An exploitative version of Capitalism and unaccountable elites

Alan Johnson conceded that ther loopholes in EU law are unfair. These allowed a Finnish shipping company to change flag and hire cheap estonian labour, and a latvian construction company working in Sweden to hire Latvians instead of Swedes. Both cases went to EU judges, who favoured the employers. This is the race to the bottom, where workers in reasonably well-off countries are also subject to wage undercutting because there will always be someone in another country who will be happy to work for less.

Some right-of-centre commentators are arguing against the official line of the Conservative party. Peter Oborne in the Daily Mail criticised Mandelson for promoting an exploitative form of capitalism. He criticised Brown for being populist also, which is true, but it depends on what you meant by populism. Janet Daley writes that people are realising what they have signed up for with the EU: "it is now illegal – illegal – for the government of an EU country to put the needs and concerns of its own population first." She then goes on to say that people who legitimately resent the importation of cheap labour en masse are being smeared with accusations of racism; that the free market of labour envisaged by the EU is part of the democratic deficit.

We should note how the accusation of populism is levelled at Gordon Brown for his "British Jobs for British workers" speech. One one level this is right: it is outrageous for a managerialist politician like Brown to promise what he can't deliver under EU law, for the sake of electioneering; but we have a situation where the concerns of probably a majority of the electorate are not being addressed by the political elites: it becomes "populist" to dispute the consensus of the political elites.

You can argue that by not protecting your workers and other countries not protecting their workers, you create this ideal world of optimal prosperity. But this is pretty abstract, at best, even if it were true. It depends on people ignoring the moral ties they have to their own communities in favour of a counter-intuitive internationalism. There are problems with this model, however. What happens instead when the compact between governments and their people are broken is that governments see their responsibility in terms of protecting world (or EU) trade laws and facilitating employment conditions that favour (increasingly) trans-national companies rather than looking to the interests of the people who elected them. This leads to a more cut-throat version of capitalism where employers can drive wages down according to the laws of supply and demand. It leads to a lowering of living standards for home workers. It creates exploitative conditions for immigrants who need to live in very poor conditions in order to live by the wages they are offered. A common practice is for employers of immigrant labour to pay the minimum wage and then to deduct (at a high rate) rents from the workers they ship in. Even when immigrants are not shipped in, the increase in the supply of labour drives down wages while simultaneously raising the prices of fixed resources such as housing.

It also assumes that no-one is cheating, that every government in the world will play by the rules. We see that Asian countries have higher tarriffs for goods whan we do; the chinese are engaging in competitive currency devaluations; china and middle-eastern governments are investing their surplus cash into Sovereign Wealth Funds owned by the state rather than independent, globally-focused enrepeneurs or companies. State-owned businesses are buying up the world's commodity resources under the noses of an increasingly impoverished West, which for the most part has lived by the mantra of Freedom of capital, goods, services and labour.

Throughout the neo-liberal period, which seemed to start in the late 70's/early 80's and reaches its apex in the 90's, there has been a popular undercurrent of disquiet about immigration, the EU, outsourcing, the decline in manufacturing, all based on the idea that we are part of one world and it is ultimately counter-productive for individual countries to distort the free market and protect its own interests. These popular feelings have been marginialised by political elites, who use cross-party consensus, obsequience to big business and politically correct national media organisations like the BBC to swamp political discourse with the internationalist perspective.

The irony is that both left and right have betrayed their intellectual roots, which is another way of saying they have betrayed their own people. After the fall of Communism and the discrediting of Socialist economics, the left saw Free Trade and Mass immigration as the means of downgrading traditional cultural values, promoting international solidarity and world-wide governmental institutions. The Free Market became one of the main instruments in promoting the cultural revolution in the West. The right, since Thatcher and Reagan, saw the doctrine of Free Trade and the unrestricted market as a way of combating socialism and the left, and guaranteeing liberty. The irony is that Thatcher herself was against laissez-faire even if many members of the later Thatcher and Major governments were not; and Reagan forced imports quotas on the Japanese in the 80's, forcing them to locate factory production in the US. These heros of the right were pragmatists, not idealogues.

This alliance between left and right is not accidental. Free Trade and big government go well together. If workers lose their jobs because of outsourcing, the state will pick up the bill in terms of welfare; if state spending goes up, corporations can avoid taxes and the striving classes (i.e., working classes and middle classes) will pay. Corporations will support all manner of green, ethnic diversity and gender equality initiatives, paid for by the Corporate Social Responsibility budgets; cheap at the price if they can avoid taxes and use the flexible labour markets to hire cheap labour. The New Labour government are afraid of driving these companies away in a globalised market, but they still want to spend taxpayers money on big government schemes. So they have accepted the devil's bargain that the productive part of the population pay higher taxes. Socialists don't mind how the wealth is produced; they care only that the money is there so they can dispense state largesse.

Even the Chinese Premier yesterday said that his government would look after China first. If a dictatorship can say this, what has happened to democratic politicians in the West. Moreover, China's production-based model is enriching his country; our capitalism is impoverishing ours.