I had a little reminisce today and took a mental journey back to the North of England where I studied for a time. Although this time (early 1980s) was just before the digital age, I have collected bits of information about the economic and social life of workers and capitalists in early industrial England. And, of-course, there are some wonderful accounts in the wider literature of what life was like in those days. These were times when there were no unions, no job security, no income support, no safety standards, and little or no sanitation of public health regulations in the urban areas where workers were sequestered by the ruling elites. While the rich industrialists erected open spaces and promenades to surround their luxury residential facilities, the workers mostly lived in filth and died dreadful deaths. There was a reason that this way of doing business was attacked by growing worker discontent throughout England and Europe in the late 1840s and beyond. There is a reason trade unions formed. There is a reason that governments were forced by popular pressure to introduce income support and labour market regulations. People can only be put down for so long and the capitalist system is built on a very small minority seeking to repress the rights and rewards of the vast majority. Once the greed pushes the balance too far to the minority – their hegemony is threatened. We might be in 2012 but the elites are once again driving us all back to 1844 or thereabouts. They will rue the day.
When the French aristrocrat Alexis de Tocqueville visited Manchester in 1835 he wrote in his subsequent account, Journeys to England and Ireland, ed., J. P. Mayer, 1958, Page 108:
The fetid, muddy waters, stained with a thousand colours by the factories they pass, of one of the streams I mentioned before, wander slowly round this refuge of poverty. They are nowhere kept in place by quays; houses are built haphazard on their banks. Often from the top of their steep banks one sees an attempt at a road opening out through the debris of earth, and the foundations of some houses or the recent ruins of others. It is the Styx of this new Hades.
Look up and all around this place you will see the huge palaces of industry. You will hear the noise of furnaces, the whistle of steam. These vast structures keep air and light out of the human habitations which they dominate; they envelop them in perpetual fog; here is the slave, there the master; there the wealth of some, here the poverty of most; there the organised effort of thousands produce, to the profit of one man, what society has not yet learnt to give. Here the weakness of the individual seems more feeble and helpless even than in the middle of a wilderness; here the effects, there the causes.
A sort of black smoke covers the city. The sun seen through it is a disc without rays. Under this half daylight 300,000 human beings are ceaselessly at work. Athousand noises disturb this damp, dark labyrinth, but they are not at all the ordinary sounds one hears in great cities.
The footsteps of a busy crowd, the crunching wheels of machinery, the shriek of steam from boilers, the regular beat of the looms, the heavy rumble of carts, those are the noises from which you can never escape in the sombre half-light of these streets. You will never hear the clatter of hoofs as the rich man drives back home or out on expeditions of pleasure. Never the gay shouts of people amusing themselves, or music heralding a holiday. You will never see smart folk strolling at leisure in the streets, or going out on innocent pleasure parties in the surrounding country. Crowds are ever hurrying this way and that in the Manchester streets, but their footsteps are brisk, their looks preoccupied, and their appearance sombre and harsh. Day and night the city echoes with street noises. But it is heavily loaded wagons lumbering slowly.
From this foul drain the greatest stream of human industry flows out to fertilise the whole world. From this filthy sewer pure gold flows. Here humanity attains its most complete development and its most brutish; here civilisation works its miracles, and civilised man is turned back almost into a savage.
A world where a scarce few but very wealthy capitalists supported by a small middle class ruled over hundreds of thousands of impoverished workers who were forced by circumstance to live in unhealthy neighbourhoods, devoid of sanitation where the child mortality rates were over 57 per cent.
The city developed in such a way to separate the slums from where the capitalists ensconced themselves.
I have a strong familiarity with this area. I studied at Manchester University (started my doctoral studies there) in the early 1980s at the height of Maggie Thatcher’s reign.
While I was there, apart from estimating Phillips curves and developing the concept of hysteresis, I spent a lot of time studying the industrial beginnings and reading as much as I could on the life of the classes. I learned that while the rich were building promenades and parks to surround their luxurious housing the workers were living in squalor – as described by de Tocqueville.
There was one area that I used to run through each day at lunch-times, sometimes during the Winter in snow but usually in just the damp, muddy grime that was typical of Manchester at that time. I used to do 10-15 kms along the canals out to Queen’s Park and surrounds.
