Uncharted Territory

February 4, 2009

Globalisation rights

Filed under: Economics, Globalisation, Politics, Reflections — Tim Joslin @ 8:09 pm

Last year I attended a conference on “human rights and climate change” – something like that, anyway.  I remember in one session the penny suddenly dropped that what is being enshrined in international law is not in many cases what one would term “human rights”.  We were arguing – and that is the correct word – about the “right to develop”.  By no stretch of the imagination (I said) is this a “human right”.  Rather, it is the “right” of a state, and given the democratic deficit that might well apply, may well be of value only to an elite.  The “right to develop” is highly likely to act against the human rights of some of the population – indigenous people, for example.  How could there be such an emphasis on the “rights” of states?  Well, it’s in the UN that these “rights” are invented. And the UN is an association of states.  States have votes, not individuals.  National sovereignty is paramount.

When it comes to the national stage, though, we encounter a different problem.  Individuals have votes, which they use to secure individual rights.  But layer upon layer of individual rights may not be in the general interest.  The small cost of one person’s “rights” spread amongst many others may outweigh the advantage to that individual.  This may not be captured in the electoral process.  Perhaps we could say individual sovereignty is paramount.

I’ve been thinking about this as I watch the unseemly “British jobs for British workers” dispute.  Why do the local workforce think they have any right at all to the jobs?

In the world I’ve always lived in you have to persuade someone to employ you.  If they choose not to you have no recourse. Are we about to invent even more “rights” here?

Now, the case in point is a construction project at Total’s Lindsey refinery.  The work was awarded to an Italian company, IREM, who brought in their own staff.  It’s not entirely clear to me (I read the Guardian), but there is a lot of evidence to suggest that the company already employed the workers.  The Guardian said on Saturday, for example, that:

“IREM, which says it will bring in 400 of its permanent skilled workforce of Italians and Portuguese to do the job.”  [my stress]

The Guardian goes on to say:

“The strikers say there is sufficient unemployed skilled labour locally to do the work.”

But this is surely beside the point.  There are no vacancies. People are employed by companies, not necessarily just for a specific project.  What do the strikers expect IREM to do, sack their existing staff (no doubt at a huge cost in redundancy payments) and employ those who happen to live near the construction site instead?  Presumably IREM values its staff as any good company should.  Why should it recruit Joe Bloggs who happens to live next door to where the work happens to be being done and might not do as good a job?  Oh, and where does job security come into it, if work always goes to the neighbours of a building site? I’ve worked in a project-based environment and you don’t simply sack your London-based experts and recruit in Paris or Padstow just because that’s where the work has to be done for a few months.

There appears to be barely a shred of justification for the whole dispute (and if you think I’m ranting, check out our hero Willem Buiter’s Maverecon blog).

Perhaps, I suggest, it’s the idea of rights that is the problem.  You can’t blame the workers’ leaders (and later – the strikes are wildcat – the unions) for fighting like, well, wildcats.  They’re doing it because they can get away with it.

And why can they get away with it?  Because all politicians worry about is individuals.  British individuals in this case, not ones who can’t vote for them, of course.  They try to keep as many of them happy as they can.  But you can’t keep everyone happy all the time.

What is obviously needed is a leader who’ll stand up – and Mandelson has come closest – and start telling people they don’t have all the rights they think they have.  People don’t, for example, have:

– the right to a job that happens to be being done nearby – someone else may have already been chosen for that job.  Because other people have the right to choose who they enter into a business arrangement with;

– the right for the town they live in to remain the same forever.  Because other people have the right to a house as well, or to create a business, amenity or whatever.  (Maybe in this case affected people should have the right to compensation);

– the right to an unlimited amount of money deposited at a high rate of interest that has been lost due to a bank failure.  Because other people have to pay taxes to fund such compensation…

It’s a curious psychological point, it seems to me, that in the UK only in my memory the Thatcher government – the point is it was headed by a woman – has dared to tell people their rights may be limited.  Other Prime Ministers, such as Brown, more readily fall, it seems to me, into what I might term the “paternalism trap”.  They see themselves as the leader of the nation and try to put things right, keep everyone happy, dispense punishment to the few (the bankers) and reward the guiltless many (savers, “hard-working families” – especially mortgagees, “British workers”, the mass of voters in general).

