A troglodyte in the ranks

Graham Young, who operates the group blog Ambit Gambit and prominent Australian e-journal Online Opinion, is a classical liberal in the finest sense. One of the manifestations of his studious liberalism is enlisting co-bloggers whose opinions differ markedly from his own.

Jeff Wall is one of them. He appears to be a classical left Labor troglodyte, judging by this post, which eulogises US Democratic Presidential candidate John Kerry for “promis¹ to impose taxation penalties on US companies that outsource jobs overseas.”

Jeff wonders why overseas “outsourcing” hasn’t become an issue in the Australian election, and thinks Labor should adopt policies just like Kerry’s:

The challenge for the major political parties is to come up with policies that reward businesses that create jobs here rather than resorting to outsourcing. If they want to ignore these incentives and continue to outsource, that’s their call.

But we need even a modest incentive to restore some balance.

What I find particularly unacceptable is when Australian owned or based companies move their call centre and other high labour content operations overseas to take advantage of low wages and inferior work place conditions, while keeping other operations here just to gain taxation and other benefits such as preferences for local supplies not widely used by federal, state and local governments.

Well Jeff, the reason this hasn’t become an issue in Australia is that the abolition of just the sorts of protectionist measures you now advocate was one of the major achievements of the Hawke/Keating Labor government of the 1980s. Moreover, those reforms succeeded in turning Australia from a stagnant economic backwater into a vibrant world-leading economy that has enjoyed unparalleled growth and prosperity through the 1990s and the first part of this new century. Reversing those reforms doesn’t really seem like a very good idea somehow. Certainly Mark Latham (thankfully) doesn’t think so. He’s a classical liberal on economic issues to every bit as great an extent as Keating was (and more so than Howard, under whom reform has just about ground to a halt).

I never cease to be amazed by lefties who bemoan the “export” of Australian jobs, and condemn the “low wages” of overseas countries as if they were an evil thing and they’d be much better off if they just adopted Australian industrial awards! But the comparative advantage of those countries lies in their lower cost economies. In that advantage lies the pathway (ladder?) of opportunity to their ultimate achievement of first world standards of prosperity. By attempting to block that pathway, these so-called “progressives” are condemning the third world to permanent poverty and lack of development.

There’s certainly a reasonable case for imposing regulations seeking to deter Australian companies from “outsourcing” to countries that have dangerously low to non-existent workplace safety and environmental laws, or that allow harsh child labour. But simply trying to restrict overseas “outsourcing” per se, or subsidising employers to keep low skill jobs in Australia (which is the same thing), is a selfish “beggar my neighbour”, “I’m alright Jack” notion that needs to be decisively squashed.

Moreover, it would not only beggar our neighbours but eventually Australia as well, by preventing Australian businesses from competing effectively in global markets.

Nevertheless, I argue that there is a respectable case for government to restrict the scope for job “outsourcing” within Australia. Domestic outsourcing is much worse than the overseas kind, because it directly undermines Australian working conditions that have been hard-won over the last century, and which have formed the foundation for our harmonious, relaxed, reasonably egalitarian society. I think government should regulate to require businesses to provide all workers with basic conditions like occupational superannuation; annual, sick and long service leave; and workers’ compensation; irrespective of whether they label those workers “independent contractors” or “employees”.

Employers would still have great flexibility on rates of pay, hours, bonuses and so on (i.e. where flexibility may be needed to respond adequately to competitive pressures), but the basic conditions that underpin a fair society should be assured. In fact, failing to insist that employers continue providing those basic conditions is merely allowing them to shift costs onto the rest of the community, because sick, injured and retired workers are then likely to be forced to rely on social security benefits. To turn neoliberal rhetoric against them, allowing employers to outsource domestically without restriction is to permit them to engage in a particularly pernicious form of “rent-seeking”. Of course that wouldn’t be the case if all social security was abolished, but only the most extreme neoliberals advocate that.

At the same time, government should foster the development of high skill jobs in Australia through investing in enhanced national infrastructure, enhanced training and retraining programs, R & D grants and much more generous but carefully targetted capital investment allowances. That would ensure the maintenance of Australian employment and living standards, at the same time as the “export” of low skill jobs overseas fosters the prosperity of those countries and Australian businesses as well. It’s a “win-win” situation, and an area of policy that we ought to be discussing.

I at least agree with Jeff Wall on the need for discussion and new ideas, and also on the fact that government does have a legitimate and larger economic role than hardline “neoliberal” advocates would allow. But it certainly must not involve winding back the clock and re-imposing a thinly disguised form of protectionism. In fact I wonder how John Kerry could actually even implement the sorts of measures he’s apparently promising without running foul of WTO rules which are legally binding on the US.

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