The specific area I am referring to used to be called – Angel Meadow – and lies just to the north of the City Centre not far from the main station.
Friedrich Engels described this area as “Hell upon Earth” in his wonderful work – The Condition of the Working-Class in England – published in 1844. If you haven’t already read it then I urge you to do so. He said “Such is the Old Town of Manchester … and the frightful condition of this Hell upon Earth. Everything here arouses horror and indignation”.
The area was notorious during the early days of the industrialisation and for the next hundred years as a squalor. I used to run past what were the cholera pits (at the park adjacent to the now demolished St Michael’s Church in Angel Street), in which many thousands of impoverished workers and their families were buried without dignity or care – as the industrial and human waste poisoned them.
On Page 292 of The Condition of the Working-Class in England, Engels wrote of the area:
In Manchester, the pauper burial-ground lies opposite to the Old Town, along the Irk: this, too, is a rough, desolate place. About two years ago a railroad was carried through it. If it had been a respectable cemetery, how the bourgeoisie and the clergy would have shrieked over the desecration! But it was a pauper burial-ground, the resting-place of the outcast and superfluous, so no one concerned himself about the matter. It was not even thought worth while to convey the partially decayed bodies to the other side of the cemetery; they were heaped up just as it happened, and piles were driven into newly-made graves, so that the water oozed out of the swampy ground, pregnant with putrefying matter, and filled the neighbourhood with the most revolting and injurious gases. The disgusting brutality which accompanied this work I cannot describe in further detail.
There is a very informative historical brochure – St Michael’s Flags and Angel-Meadow – put out by the Friends of Angel-Meadow, which you might find interesting. The reference to the flags were to the Act of Parliament that flagged over the burial ground in 1855 because the poverty drove locals to digging up the soil for manure to sell to the local farmers. This BBC article on Angel Meadow is also interesting.
Moving on to 2012
What qualifications do you think this character – the one in the Aston Martin with that cultivated look of disdain that Tory millionaire elites tend to acquire early in life – has to write detailed reports analysing the labour market?
This chap is described as a “venture capitalist” and a prominent and very large donor to the Conservative Party in the UK. He gained his university education in Physics and did an MBA at Harvard. So hardly trained in the nuances of labour markets.
This Mirror article (May 24, 2012) – The Aston Martin fanatic fatcat who is driving workers to ruin – provides a brief history of Beecroft.
They say that his businesses will “make even more money if his plans to slash employment red tape become law”. The Mirror says that:
Britain already has the weakest workplace protections in Europe but that’s not enough for the private equity multi-millionaire … A paper he has produced for Prime Minister David Cameron’s office suggests it should become law that bosses should be able to sack staff at will.
The OECD publish their Indicators of Employment Protection on a regular basis.
The following graph is taken from the latest data available (2008) and shows that the Anglo nations (including the UK) are down near the bottom. The least protection is 0 and the most 6.
The Mirror traces some earlier dealings that “a consortium led by Beecroft’s private equity firm Apax partners” had with workers. In 2005, the private equity firm bought a large retail chain and shed 8000 jobs and cut wages. The point they make that was all done within the current legal framework. Now Beecroft wants to make it even easier.
The supermarket chain was sold 3 years later for a huge profit to the private equity group.
Beecroft’s latest venture is Dawn Capital, which owns Wonga – described on their home page as “a ground-breaking online lender based in London … The mission is to provide consumers with instant money whenever they need it – cash on demand”. We also know these firms as payday lenders which extort huge interest payments on workers who are desperate for short-term cash.
The Mirror notes that Wonga lends “to struggling families at eye-watering interest rates of up to 4,200% APR”.
In general, Beecroft is described by the Mirror as being involved in companies that “have been compared to vultures, buying up companies then cutting costs, sacking staff, slashing wages – all in order to sell for a fast buck”.
So an all-round nice guy!
But his huge donations to the Tories have curried influence and apparently the Prime Minister’s “policy guru” asked Beecroft to tell them how best to undermine what is left of the workers’ legal protections in the UK labour market.