Perhaps the nadir, though, was when – rather and stand up and say we just had an election to decide this – the Blair/Brown government decided a few drivers had the right to set the level of their fuel taxes.  Never mind the long-term consequences.

The paternalism trap is a case of the translation of small group behaviour to the national stage.  It results from universal suffrage democracy (I’m not arguing that that’s a bad thing, just that it has unintended consequences) and policies that, through repeated paternalistic commitments, have encouraged state-dependency rather than self-reliance, which never made sense, but does so less and less in a globalised world.

What’s needed is someone to stand up and say “these are the rules, that’s all we can do for you”.

I see a connection between “British jobs for British workers” and the tax avoidance by multinationals the Guardian has been reporting on all week.  I’ve cut out all the articles and I’m sure they’ll make fascinating reading, but I start to wonder if anyone’s thinking this through.  Maybe, just maybe, corporation taxes make less sense in a globalised world.  What’s the logic?  Now that companies can choose where to carry out various activities, attempting to tax said activities is bound to provoke relocation (does Britain have a “right” for the relevant activities to be performed within reach of the UK taxman?, for a company not to declare itself henceforth based in Ireland, Luxembourg, the Seychelles?).  Income taxes, say, make some sense.  We all pay a share of the cost of policing, defence, education, healthcare and so on based on where we work and/or live.  But even VAT is starting to make less sense, as, say, CDs are sent tax-free into the UK by post.  Now, if you want to browse racks of music, you can only do it at HMV – all the other bricks ‘n’ mortar stores else has gone bust.

And if you tax corporations, it simply puts up the price of their goods.  Where there is a problem, which I haven’t seen the Guardian point out yet, is between small and large companies.  If the smaller companies can’t set up tax avoidance schemes you end up with an uneven playing-field.  Smaller companies struggle and you end up with industry after industry dominated by pile-up-the-same-old-rubbish goliath companies.  Sector after sector of the retail industry in the UK is now dominated by a single chain.  And they don’t need to keep their standards up, because there’s nowhere else to go.  Homebase, Currys, HMV, Boots…, you know who I mean!

And people try to use the planning process to control this!  Any sensible Government would tell people they don’t have a right to stop Tesco opening a store in Mill Road (what about my right to shop at Tesco?, or for the competition from Tesco to raise standards at the local Sainsbury’s?).  But they do have a right to demand a level playing-field so there’s more choice of stores (and tax evasion isn’t even the half of it – power over suppliers allowing big players to keep costs down is probably the biggest problem).

Do people really want their right to apply for a job to depend on whether someone happens to create some jobs within – I don’t know – 5 miles?, one mile?, their constituency?, local council ward?  No, of course they don’t.  So, Gordon, why don’t you try telling people the way it is sometime?

The most sense I’ve read this week was a letter in today’s Guardian.  A Dr Martin Weale of London writes:

“…if you wanted to end tax avoidance by companies, why not consider abolishing corporation tax and raising the tax rate on dividends and interest paid by firms. Surely this is much simpler than tilting at windmills.”

Exactimundo.

Compare Vince Cable’s self-knotting:

“Corporate profits may not be an ideal tax base. But there is surely some basic justice in the proposition that companies should pay the government of their host country for the infrastructure and other tax-financed services they receive: education, health, transport systems, policing.”

No, Vince, these services are provided to people or (in the case of transport) can be funded from charges and other taxes, on fuel, for example.  And the more jobs that are created in the UK the more people there are paying income tax to divide costs.  “Corporate profits” are certainly not “an ideal tax base”, so why carry on flogging a dead horse?

We’re just part of a global economy.  We don’t have special rights because we’re British or French.  Wouldn’t it be better to focus on what rights do make sense?  And don’t require minutely-detailed international agreement and enforcement or an incorruptible, all-knowing, paternalistic world government to enforce them – because the first is unlikely and the second a childish fantasy.

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