitalist world long ago.

Moreover even assuming that exports get a boost from labour market flexibility, there is no reason to believe that this would happen to a degree sufficient to overcome the demand reduction on account of the income redistribution, mentioned earlier. In short, an attack on the living and working conditions of the workers is being sought to be launched on the basis of a theory that does not stand scrutiny.

Of course, it may be argued that since other countries are introducing "labour market flexibility" we have no option but to follow suit, for if we do not then we will lose markets to them. But if all countries adopted such a policy then the claimed benefit from it has even less reason to materialise for any of them. In short, the argument becomes absolutely invalid when applied to all countries. Workers everywhere in such a case end up being absolutely worse off in terms of both wages and employment.

Instead of playing this capitalist game of frantically competing against each other to bring about a pointless (from their perspective) push of the wages to the bottom, it becomes necessary for workers in each country to fight against such policies. Ideally of course such fights should be co-ordinated, but even if such co-ordination does not happen, it is better from the point of view of the workers in each country to fight for protection against competition from other countries where labour market flexibility has driven down wages than to accept such flexibility in a defensive manner as a fait accompli and pursue other workers in a race to the bottom. For a proper understanding of the i ssues involved however it is necessary that the falsity of the theories which promote such policies is first exposed through deliberations at forums such as this one. It is with great pleasure therefore I inaugurate this conference. I am confident that the deliberations of this conference will be of great benefit to our country and its working people.

Thank you very much for your patience.