The Mirror says that:
The result was so controversial that it was shelved for six months and eight pages of the most radical plans were removed – including ditching parental flexible working and even a proposal to allow small firms to hire children.
Here is a link to the Official version of the Report – Report on Employment Law – published October 24, 2012.
As noted there was an earlier version of the Report. The BBC reported (May 22, 2012) – Adrian Beecroft work report not doctored, No 10 says – that:
The report by Adrian Beecroft was published early after an initial draft had been leaked to the Daily Telegraph … The Telegraph published a draft of the report by the venture capitalist, which was dated 12 October last year.
In it there were three ideas that were not contained in the final report published by the government on Monday, which was dated 24 October.
The proposals called for a delay to plans to introduce flexible working for parents, to abandon proposals to allow all workers to request flexible working, and to remove regulations surrounding the employment of children.
I thought the funniest (tragic funny that is) part of the leak then release was the reaction to the response by the UK Business secretary Vince Cable, one of those totally compromised Liberal Democrat politicians who did the dirty deed with the Tories just to get their hands on power.
Cable told the BBC:
I don’t see the role for that … Britain has already got a very flexible, cooperative labour force. We don’t need to scare the wits out of workers with threats to dismiss them. It’s completely the wrong approach.
He was backing up his boss (Clegg) who said it would lead to “industrial scale insecurity amongst millions of workers”.
The response by Beecroft reported in the Independent article (May 23, 2012) – Adrian Beecroft criticises ‘socialist’ Vince Cable – was classic.
The Independent quotes Beecroft’s reaction to Cable:
I think he is a socialist who found a home in the Lib Dems, so he’s one of the left … I think people find it very odd that he’s in charge of business and yet appears to do very little to support business.
I think the Tories are learning from the Americans. Anyone who disagrees with what the neo-liberals suggest are immediately labelled a Socialist and then, upon further scrutiny (not much I can assure you) are re-labelled a dangerous Communist.
Many Americans think that the Job Guarantee proposal (a logical part of Modern Monetary Theory), which aims to provide income security and meaningful public sector work to a small percentage of workers at any point in time, is a socialist plot. Some think it is the thin end of the wedge where the US government will employ all workers under conditions of coercive slavery.
One cannot help it I suppose if the public education system has failed them. Such views are pitiful to say the least.
If you bother to read the Beecroft Report released this week you will be immediately taken by the lack of referencing to extant research. Saying there is a lack implies there is some. In fact, there is none. When some scant evidence is asserted there is no citation for us to check the context etc.
From the outset you get the message. The first section on unfair dismissal says that policy should be changed to perhaps “extend the time period during which an employer can dismiss an underperforming employee from one year to two years”.
But while that is said to be “a step in the right direction”, in the next paragraph we learn that is not enough and the “the period within which an employee can be dismissed without being able to claim unfair dismissal could be extended beyond two years”.
Policy should also:
1. Reduce the “burden of proof on the employer … making it harder for the employee to claim to a tribunal that the … [dismissal] … process was flawed”.
2. Impose “fees for employees starting the employment tribunal process” to discourage workers seeking legal recourse.
3. The “greater use of cost orders” against workers who go to tribunals.
His preference – “if it is felt to be politically unacceptable to simply do away with the concept of unfair dismissal” is an “approach which allows an employer to dismiss anyone without giving a reason provided they make an enhanced leaving payment” limited to “a maximum of £12,000″ for long-term employees.
The approach – where industrial matters are forced into contract type law and costly processes were necessary before a worker could mount their cases – was introduced by the previous conservative Australian government under the despised WorkChoices legislation. It effectively precluded legal defence by workers because they could not afford to take the action and if they did they might lose everything (their houses etc).
Beecroft claims that his approach would then mean that:
… the onus would then be squarely on the employee to perform well enough for the employer to value them as an employee. It would no longer be possible to coast along, underperforming in a way that is damaging to the enterprise concerned but not bad enough for the employer to want to undertake the whole rigmarole of the unfair dismissal process with its attendant threats of tribunals and discrimination charges.
As I said – an all-round nice guy.
There are some real gems.
On Pensions, the so-called “new Automatic Enrolment system” requires that firms ensure workers are in superannuation schemes (following the Australian model) under certain criteria.
