During a discussion on the radio this morning between Ian Fletcher, author of ‘Free Trade Doesn’t Work- What should replace it and why’, and Philippe Legrain, author of ‘Aftershock’, the latter stated that a tariff is a tax on the consumer. While strictly true, the remark typified the kind of thinking in boxes that has led us into the present mess. It overlooks the simple truth that consumers are largely employees under another heading. By setting capital footloose in the world we have cheapened the goods we consume, but at the cost of employment. As employment continues to decline, so must consumption of non-essentials, cheap or not. This is a race to the bottom. I have not read Fletcher’s book, though I have just ordered it, but I suspect that much of his argument reflects concerns that some of us have held for years.
At a time when the ‘experts’ in the CIPD were advising companies that they must ‘empower’ their employees, I argued that empowerment was dead in the water as a concept. “Deregulation and technological development have stripped away forever the protective walls behind which western employees were able to organise in order to wring concessions from employers and government alike on terms and conditions. Capital is now free to seek out the cheapest sources of labour anywhere in the world and to move to where poverty and authoritarian government combine to ensure a compliant labour force.” (‘Human Resource Development-a contingency function?’ by Tom Kilcourse. Journal of European Industrial Training. Vol 20. No. 9. 1996)
I predicted in the nineties that “Their employer, if they have one, will probably be a labour only contractor offering them a short-term of employment. It is possible that they will not have a contract of any kind. We could see the white collar equivalent of the old tally system used on the docks whereby workers reported for duty in the morning with no guarantee of work that day.” (‘Empowerment and other myths’ by Tom Kilcourse. The Leadership and Organization Development Journal. Vol 17. No 5. 1996). We are not there yet, but the increasing number of agency workers indicates that we are heading in that direction. Increasingly workers, including the highly skilled, are not employees of the firm they work in, but of outfits like ‘Manpower’.
Broken Britain? You aint seen nothin’ yet, and in America too. The politicians and their big business backers have sold the people out.
Boadicea's Chariot 
You are, unfortunately, right, Tom. Wading one’s way through a lebyrinth of regulations,leads to the inevitable answer. The consumer is the sufferer every time, and those in power through politics, or wealth, intend to keep it that way, God rot them!
Let us hope that a demagogue does not appear on the scene.
BALLS?!
He might have the ambition, but not the charisma.
Hopefully – bit like Prescott, still with rough sdges!
Demagoguery is a thing of the past. This is the era of the smart soundbite on a screen near you.
I agree also with you, totally.
I never could see that the west could hope to keep the whole place afloat on service economies.
Not only were the jobs taken abroad but the few remaining were given to immigrants for less money.
However did the politicians expect to pay the unemployment and what with?
Surely there is no other end to it all except hyperinflation and spiralling decreases in standards of living? Or, even worse, peasant hegemony to the Far East.
Why on earth could they not see it?
To my way of thinking the seeds are sown of total disaster.
Frankly I think a mega world disaster such as a climatological/geological happening might just end up as a soft option!
A damned sight less embarrassing anyway!
CO; what you describe is being played out here. Big biz is telling the gubmint that DK is uncompetitive – currency, tax regime, attitude to foreign talent – to be told they are unpatriotic. Tax revenues decline, welfare costs escalate……..
It looks bad.
In The History of the Decline and Fall of the Roman Empire, Edward Gibbon puts his finger on the decline primarily due to outsourcing the defence of the empire to mercenaries, when local citizens were no longer prepared to serve to defend themselves. The mercenaries in turn grew so powerful and influential that eventually they took over.
The automotive labour unions in the USA priced themselves out of international competitiveness, and caused the near collapse of the domestic automobile industry. The Japanese took over supply, producing first-class vehicles employing modern technology, rather than gas-guzzling dinosaurs put together by an overpaid labour force, which finally caused the near collapse of the US automotive industry with their ever more outrageous wage demands.
What is the solution proposed – producing uncompetitively-priced goods domestically, which will not compete in world markets, but which we we are forced to buy ourselves, but which noone else will want?
The free movement of capital and labour is irreversible, and we had better get used to our power and influence waning!
