VOICE
OF ELECTRICITY WORKERS
Oct-Dec 2001
Vol 2 No.4 Index
GOVERNMENT IN HURRY TO REFORM LABOUR
LAWS AND DOWNSIZING
The NDA Government is desperate to push through the wholesale
changes in the labour laws to snatch the democratic trade union
right of the working class. In the background of the continuously
deepening economic crisis, its root lies in the policies of
liberalisation and privatisation under imperialist globalisation.
Announcing a three month agenda for privatisation of specified PSUs
( 13 PSUs in current financial year i.e., one PSU per fortnight),
labour and power reforms as well as downsizing as part of an urgent
action plan to pull the economy out of crisis.
Portraying a gloomy picture of the economy due to the poor
performance of agriculture and industry, the finance ministry
asserted that corrective steps over the next three months include
progress on fiscal control and implementation of the recommendations
of the Expenditure Reforms Commission on downsizing the government.
Montek Singh Ahluwalia (former Finance Secretary who has joined
the IMF) Committee was constituted by the Planning Commission.
Chapter 7 of the report has exclusively dealt with “Reforms of
Labour Laws”. The Task Force has come out with a baseless argument
that the so called ‘rigid labour laws’ are hurdles in the way of
employment generation in the country. It said: “One of the factors
which is often said to restrain expansion of employment in the
organised sector in India is the rigidity of our labour market
arising from the nature of our labour laws.” It is obviously a
design to pit the unemployed youth against the working class.
Ever since Ronald Reagan in the United States of America and
Margaret Thatcher in the United Kingdom launched their drive to cut
down the role of governments in the 1980s, downsizing has become a
global mantra. It has been more rhetoric than reality.
World Development Indicators (WDI) gives some more interesting
data on changes in central government spending as a proportion of
GDP (see table). This excludes spending by regional and local
governments, and so is not a complete picture, especially in large
countries (USA, India, China) where lower tiers of government can
have very large budgets. Nevertheless it is a fair indicator of
global trends. Some of the figures are startling.
Notwithstanding the rhetoric of Reagan and Thatcher, there has
been no downsizing in the US and UK. Despite the peace dividend
flowing from the end of the Cold War, government spending in the UK
actually rose from 38.3 per cent in 1980 to 39.1 per cent in 1997.
In the U.S, it declined fractionally from 22.0 per dent to 21.6 per
cent, but since Reagan and his successors transferred more duties to
state governments, this probably represents an increase in what the
federal government does.
Reagan and Thatcher were hypocrites who talked about downsizing
but did little. In a rich democracy, even the most radial politician
dares not attack beloved public entitlements without antagonizing
voters, and so merely trims spending at the margin. Reagan boasted
loudly that defence spending doubled in his eight years, but he
quietly doubled spending on income support and health support too.
Between 1980 and 1997, subsidies and transfers rose as a
proportion of government spending from 53 per cent to 58 per cent in
the UK, and from 54 per cent to 60 per cent in the U.S. Thanks
mainly to subsidies and transfers, central spending as a proportion
of GDP has actually risen in all high-income countries put together,
from 26.4 per cent in 1980 to 31.2 per cent in 1997. This may be the
biggest surprise for some readers. In France the ratio is up from
39.5 per cent to 46.6. per cent, in Italy from 41.3 per cent to 48.2
per cent, in Spain from 26.5 per cent to 36.1 per cent.
CENTRAL GOVT.SPENDING:
Selected Countries
Spending as % of GDP
1980 1997
Ireland 72.8 48.1
Egypt 50.3 30.6
Syria 48.2 24.6
Italy 41.3 48.2
Sri Lanka 41.4 25.7
France 39.5 46.6
UK 38.3 39.1
Spain 26.5 36.1
Greece 29.3 34.0
USA 22.0 21.8
India 12.3 15.0
China N.A 8.1
World 25.3 28.7
High-income 26.4 31.2
Countries
Source: World Development Indicators, 2000
Largely because of rich countries, the global share of central
government spending has increased from 25.3 per cent to 28.7 per
cent. The world as a whole has upsized. This is true of India, where
spending has risen from 12.3 per cent in 1980 to 15 per cent in 1997
(although it slowed to a crawl after 1991).
However, the spending ratio has fallen in developing countries as
a whole, notably in former communist countries. So, downsizing has
taken place mainly in developing countries, and upsizing mainly in
rich ones. Yet we hear lectures non-stop from many rich countries on
the need for developing countries to cut down government flab. Does
this represent sheer hypocrisy?
Not entirely. First high-income countries have indeed cut wages
from 13 per cent to 9 per cent of total central spending. Many
developed countries spend a far higher proportion on wages despite
paying much lower salaries.
Second rich countries have cut capital spending from 7 per cent to
4 per cent of government spending. This is really low, and
represents a deliberate retreat of government from tasks the private
sector can do as well or better.
Since rich countries have downsized salaries and capital spending
urging similar policies for developing countries is not
hypocritical. However, high-income countries devoted 60 per cent of
government spending to transfers and subsidies in 1997, against a
global average of just 37 per cent. So, it is not hypocritical for
rich countries to keep telling poor ones to cut spending on
subsidies?
The answer hinges on two issues: quality and sustainability. In
Sweden, exceptionally high taxes are used to provide exceptionally
good services, and it works (though benefits have recently been
pared for sustainability). The U.K proposes increased public
spending to improve the quality of public services, but within the
limits of fiscal in many developing countries, including India.
The imperialist and Indian ruling classes to impose slavery on the
Working Class is already at work. The trade union movement must
realize the depth of the satanic design and prepare for broadest
possible unity and strongest resistance struggle throughout the
country. The design for slavery cannot be allowed to pass.
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