Beecroft writes that “there is no general resistance to the scheme as a whole among employers or employers’ representative bodies” and that “75% of individuals support the scheme, a figure which is expected, based on Australian experience, to rise after the scheme is introduced”.
So both sides of the labour market support the scheme. But Beecroft recommends small firms be exempted and other changes made to limit the benefits available.
The reality is that the Australian experiment has not been a success. It has forced workers to hand over their savings to superannuation funds which charge exhorbitant management fees and then lose money is speculative portfolios. A worker in Australia would on average have been better off investing their savings in fixed-term cash deposits than having them locked up in these super funds.
Please read my blog – Eliminating the great superannuation rip off – for more discussion on this point.
I will leave it to you to read the rest although I don’t recommend it. The general point is enough to grasp.
I have previously examined the evidence relating to impact on employment protection rules and other labour market regulations on growth and employment.
For example, please read my blog – Minimum wages 101 and The unemployed cannot find jobs that are not there! – for more discussion on this point.
It was a popular pastime for conservative labour economists in the 1990s to try to establish the empirical veracity of the neoclassical relationship between unemployment and real wages and workplace protections and to evaluate the effectiveness of active labour market program spending.
This has been a particularly European and English obsession. There has been a bevy of research material coming out of the OECD itself, the European Central Bank, various national agencies such as the Centraal Planning Bureau in the Netherlands, in addition to academic studies.
The overwhelming conclusion to be drawn from this literature is that there is no conclusion. These various econometric studies, which constructed their analyses in ways that were most favourable to finding the null that the orthodox line of reasoning (that wage rises destroy jobs) is valid, provided no consensus view as Baker et al (2004) show convincingly.
In the period leading up to the crisis, partly in response to the reality that active labour market policies did not solve unemployment and instead created problems of poverty and urban inequality, some notable shifts in perspectives became evident among those who had wholly supported (and motivated) the orthodox approach (exemplified in the 1994 OECD Jobs Study).
In the face of the mounting criticism and empirical argument, the OECD began to back away from its hard-line Jobs Study position. In the 2004 Employment Outlook, the OECD (2004: 81, 165) admitted that “the evidence of the role played by employment protection legislation on aggregate employment and unemployment remains mixed” and that the evidence supporting their Jobs Study view that high real wages cause unemployment “is somewhat fragile.”
The winds of change strengthened in the 2006 OECD Employment Outlook entitled Boosting Jobs and Incomes, which presented a comprehensive econometric analysis of employment outcomes across 20 OECD countries between 1983 and 2003. The sample included those who have adopted the Jobs Study as a policy template and those who resisted labour market deregulation.
The report provided an assessment of the Jobs Study strategy to date and reveals significant shifts in the OECD position. OECD (2006) finds that:
- There is no significant correlation between unemployment and employment protection legislation;
- The level of the minimum wage has no significant direct impact on unemployment; and
- Highly centralised wage bargaining significantly reduces unemployment.
I wonder if Mr Beecroft has taken the time out from racing his Aston Martin and signing dismissal notices that his private equity company delivers to workers in firms it pillages to read the evidence.
Then he would know as we know that his intervention is ideological not economic (Note: he claimed that Vince Cables objections were ideological not economic).
And all of this when the British Office of National Statistics published the revised National Accounts data for the March-quarter 2012 which shows the double-dip recession in the UK is worse than previously thought!
It is clear that the thrust of austerity, while being dressed up in the language of fiscal consolidation and saving governments which cannot go bankrupt from bankruptcy, the insidious and underlying agenda is to continue the neo-liberal demolition of labour market protections, income support provisions and more general social security that the majority of us enjoy and have prospered from.
It is clear that they want – to take us back as close to 1844 as they possibly can.
But there is a reason that trade unions formed and eventually advanced nations introduced comprehensive systems of income support, health and safety regulations, and industrial rules protecting workers’ jobs and rights. There is a reason why the Welfare State became central.
These characters haven’t understood history. It will come back to haunt them.
The Saturday Quiz will be back sometime tomorrow. I have made the questions relatively straightforward (-:
That is enough for today!