All this is very true, but I wonder if what comes round will come round. As the UK and Europe slide into depression and India and China become super powers (why do we still give them aid???) then eventually the goods the Indians and Chinese will want will become expensive, until they outsource the work to poor countries such as the UK and Europe.
Either that or we shall have a great big war and have to start all over again. This I think is the real worry and event that is on the brink of happening.
The Greeks are revolting (no pun) they will not accept the cuts, shops are closing, restaurants are going out of business, houses being repossessed salaries declining. the people are murmuring loudly, before long it will be a cacophony, then once again the Balkans will ignite the world.
CWJ, remember, the Japanese economy grew behind a protective wall. The free movement of capital is not irreversible at all, and the alternative is not uncompetitive goods. We are allowing China to operate under conditions that would not be permitted in the West.
Tom, you write, “we are allowing China to operate under conditions which would not be permitted in the West”. What is it that it is believed the West can do about low wage economies? Are sanctions and trade barriers the answer proposed? I remember thirty years ago earnest young Industrial Relations lecturers at Cranfield singing the praises of the ILO. I am not convinced that they have achieved very much in most of the countries which are the targets of the West’s critism of labour exploitation.
The West for centuries benefitted from these same low wage economies through colonisation and exploitation of their raw materials and low cost labour, but I am not an apologist for those actions. But they are now turning round and biting us on the ass!
criticism…
cwj –
“the decline primarily due to outsourcing ”
How very right you are. When we produce nothing, how can we ever hope to regain our status on the international playing field?
What I don’t understand about this post, though, is why Free Trade doesn’t work. I seem to recall from my A level nineteenth century history that “free trade was the weapon of the most powerful nation.” Why should that no longer be the case?
Squarepeg: I think it no longer “works” (as in ,to our advantage!) because low labour cost economies that have been industrialised – as Japan was with the Marshall Plan after WWII – produce goods at lower cost and better quality than we are able to. We cannot compete now successfully with higher labour costs in traditional industrial products. Indian software engineers populate Silicon Valley to a marked extent, when they have not set up in the IT business in Bangalore, and we don’t seem to be able to run even a decent Call Centre (if that isn’t a contradiction in terms?) competitively. The NHS would fall apart without immigrant medical and nursing staff, yet we are training 100 times more British Allied Health Professionals (nurses, physiotherapists, and so on, than there are funded job vacancies for in the NHS. Yet they do not have the experience to replace the immigrant labour force – Catch 22 situation.Many of them are on the dole, and those that aren’t have emigrated to Australia and New Zealand, with the UK having financed the cost of their education.
For once, I am glad I am not young, qualified, out of work and looking for a job in this economic climate.
cwj –
But is it not also because the emerging economies are not tramelled by such impediments as the European Working Time Directive, which is currently ensuring the decline of our health service, particularly when our European partners are getting round its strictures by not implementing it quite so “literally” (or so the French have said) as seems to be the case here?
As for being young, qualified, but out of work, you would stand a much better chance if you came from some “diverse” background – as my own children are discovering.
It is not just directives but the ever increasing costs of running a business in the UK. Like it or not Uniform business rates add a massive costs to businesses, a small corner shop will have rates of anything up to £13,000 per annum (the butchers below my office pays 14k, just a single shop front), then we have the employers NI contribution of 12.8% of salary.
Add onto this the maternity, paternity, sickness costs and insurances. Then factor in the idiocy of making all premises disabled friendly all costs that have to be passed onto consumers and we are no longer competitive.
A shop in our High street closed rather than spend 20 odd thousand to put in a ramp for wheelchair access, putting people out of work. The owner said he only made 35 to 40k per year and this cost would half his money for maybe half a dozen customers, so as he was nearing retirement he shut.
Free Trade worked when it meant that a country could import materials tariff free, pay its workers low rates, did not have a raft of legislation that imposed costs on businesses and could then export goods tariff free. That is no longer the case.
As to industries and services ‘falling apart’ without immigration. The UK has, until recently, found it easier to import labour and pay for a large non-productive population than to tackle the task of getting its indigenous people off their back-sides to contribute.